Page 1 GAO-12-184R Status of OMB’s Review of Financial System Projects

United States Government Accountability Office

Washington, DC 20548

February 8, 2012

The Honorable Thomas R. Carper

Chairman

The Honorable Scott P. Brown

Ranking Member

Subcommittee on Federal Financial Management, Government Information, Federal Services, 

and International Security

Committee on Homeland Security and Governmental Affairs

United States Senate

Subject: Financial Management Systems: Status of OMB’s Review of Financial System Projects

This letter transmits the enclosed briefing slides that we presented to your staff on February 1, 

2012, in response to your request that we review the status of the Office of Management and 

Budget’s (OMB) oversight of federal financial system projects.1 In June 2010, OMB announced 

an initiative to review federal agency financial system modernization projects at the 24 Chief 

Financial Officer (CFO) Act agencies.

2 OMB provided guidance on this initiative in its June 2010

Memorandum M-10-26, Immediate Review of Financial Systems IT Projects.

3 The

memorandum provided instructions for CFO Act agencies to revise financial system 

modernization projects in accordance with three guiding principles and to submit their revised 

project plans for review.

As discussed with your staff, our objectives were to describe: (1) the approach OMB followed to 

develop and implement the June 2010 memorandum; (2) the changes agencies reported 

making to their financial system project plans as a result of the June 2010 memorandum; and 

(3) OMB’s future plans for oversight of financial system modernization projects. 

To address these objectives, we:

 met with OMB staff and Financial Systems Advisory Board (FSAB)4

 

1

See enc. I for our briefing slides. 

members to 

determine the approach OMB followed to develop and implement the June 2010 

memorandum; 

2

CFOs were established under 31 U.S.C. § 901(b) for 24 specific agencies that are subject to the CFO Act, as 

amended: the Departments of Agriculture (USDA), Commerce, Defense (DOD), Education, Energy, Health and 

Human Services, Homeland Security, Housing and Urban Development, the Interior, Justice (DOJ), Labor, State, 

Transportation, the Treasury, and Veterans Affairs; Environmental Protection Agency; National Aeronautics and 

Space Administration; Agency for International Development; General Services Administration (GSA); National 

Science Foundation; Nuclear Regulatory Commission; Office of Personnel Management (OPM); Small Business 

Administration; and Social Security Administration.

3

OMB Memorandum M-10-26, Immediate Review of Financial Systems IT Projects (Washington, D.C., June 28, 

2010).

4

In addition to the issuance of the June 2010 memorandum, OMB established FSAB under the CFO Council. FSAB 

was comprised of three CFOs and three Chief Information Officers (CIOs) from major agencies. The FSAB function 

was to make recommendations to OMB, as requested, on financial system projects reviewed under the June 2010 

memorandum.
Page 2 GAO-12-184R Status of OMB’s Review of Financial System Projects

 conducted a survey of the 24 CFO Act agencies to obtain their perspectives on OMB’s

oversight process, its impact on agency financial system projects, and future plans for 

financial system projects; and 

 interviewed OMB staff to determine OMB’s future plans for oversight of financial system 

modernization projects.

We conducted our work from January 2011 through February 2012 in accordance with all 

sections of GAO’s Quality Assurance Framework that are relevant to our objectives. The 

framework requires that we plan and perform the engagement to meet our stated objectives and 

to discuss any limitations in our work. We believe that the information and data obtained, and 

the analysis conducted, provide a reasonable basis for any findings and conclusions. See 

enclosure II for further details on our scope and methodology. Enclosure III provides a list of 

financial system projects that OMB or FSAB reviewed. Enclosures IV and V provide the survey 

results on the reported impact and challenges, respectively, of implementing the June 2010 

memorandum. 

In summary, OMB developed the June 2010 memorandum in consultation with the CFO Council 

and created FSAB to assist in its oversight and review of agency financial system projects as 

announced in the June 2010 memorandum.5 In November 2010, OMB reported an overall 

budget savings of $1.6 billion as a result of decisions to postpone, cancel, or revise the scope of 

projects initially reviewed. In response to our survey, most agencies reported no change or that 

they did not know how the long-term project cost or completion time would change as a result of 

the actions, decisions, and recommendations related to the June 2010 memorandum and 

oversight process. However, several agencies reported that they narrowed the scope of their 

current project plans to focus on implementing more critical business needs first as a result of 

the June 2010 memorandum. They noted that this rescoping had the effect of delaying their 

efforts to improve accounting and reporting functions. Agencies also reported other challenges 

related to their financial system projects, including standardization of internal processes or data 

and funding delays. According to OMB staff, their plans for oversight of financial systems 

include (1) continuing to review agencies’ financial system projects and (2) issuing a revised 

Circular A-127 that will serve as guidance on the issues noted in the June 2010 memorandum. 

OMB did not provide details or time frames on the planned issuance of the revised circular.6

Agency Comments

We requested comments on a draft of the briefing slides and related enclosures from the 

Director of the Office of Management and Budget or his designee. On January 13, 2012, staff 

from OMB’s Office of Federal Financial Management provided oral comments and stated that 

they generally agreed with the information presented. They also provided technical comments, 

which we incorporated as appropriate.

- - - - - 

As agreed with your offices, unless you publicly announce the contents of this report earlier, we 

 

5

The CFO Council is an organization comprised of the CFOs of the 24 CFO Act agencies and senior officials in OMB 

and the Department of the Treasury who work collaboratively to improve financial management in the U.S. 

government. 

6

OMB Circular A-127 prescribes policies and standards for executive departments and agencies to follow concerning 

their financial management systems. See OMB Circular A-127, Financial Management Systems (Washington, D.C., 

Jan. 9, 2009).
Page 3 GAO-12-184R Status of OMB’s Review of Financial System Projects

plan no further distribution until 30 days from the report date. At that time, we will send copies to

the Chairman and Ranking Member, Subcommittee on Government Organization, Efficiency, 

and Financial Management, House Committee on Oversight and Government Reform; the 

Director of OMB; and other interested parties. The report also will be available at no charge on 

the GAO website at http://www.gao.gov. If you or your staffs have any questions concerning this 

report, please contact Paula Rascona at rasconap@gao.gov or (202) 512-9816, or Nabajyoti

Barkakati at (202) 512-2700 or barkakatin@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page of this report. GAO

staff who made major contributions to this report are listed in enclosure VI.

Paula M. Rascona

Director

Financial Management and Assurance

Nabajyoti (Naba) Barkakati

Chief Technologist

Applied Research and Methods

Center for Engineering and Technology

Enclosures - 6 
Page 4 GAO-12-184R Status of OMB’s Review of Financial System Projects

Enclosure I 

Financial Management Systems: Status of OMB’s Review of 

Financial System Projects

Briefing for Staff Members of the 

Subcommittee on Federal Financial Management, Government Information, Federal 

Services, and International Security 

Committee on Homeland Security and Governmental Affairs 

United States Senate

February 1, 2012
Page 5 GAO-12-184R Status of OMB’s Review of Financial System Projects

Overview

Introduction

Objectives

Background

Results

Enclosures:

II: Scope and Methodology

III: Financial System Projects Reviewed by OMB/FSAB

IV: Reported Impact of Implementing OMB Guidance 

V: Reported Challenges of Implementing OMB Guidance

VI: GAO Contacts and Staff Acknowledgments 
Page 6 GAO-12-184R Status of OMB’s Review of Financial System Projects

Introduction

• As we have reported in our audit of the U.S. Government’s Financial Statements,1

long-standing financial management system weaknesses at several large Chief 

Financial Officers (CFO) Act agencies,2

• Federal agencies continue to invest large amounts of resources in financial system 

modernization efforts. These efforts have too often cost more than they should, taken 

longer than necessary to deploy, and not delivered solutions that met agency needs. 

along with the size and complexity of the 

federal government, continue to present a formidable management challenge in 

providing accountability to the nation’s taxpayers. 

 

1

See our audit report on the federal government’s 2011 and 2010 consolidated financial statements that was incorporated into the 

2011 Financial Report of the United States Government published by the Department of the Treasury (Dec. 23, 2011). 2

CFOs were established under 31 U.S.C. § 901(b) for 24 specific agencies that are subject to the CFO Act, as amended: the 

Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, Housing and 

Urban Development, the Interior, Justice, Labor, State, Transportation, the Treasury, and Veterans Affairs; Environmental Protection 

Agency; National Aeronautics and Space Administration; Agency for International Development; General Services Administration;

National Science Foundation; Nuclear Regulatory Commission; Office of Personnel Management; Small Business Administration; and 

Social Security Administration. 
Page 7 GAO-12-184R Status of OMB’s Review of Financial System Projects

Introduction

• Although federal financial system modernization efforts have proven to be 

challenging, they are critical to instituting strong financial management as called for 

by the CFO Act of 1990, Federal Financial Management Improvement Act of 1996 

(FFMIA), and other financial management reform laws.

3

• In June 2010, the Office of Management and Budget (OMB) announced an initiative 

to review federal agency financial system modernization projects at the 24 CFO Act 

agencies as part of its overall strategy to reform how the federal government 

purchases and uses information technology (IT)–cutting waste and saving money. 

OMB provided guidance on this initiative in Memorandum M-10-26, Immediate 

Review of Financial Systems IT Projects (June 2010 memorandum) and provided 

instructions for agencies to submit revised financial system modernization project 

plans for review. 

 

 

3

The CFO Act calls for the improvement of financial management systems in departments and major agencies throughout the federal 

government to achieve the systematic measurement of performance; the development of cost information; and the integration of 

program, budget, and financial information for management reporting. FFMIA builds on the foundation laid by the CFO Act by requiring

CFO Act agencies to have financial management systems that can generate reliable, useful, and timely information with which to make 

fully informed decisions and to ensure accountability on an ongoing basis.
Page 8 GAO-12-184R Status of OMB’s Review of Financial System Projects

Objectives

As discussed with the staff, our objectives were to describe: 

(1) the approach OMB followed to develop and implement the June 2010 

memorandum; 

(2) the changes agencies reported making to their financial system project plans as a 

result of the June 2010 memorandum; and 

(3) OMB’s future plans for oversight of financial system modernization projects. 

(See enclosure II for details on our scope and methodology.) 
Page 9 GAO-12-184R Status of OMB’s Review of Financial System Projects

Background

 

• OMB plays a central role in setting federal financial management policy and for 

reviewing and evaluating IT expenditures, including financial systems, across the 

federal government. OMB uses the IT spending information submitted by agencies 

during the budget formulation process to review requests for agency financial system

modernization projects and other IT spending. 

• The CFO Act established OMB’s Office of Federal Financial Management, which has 

responsibility to provide overall direction and leadership to the executive branch on 

financial management matters by establishing policies and requirements and by 

monitoring the establishment and operation of federal government financial 

management systems. 

• Over the years, OMB has provided oversight, issued guidance, and started several 

initiatives with the goal of improving federal agency investments in financial system 

modernization efforts. 

o For example, prior to the June 2010 memorandum, OMB initiated the financial 

management line of business initiative in March 2004, in part, to reduce the cost 

and improve the quality and performance of federal financial management 

systems by leveraging shared service solutions and implementing other reforms. 
Page 10 GAO-12-184R Status of OMB’s Review of Financial System Projects

Background

• In September 2010, we noted that key issues associated with OMB’s approach for 

financial system modernizations announced in the June 2010 memorandum needed 

to be addressed, such as clearly defining the criteria to be used to evaluate agency 

financial system modernization projects.4 According to OMB staff, these key issues 

will be addressed in the revised Circular A-127.

5

 

4

GAO, Financial Management Systems: Experience with Prior Migration and Modernization Efforts Provides Lessons Learned for New 

Approach, GAO-10-808 (Washington, D.C.: Sept. 8, 2010). 5

OMB Circular A-127 prescribes policies and standards for executive departments and agencies to follow concerning their financial 

management systems. See OMB Circular A-127, Financial Management Systems (Washington, D.C.: Jan. 9, 2009).
Page 11 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 1 

OMB’s approach to develop and implement the June 2010 memorandum

Figure 1 shows the timeline of key events that occurred in the development and 

implementation of the June 2010 memorandum.

Figure 1: Timeline of Key Events Related to June 2010 Memorandum

• A forum was held by the President on January 14, 2010, to discuss, among other 

topics, IT best practices. The White House forum included 50 Chief Executive 

Officers from a broad range of private industries. 
Page 12 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 1 

OMB’s approach to develop and implement the June 2010 memorandum

(continued)

• After the forum, OMB staff developed a series of IT reform initiatives, including a draft 

memorandum for the immediate review of financial systems IT projects. On May 27, 

2010, OMB released the draft memorandum to the CFO Council for comment.6

• On June 28, 2010, OMB issued its final Memorandum M-10-26, which set forth 

guiding principles for the acquisition and project management of financial systems. 

The primary goals stated in the memorandum were to reduce costs, shorten time

frames, and reduce risks associated with agency financial system projects. OMB’s 

June 2010 memorandum required CFO Act agencies to

 

o halt the issuance of new task orders or new procurements for all financial system 

projects with $20 million or more in planned spending on development or 

modernization expenses, pending an immediate review and approval from OMB; 

and 

o within 60 days provide OMB with revised project plans to be evaluated against

the three guiding principles outlined in the memorandum. 

 

6

The CFO Council is an organization comprised of the CFOs of the 24 CFO Act agencies, senior officials in OMB, and the Department 

of the Treasury who work collaboratively to improve financial management in the U.S. government. 
Page 13 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 1 

June 2010 Memorandum - Three Guiding Principles

1. Agencies are to split financial system modernization projects into smaller, simpler 

segments with clear deliverables (i.e., project segmentation). The memo states that 

project segments should generally take no longer than 90-120 days to achieve 

specific project milestones. Furthermore, the overall length of a development 

project—which includes the planning, development, and implementation phases of 

the project—should not exceed 24 months.

2. Agencies are to focus on the most critical business needs first. According to the 

memo, agencies should prioritize the most critical financial functions first and 

consider functions of lesser importance for subsequent delivery.7

3. Agencies are to provide ongoing, transparent project oversight, which includes 

identifying and monitoring milestones, warning flags, and stop points over the course 

of the segment life-cycle. 

 

7

The June 2010 memorandum does not specifically identify financial functions or those that are the most critical. However, the major 

functions supported by a core financial system are defined by the Office of Federal Financial Management’s Core Financial System 

Requirements as: System Management, General Ledger Management, Budgetary Resource Management, Payment Management, 

Receivable Management, Cost Management, and Fund Balance with Treasury Management. 
Page 14 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 1 

OMB established FSAB to perform project reviews

In addition to the issuance of the June 2010 memorandum, OMB created the Financial 

Systems Advisory Board (FSAB) to make recommendations to OMB, as requested, on 

the projects being reviewed under the June 2010 memorandum. To select the sixmember board, OMB staff told us that they focused on three criteria.

• Diversity of members’ perspectives

•

: To provide a balanced perspective for reviews, 

OMB selected three CFOs and three Chief Information Officers. Since modernization 

projects involve multiple levels of agency staff, OMB selected officials who held 

departmentwide positions and others who held positions in specific bureaus within an 

agency to further diversify FSAB.

Significant, relevant experience

•

: OMB sought to select officials with significant and 

relevant experience with financial system modernization projects to help ensure that 

FSAB members understood the processes and challenges involved with these 

projects.

Availability to participate in reviews: Given the time commitment necessary to 

conduct the reviews, OMB also took into account the availability of potential 

members to serve both as FSAB members in addition to performing their regular

duties.
Page 15 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results 

Objective 1 

OMB established FSAB to perform project reviews (continued)

FSAB coordinated with OMB and created a charter defining the purpose, scope, and 

responsibilities of the board. 

• FSAB members defined the methodology for reviewing agencies’ financial systems 

modernization projects based on the three guiding principles provided in the June 

2010 memorandum. 

• The FSAB charter outlines the board’s responsibility to provide OMB with 

recommendations, advice, and support. It also states that the board is not chartered 

to (1) provide oversight of, or decisions to, the agencies or (2) make final decisions 

on behalf of, or binding on, the agencies or OMB. 

• According to the charter, subsequent to initial project reviews and approval of revised 

plans, OMB will convene the board, as it deems necessary, on a quarterly basis 

through the end of fiscal year 2012.
Page 16 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 1 

OMB announced projects to be reviewed

• On July 8, 2010, OMB announced a draft list of 20 agency projects for review at 18 of 

the 24 CFO Act agencies. Based on further discussions and selections made by the

agencies, OMB or FSAB reviewed 31 projects at all 24 CFO Act agencies, including

10 projects that were fully deployed. 

• The key characteristics of projects reviewed varied significantly. For example, 

projects were described by agency officials at various life-cycle stages of 

development: 

o Planning or pre-deployment (planning, solicitation, pre-deployment): 13 projects

o Initial deployment or phased deployment (being deployed): 6 projects

o Fully deployed (operations and maintenance): 10 projects

o Other—mixed cycle (multiple phases of development): 2 projects

• In October 2011, OMB staff informed us that the Department of Defense (DOD) 

project reviews were ongoing and that OMB utilized a process separate from the 

FSAB reviews to evaluate DOD’s compliance with the June 2010 memorandum. 
Page 17 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 1 

FSAB conducted project reviews from July 2010 through November 2010

Based on our interviews with FSAB members: 

• FSAB relied on project plans submitted by agencies (excluding DOD) in accordance 

with the template provided in OMB’s June 2010 memorandum. 

• Some agencies provided additional information for the review such as architectural 

diagrams, project management plans, risk management plans, and implementation 

plans. OMB provided auditor reports to FSAB for some agencies to supplement this

information.

• After reviewing the information provided, FSAB determined the need to meet with

selected agencies. In those meetings, agencies presented their project plans and 

addressed any questions from the board.

• Board members did not participate in FSAB discussions of their own agency, but 

some participated in the presentation of their agency’s project.

• FSAB prepared memorandums summarizing its findings and recommendations on 

each agency project reviewed and provided these to the affected agencies and OMB

for a fact check before submitting its written assessments to OMB.
Page 18 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 1 

OMB staff reviewed the FSAB recommendations and issued decision 

memorandums to agencies

• OMB reviewed FSAB recommendations and issued decision memos to 21 agencies, 

including 2 agencies in September 2010, 18 agencies in January 2011, and 1 agency 

in October 2011.

8

• In the final decision memos, OMB reported its decision for each project and made 

recommendations to agencies (if applicable). OMB also assigned each project a risk 

level, which determines the frequency of OMB follow-up reviews. 

 As of October 2011, OMB’s review of 3 agencies, covering 7 

projects, was still in process with the final decision memos pending. 

• Figure 2 summarizes OMB’s decisions and assigned risk levels by project life-cycle 

phase for 24 projects at 21 agencies. 

(See enclosure III for a detailed list of projects reviewed with the phase of development; 

project budget; OMB-designated risk level; and decision, if issued.)

 

8

For one of these agency projects, we were unable to obtain the issued decision memo from the agency or OMB.
Page 19 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 1 

Figure 2: OMB Decisions and Assigned Risk Levels of Projects

Note: For projects identified as “partially approved,” OMB only approved certain parts of the agency’s project to proceed at the time. 
Page 20 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 1 

OMB staff reviewed the FSAB recommendations and issued decision 

memorandums to agencies (continued)

• As indicated in figure 2, OMB generally approved projects that were fully deployed 

and designated them as low risk.

• In November 2010, OMB reported on the results of projects initially reviewed, 

including an overall budget savings of $1.6 billion as a result of changes to agency 

project plans made in response to OMB’s June 2010 memorandum. This amount 

included projects that agencies postponed, canceled, or revised in scope. 

• According to the June 2010 memorandum, beginning in fiscal year 2011, funding for 

financial system investments will be apportioned on a quarterly basis, as appropriate. 

Throughout the fiscal year, OMB will assess whether an investment should receive 

funding for the next segment. If approval is not granted, OMB will work with the 

affected agency to redirect funding pursuant to existing reprogramming requirements.

According to the June 2010 memorandum, OMB may employ flexibility regarding 

funds control for projects that OMB has not designated as high-risk or that have a 

proven track record of achieving specific milestones within well-defined segments.
Page 21 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 2 

Reported Impact on Agencies

In response to our survey, most agencies reported no change or that they did not know 

how the long-term project cost or completion time would change as a result of the actions, 

decisions, and recommendations related to the June 2010 memorandum and oversight 

process. However, several agencies reported that they narrowed the scope of their 

current project plans to focus on implementing more critical business needs first as a 

result of the June 2010 memorandum. They noted that this rescoping had the effect of 

delaying their efforts to improve accounting and reporting functions. Agencies also 

reported other challenges related to their financial system projects, including 

standardization of internal processes or data and funding delays.

 
Page 22 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 2 

Figure 3: Agency Reported Estimated Change to Long-Term Project Cost and Schedule
Page 23 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 2 

Reported impact on agencies’ project costs and schedules 

• As indicated in figure 3, almost all projects that were fully deployed reported no 

estimated change in the total project cost or completion time. One agency with a fully 

deployed system indicated that costs may increase over the long term without clear 

guidance on federal financial system requirements.

• For projects that OMB did not approve in their entirety or for which OMB directed a

change in scope, agencies reported that some of those costs are deferred to future 

efforts. 

o One agency noted that the project revision directed by OMB removed functional 

components, such as payroll accounting and payment systems, from its current 

core implementation and deferred them and their associated costs to future 

implementations.

o One agency noted that although OMB did not approve certain portions of its 

projects or system components, such as standardization of financial capabilities

and system upgrades, it is planning to revisit the decision with OMB. The cost of 

those efforts is also being delayed. 
Page 24 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 2 

Reported impact on agencies’ efforts to improve accounting and reporting 

functions

Several agencies noted that they narrowed the scope of their current project plans to 

focus on implementing more critical business needs first. They noted that this had the 

effect of delaying their efforts to achieve improved accounting and reporting functions. For 

example, according to agencies’ survey responses:

• For one agency, which is also a shared service provider to other agencies, OMB did 

not approve its project to upgrade its accounting software to the current version. The 

agency stated that this action adversely affected its ability to maintain system 

security, maintain vendor support for aging software, upgrade existing software, and 

implement new technology—all factors that will also affect its customers.

• OMB postponed another agency’s modernization efforts for three of its components. 

The agency stated that this action increases the cost of achieving unified 

modernization across the agency and requires additional investments to maintain 

existing legacy systems for a longer period of time. 

• OMB postponed an agency’s projects to standardize and expand core financial 

capabilities and upgrade core financial systems. The agency reported this action will 

delay the agency’s ability to provide efficiencies and improve functionality. 
Page 25 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 2 

Reported impact on agencies’ efforts to improve accounting and reporting 

functions (continued)

• Another agency restructured its project to focus on the core financial system 

component as its highest priority business need. The agency commented that while 

postponing the remaining five components of the original project reduced project risk, 

it also delayed deploying functionality, such as account code structure integration.

• One agency deferred functionality for electronic records management and budget 

formulation to reduce risk and cost to the project. The agency also deferred 

implementation, which the agency reported will result in maintaining legacy systems 

for another year and increase project costs.

• Another agency’s integration of component segments was postponed as a result of 

OMB’s decision. The agency stated that this action has a strong negative impact on 

its ability to resolve audit findings and puts at risk any progress towards completing 

the project vision of an integrated financial system by at least an additional 2 years. 

(See enclosure IV for survey results on the impact of implementing the June 2010 

memorandum.) 
Page 26 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 2 

Agencies reported other observations and challenges related to financial system 

projects

• Agencies whose projects were partially approved or not approved plan to continue to 

request OMB’s approval or look for opportunities in the future for desired 

functionality.

• Of the remaining challenges reported by agencies, the most prevalent related to the 

following: 

o 12 of 22 agencies reported that standardization of internal processes or data is a 

major or moderate challenge. For example, one agency noted that it faces the 

challenge of simultaneously accommodating the need for management flexibility 

at the mission or office level and the need to collect standardized data for ease 

of aggregation, comparison, and reporting. 

o 9 of 22 agencies reported that funding delays are a major or moderate 

challenge. For example, one agency reported that ongoing delays and 

uncertainties make planning difficult, as the program manager is unable to 

initiate new projects, such as system upgrades or new enhancements, until 

funding status is certain.
Page 27 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 2 

Agencies reported other observations and challenges related to financial system 

projects (continued)

o 9 of 22 agencies reported that funding priorities are a major or moderate 

challenge. For example, one agency commented that trying to consider 

competing priorities is a major challenge because of the inflexibility, and 

uncertainty, of changing government mandates. Specifically, the program 

manager is currently determining how to accommodate budget cuts and reduce 

a long list of priority initiatives down to a small number of high-priority projects 

that could be completed within budget in fiscal year 2012.

(See enclosure V for survey results on challenges of implementing OMB guidance.) 
Page 28 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 2 

Agencies’ feedback

In their responses to a question included in our survey, many agencies offered feedback 

about the process. The following are the relevant suggestions that could be considered in 

future review efforts that the agencies provided in their written responses:

• The review process could be tied to steps in either the agency’s systems 

development life-cycle or enterprise performance life-cycle methodology instead of 

90-day segments. The agency’s steering committee and OMB would review the 

project status prior to moving to the next stage. This solution supports the unique 

aspects of individual financial system implementation projects.

• Also, consider tailoring the review process to the project’s life-cycle phase because 

fully deployed projects may not need the same level of scrutiny as projects in 

planning or early implementation phases.

• A workgroup concept could be used as an oversight body. This workgroup would 

spend a dedicated amount of time, potentially on-site, discussing the plans and 

status of projects. 
Page 29 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 2 

Agencies’ feedback (continued)

• Consider implementing an ongoing cross-organizational collaboration with customer 

control boards, sharing of agency best practices, and benchmarking experiences of 

agencies in terms of use, satisfaction, functionality, and business change. 

• Possibly develop tools or mechanisms that might aid agencies in efforts to cost

effectively enforce questionable vendor self-certification claims of meeting federal 

financial system requirements.

• Streamline governmentwide utilities, such as agency interfaces or maintenance of a 

specific interface, to help reduce agency costs to operate financial systems. 

• Provide standard tools and templates for managing financial management system 

implementations to help in agencies’ financial system projects.
Page 30 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 3 

OMB plans risk-based follow-up reviews

• The June 2010 memorandum states that, subsequent to initial project reviews, OMB 

will perform ongoing assessments to determine whether or not an investment should 

continue to receive funding for the next segment. The memorandum also stated that 

the purpose of these ongoing assessments is to inform the appropriations process 

going forward. 

• According to OMB staff, OMB plans to review high-risk projects monthly, moderaterisk quarterly, low risk annually and has already started that review process.9

o For the five projects at five agencies OMB designated as high risk, OMB has 

held 14 meetings since February 2011.

 As of 

October 2011, OMB staff reported that follow-up reviews have occurred as follows: 

o For the seven projects at five agencies OMB designated as moderate risk, OMB 

has held 10 meetings since March 2011. 

 

9

According to the June 2010 memorandum, projects identified as high risk by OMB should require more frequent assessment to 

include review of task orders or activities. Review of projects nearing completion may be abbreviated and will include consideration of 

the costs and benefits of implementing the policy (i.e., the three guiding principles) within the project. 
Page 31 GAO-12-184R Status of OMB’s Review of Financial System Projects

Results

Objective 3 

OMB plans to issue a revised Circular A-127

• OMB staff stated a revised Circular A-127 would provide additional guidance on the

issues noted in the June 2010 memorandum. 

• OMB issued a draft of the revised Circular A-127 in October 2010. However, as of 

October 2011, OMB did not provide an estimated date of when a final version of its 

revised Circular A-127 would be issued.
Page 32 GAO-12-184R Status of OMB’s Review of Financial System Projects

Enclosure II: Scope and Methodology

To determine the Office of Management and Budget (OMB) approach to develop and implement 

OMB Memorandum M-10-26,

1 we conducted interviews with OMB staff, including the Deputy 

Controller of the Office of Federal Financial Management to discuss the process OMB followed 

to develop the memorandum to review agencies’ financial system modernization projects to 

ensure consistency with the memorandum. We obtained and reviewed the Financial Systems 

Advisory Board (FSAB) charter to identify its purpose, scope, and responsibilities. In addition, 

we met with all six of the FSAB members to discuss their roles, the process used in reviewing 

agencies’ financial system projects, and the assessments and recommendations made to OMB, 

and to obtain the members’ perspectives on the oversight process. Further, we also obtained 

and reviewed the decision memos OMB issued to agencies.

2

 

To identify the changes agencies made to financial system projects as a result of the June 2010 

memorandum, we conducted a survey of the 24 Chief Financial Officer (CFO) Act agencies. We 

asked each agency to identify the financial system projects that underwent review by OMB or 

FSAB as part of OMB’s oversight and review process. We obtained and reviewed agencies’ 

revised project plans submitted to OMB for review. Through the use of an e-mailed, selfadministered questionnaire, we collected descriptive information on the financial system 

projects selected for review as well as agency perspectives on the process for reviewing 

financial system projects. We also collected descriptive information on agencies’ efforts to 

implement the June 2010 memorandum; the impact of the memo on project costs, schedule, 

and agency efforts to improve accounting and reporting functions; and agencies’ suggestions for 

improving OMB’s oversight and review process for financial system projects. We designed and 

tested the questionnaire in consultation with GAO survey research methodologists, subject 

matter experts at GAO, and selected agency officials. Data collection took place from June 2011 

to September 2011. Of the 24 CFO Act agencies surveyed, all agencies responded to the 

survey request, and 22 agencies completed questionnaires on 29 projects that had been 

reviewed by OMB or FSAB. However, two agencies, with one project each, did not complete the 

 

1

OMB Memorandum M-10-26, Immediate Review of Financial Systems IT Projects (Washington, D.C., June 28, 

2010).

2

As of October 2011, OMB had issued decision memos to 21 of 24 CFO Act agencies, but we were unable to obtain 

the issued decision memo for one of these agencies from the agency or OMB. The reviews of projects at the 

remaining 3 agencies were still in process.
Page 33 GAO-12-184R Status of OMB’s Review of Financial System Projects

survey because they said their financial systems were fully deployed and therefore not subject 

to OMB’s review. See enclosure III for a listing of the 31 projects reviewed by OMB or FSAB.

The practical difficulties of conducting any survey may introduce other errors into our findings. In 

addition to questionnaire design activities discussed above, to minimize errors of measurement, 

question-specific nonresponses, and data processing errors, GAO analysts (1) pretested a draft 

questionnaire with officials from two agencies prior to conducting the survey, (2) contacted 

respondents to follow up on answers that were missing or required clarification, and (3) 

answered questions from respondents to resolve any difficulties they had in responding to the

survey. 

To address the objective concerning OMB’s future plans for financial system modernization 

projects, we conducted interviews with OMB staff to discuss their plans for oversight of 

agencies’ financial system modernization projects. During the meetings, we discussed OMB’s

plans to issue a revised Circular A-127 to serve as guidance on the issues noted in the June 

2010 memorandum. 

We requested comments on a draft of the briefing slides and related enclosures from the 

Director of OMB or his designee. Staff from OMB’s Office of Federal Financial Management 

provided oral comments, including technical comments, which we incorporated as appropriate.

We conducted our work from January 2011 through February 2012 in accordance with all 

sections of GAO’s Quality Assurance Framework that are relevant to our objectives. The 

framework requires that we plan and perform the engagement to obtain sufficient and 

appropriate evidence to meet our stated objectives and to discuss any limitations in our work. 

We believe that the information and data obtained, and the analysis conducted, provide a 

reasonable basis for any findings and conclusions.
Page 34 GAO-12-184R Status of OMB’s Review of Financial System Projects

Enclosure III: Financial System Projects Reviewed by OMB/FSAB 

Enclosure III summarizes the results of responses from CFO Act agencies related to their 31 

financial system projects, including the reported deployment phase of projects, estimated 

project costs, OMB decisions after reviewing projects, and the assigned risk level of projects. 

The reported life-cycle phases of agencies’ financial system projects are categorized as follows:

• Planning and pre-deployment—Agency project is in the planning, solicitation, or predeployment phase.

• Initial or phased deployment—Agency project is in process of being deployed, including 

initial deployment, subsequent and phased deployments, or in final deployment. 

• Fully deployed—Agency project is in operations and maintenance and fully deployed. 

• Other—mixed cycle—Agency has multiple sub-projects or components that are in 

different phases of development. For example, projects can be in planning, solicitation, 

pre-deployment and fully deployed life-cycle phases.
Page 35 GAO-12-184R Status of OMB’s Review of Financial System Projects

Figure 4: Financial System Projects Reviewed
Page 36 GAO-12-184R Status of OMB’s Review of Financial System Projects
Page 37 GAO-12-184R Status of OMB’s Review of Financial System Projects

Enclosure IV: Reported Impact of Implementing OMB Guidance

Enclosure IV summarizes agencies’ responses to the survey question regarding the impact of 

the June 2010 memorandum and OMB’s oversight and review process on their financial system 

projects. As indicated below, most agencies reported neither a negative or positive impact on 

their efforts to perform a variety of activities for their projects.

Figure 5: Survey Results on Impact
Page 38 GAO-12-184R Status of OMB’s Review of Financial System Projects

Enclosure V: Reported Challenges of Implementing OMB Guidance

Enclosure V summarizes agencies’ responses to the survey question regarding challenges 

related to financial system projects after issuance of the June 2010 memorandum. As shown 

below, agencies reported that standardization of internal processes or data, funding delays, and 

funding priorities as the most prevalent major and moderate challenges.

Figure 6: Survey Results on Challenges
Page 39 GAO-12-184R Status of OMB’s Review of Financial System Projects

Enclosure VI: GAO Contacts and Staff Acknowledgments

GAO Contacts

Paula M. Rascona, (202) 512-9816 or rasconap@gao.gov

Nabajyoti (Naba) Barkakati, (202) 512-2700 or barkakatin@gao.gov

Staff Acknowledgments

In addition to the contacts named above, Chris Martin, Senior-Level Technologist; 

Michael LaForge, Assistant Director; Jehan Abdel-Gawad; Francine DelVecchio; James 

M. Healy; Wilfred Holloway; Jason Kelly; Yvonne Moss; Carl Ramirez; Jerome Sandau; 

Pamela Valentine; and Carolyn Voltz made key contributions to this report. 

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