GAO

United States General Accounting Office

Report to the Chairman, Subcommittee 

on the District of Columbia, Committee 

on Appropriations, House of 

Representatives

April 2001 DISTRICT OF 

COLUMBIA

Weaknesses in 

Financial Management 

System 

Implementation

GAO-01-489
Page 1 GAO-01-489 District of Columbia Financial Management System

April 30, 2001

The Honorable Joe Knollenberg

Chairman, Subcommittee on the District of Columbia

Committee on Appropriations

House of Representatives

Dear Mr. Chairman:

This report responds to your concerns about the District of Columbia’s

progress in implementing its financial management system and the

system’s ability to provide reliable data for decision-making. As agreed

with your office, we assessed the status of the District’s implementation of

important components of the overall financial management system,

including its new core general ledger System of Accounting and Reporting

(SOAR). You also specifically asked us to review the District’s budget

formulation process, including how the District accounts for its operations

and monitors budgetary status. We are also providing a status of the

District’s efforts to implement our prior recommendations on these

matters. (See appendix I.)

The District is now in its fourth year of implementing its new financial

management system, but essential elements of the system are not yet

operational.1

 Two components of SOAR have not been fully implemented:

the budget module is on hold, and the fixed assets module is incomplete.

The implementation of systems that feed into SOAR—personnel and

payroll, procurement, and tax—is incomplete and the systems lack

electronic interfaces with SOAR. Further, the personnel and payroll

system, which the District estimates has cost about $13 million so far, may

be abandoned. Currently, the District has no timetable or comprehensive

plan for fully implementing its financial management system.

Because the financial management system is incomplete, much of the

District’s financial management and budget information, including its

annual financial statements, is produced through cumbersome, manual

processes and the extraordinary efforts of a few key staff. For example,

 1

The financial management system includes SOAR as well as other feeder systems requiring

interfaces with SOAR.

United States General Accounting Office

Washington, DC 20548

Results in Brief
Page 2 GAO-01-489 District of Columbia Financial Management System

the District does not have a formal budget formulation process to ensure

that planned spending is carried out as envisioned. Instead, it relies on an

error-prone manual process to periodically compare actual spending to

planned budget limits. Thus, the District cannot reliably and regularly

report on whether it has spent its budget as intended for targeted city

services, such as trash collection, nor can it reliably report on the cost of

those services. The District is continuing to conduct business process

reengineering for its budget process before making any decisions about

implementing a budget system.

The District recently received its fourth consecutive unqualified or “clean”

opinion on its financial statements for fiscal year 2000 and reported a

$240.7 million surplus. Consequently, as called for by statute, the District

of Columbia Financial Responsibility and Management Assistance

Authority (Authority), which has overseen financial management since

1995, will return full financial management to the elected District

government by October 2001. The District’s unqualified opinions on its

financial statements, however, are primarily the result of the tremendous

amount of effort expended by a few key individuals who were able to

accomplish this yearly task despite the serious weaknesses of the city’s

financial management system, including its inability to routinely produce

reliable data on demand. Such a situation cannot be sustained without

significant costs to the District. One of the reasons that the District finds

itself in this situation is that it has not employed the necessary disciplined

processes to develop and implement its financial management system. In

addition, the District has not conducted a comprehensive assessment of its

human capital needs for financial management functions. Such an

assessment would help to ensure that the District’s financial professionals

are equipped to meet the challenges of successfully implementing its

financial management system to support the District’s mission and goals.

Reflecting the current overall status of implementation, officials from the

District’s five pilot agencies have indicated that the experience of their

agencies with SOAR, as it is currently implemented, does not meet the

expectations originally set forth for the new system, and that old

deficiencies have still not been remedied.

In our earlier work, which addressed the District’s need for a new financial

management system, we reported that experience studying the success

and failure of hundreds of information systems has shown that hardware

and software do little to improve financial management unless they are

part of an overall assessment of the processes, personnel, and equipment

that make up the entire system. In each of our reports leading up to the

September 1997 system acquisition contract and since the acquisition, we
Page 3 GAO-01-489 District of Columbia Financial Management System

have emphasized the need for a disciplined approach to the development

of a financial management system. We noted that the key to having a

disciplined system development effort is to have disciplined processes in

multiple areas, including requirements management, project planning,

project tracking and oversight, quality assurance, configuration

management, and risk management.

In our July 1997 report,2

 we stated that it was important that the District

adopt and follow the best practices of information management in order to

avoid costly failure while acquiring a new financial system that meets the

city’s needs. We also noted that computer modernizations are typically

risky ventures, especially if entities do not take basic steps in planning

projects and controlling costs. In 1998,3

 we reported that the District was

depending largely on specific individuals for success in acquiring its

financial management system rather than basing success on well-defined

software acquisition management practices. For example, we noted that

the District did not have an organizational policy for establishing and

managing software-related requirements. We cautioned that this approach

greatly reduced the probability that the system would be delivered on

schedule and within budget and consistently perform as intended.

The District proceeded with an ambitious implementation schedule that

abbreviated and eliminated key steps in a disciplined process. As our

current review indicates, SOAR implementation has been plagued by

delays and increasing costs. Almost 6 years after we began reviewing the

system and started making recommendations, the District’s financial

management system now serves as yet another cautionary example of the

risks entities run when they choose to short-cut a structured, disciplined

approach to the planning, acquisition, and management of a new financial

management system. The District has completed action on very few of the

recommendations we have made in reports dating back to 1995.

We are making recommendations that focus on the District’s need to apply

a structured, disciplined approach to completing the implementation of

SOAR and related financial management systems to ensure that the entire

financial management system is properly, expeditiously, and fully

 2

District of Columbia: Status of Efforts to Develop a New Financial Management System

(GAO/AIMD-97-101R, July 9, 1997).

3

District of Columbia: Software Acquisition Process for a New Financial Management

System (GAO/AIMD-98-88, April 30, 1998).
Page 4 GAO-01-489 District of Columbia Financial Management System

implemented. These recommendations also address the District’s need to

ensure that, when SOAR is fully implemented, it effectively and efficiently

meets the requirements of its intended users and achieves the needed

financial management reform in the District envisioned at the outset of

implementation.

In commenting on a draft of this report, the Chief Financial Officer of the

District agreed with our recommendations and provided additional details

on four areas: (1) our prior recommendations, (2) our recommendation

about assessing human capital needs, (3) our recommendation regarding

the budget process, and (4) implementation of SOAR. With respect to the

CFO’s comments on SOAR, the results of our work showed that the CFO’s

characterization of the progress made to date was overly optimistic. The

CFO’s comments are reprinted in appendix II. A representative from the

Mayor’s Office also reviewed this draft, along with the CFO’s comments,

and stated that the Mayor’s Office had no further comments.

On June 21, 1995, we testified4

 that the District’s financial records were

inadequate and that the City did not have the most basic financial data,

including the status of its expenditures against budgeted amounts, the

amount of bills owed, or the balance of cash available. As a result, District

managers did not have fundamental financial information necessary to

help control spending and costs and to estimate budget and cash needs.

Given the long-standing problems with the District’s financial

management, we recommended that the Authority study the accounting

and financial management information needs of the District.5

Subsequently, the Authority and the District requested and the Congress

approved funds to assess the need for implementing a new financial

management system. The 1996 District of Columbia Appropriations Act

(Public Law 104-134) authorized the District of Columbia government to

spend $28 million of its revenues to implement a replacement for its

existing financial management system. Of the $28 million, $2 million was

provided for a needs analysis and assessment of the existing financial

management environment. Public Law104-134 made the remaining

$26 million available to procure the necessary hardware; install new

 4

District of Columbia: Improved Financial Information and Controls Are Essential to

Address the Financial Crisis (GAO/T-AIMD-95-176, June 21, 1995).

5

See GAO/T-AIMD-95-176, June 21, 1995.

Background
Page 5 GAO-01-489 District of Columbia Financial Management System

software; and perform system conversion, testing, and training after the

needs analysis and the assessment were received by the Congress.

The District is now in its fourth year of implementing its new financial

management system. On September 4, 1997, the Authority awarded a 1-

year contract with four option years potentially totaling $21 million to

design and install a state-of-the-art financial management system for the

District. The District began working with the contractor in September 1997

and piloted the new system at five agencies beginning February 1, 1998,

with the goal of District-wide implementation of SOAR on October 1, 1998.

SOAR consists of commercial, off-the-shelf applications used by state and

local governments. SOAR was expected to strengthen control over

appropriations and spending plans; enhance tracking of grants and

projects; automate and streamline the financial management process;

record obligations as incurred; make and track payments and

disbursements; monitor performance measures by program and

organization; prepare timely, accurate, and reliable financial reports;

expedite the month-end closing process; and provide the ability to input

and control data on-line.

SOAR is the District’s central general ledger system and includes the five

following components:

• The Relational Standard Accounting and Reporting System (R*STARS),

the core accounting module, provides general ledger capabilities as well as

budgetary control, cash management, expenditures/payables,

revenue/receivables, and budget execution functions.

• The Advanced Purchasing and Inventory Control System (ADPICS) is

integrated with R*STARS and provides a comprehensive system of

materials management encompassing requisition/purchase transactions,

accounts payable, and inventory processing.

• The Performance Budgeting module supports the development of

operating and capital budgets and provides information on program costs

and performance measures.

• The Fixed Assets System supports accounting, management, and control

over capital and controllable assets.

• The Executive Information System (EIS) is a high-level analysis tool for

program and financial management that enables data modeling, creates

analyses for “what if” scenarios, and offers the flexibility to generate ad

hoc reports.
Page 6 GAO-01-489 District of Columbia Financial Management System

In addition to SOAR, there are other critical feeder systems that make up

the District’s financial management system. Figure 1 shows the various

SOAR components within the District’s overall financial management

system.
Page 7 GAO-01-489 District of Columbia Financial Management System

Figure 1: Current Status of the District’s Financial Management System

SOAR

Fixed

Assets

(FAS)

Purchasing

(ADPICS)

Executive

Information

System

 Procurement

 (Prism/OCP

 Express)

 Core

 Accounting

 (R*STARS)

• funds/cash control

• accounts receivable

• accounts payable

• general ledger

• budget execution

Personnel

& payroll

(CAPPS)

Integrated tax (ITS)

Personnel

& payroll

(UPPS) Business Individual

Real

property

Manual interface

Partially implemented

Fully implemented

Automated interface

Not implemented

Budget Creation

• Performance

 measures

• Program cost

 information

(Performance

 Budgeting)
Page 8 GAO-01-489 District of Columbia Financial Management System

To fulfill our objectives, we

• analyzed the District’s financial management systems project and program

management plans, work breakdown implementation schedules, project

cost tracking documents, contract records, meeting minutes, and briefing

reports;

• reviewed the District’s budget formulation process, budget process

manual, and the Government Finance Officers Association’s report on the

District’s budget office organizational structure;

• reviewed reports issued by the Inspector General of the District; and

• reviewed audit reports and related documents describing financial

management system implementation activities and weaknesses identified

during financial statement audits of the District covering fiscal years 1995

through 2000.

We met with the following District personnel:

• Chief Financial Officer;

• Deputy CFO for the Office of Budget and Planning;

• Deputy CFO for the Office of Financial Operations and Systems;

• SOAR Program Management Office officials;

• Director, Mission Support, OCFO;

• Director, Information Systems Administration, Office of Tax and Revenue;

• Office of the Inspector General officials;

• Representatives from the Authority;

• agency CFOs and financial staff; and

• Office of Procurement staff.

We also met with contractors responsible for implementing the new

system.

Our work was performed from September 2000 through February 2001 in

accordance with generally accepted government auditing standards. We

requested and obtained comments on a draft of this report from the Mayor

of the District of Columbia and the District’s Chief Financial Officer. These

comments are discussed in a later section of this report and reprinted in

appendix II.

Scope and

Methodology
Page 9 GAO-01-489 District of Columbia Financial Management System

Financial management requires that financial and program managers be

accountable for financial results of actions taken, control over the

government’s financial resources, and protection of assets. The District’s

Office of the Chief Financial Officer (OCFO) has responsibility for

effective financial management in the District. In order to meet the above

requirements, financial management systems must be in place to process

and record financial events effectively and efficiently and to provide

complete, timely, reliable, and consistent information for decisionmakers

and the public.

Over the past several years, the District has undertaken a number of

initiatives designed to improve its financial management environment.

However, a number of key initiatives have still not been completed or have

been placed on hold, and some are still being revised. For example, the

District has yet to complete implementation of SOAR, the personnel and

payroll system, the procurement system, and the tax system. The District

is also in the process of reengineering its budget process before deciding

whether to implement a new budget process and fully integrate the budget

data within SOAR. In addition, the District has not yet implemented the

fixed asset module of SOAR.

The original implementation schedule indicated that SOAR would be fully

implemented by September 30, 1998, and the external feeder system and

the related interfaces were scheduled for completion by April 1999. The

SOAR implementation, however, has been marked by delays. As we noted

in our April 1998 report,6

 we found severe weaknesses in critical

implementation processes, including lack of requirements development

and project management. For example, the District did not have an

organizational policy for establishing and managing software-related

requirements and no clear assignment of responsibility for requirements

development and management. As a result, the District did not have

assurance that the new financial management system or any other

software acquisition project undertaken would be conducted in a

disciplined manner. Further, studies have shown that problems associated

with requirements management are key factors in software projects that

 6

See GAO/AIMD-98-88, April 30, 1998.

Major Components of

the District’s System

of Accounting and

Reporting Are Not

Operational
Page 10 GAO-01-489 District of Columbia Financial Management System

do not meet their cost, schedule, and performance goals and that these

systems can cost many times more than expected if done improperly.7

The Performance Budgeting module included in SOAR was expected to

facilitate the management of the entire budget formulation process, from

budget submission to final review and approval. One of the primary

objectives of the Performance Budgeting module is the automation of the

annual budget development process to replace the present cumbersome,

manual process. The module was also expected to provide financial

reporting at various program levels as needed and contains a performance

measures feature to capture information for performance measures.

District officials anticipated that the performance measures feature in the

module would be able to provide comparative and cost information for all

levels of programs throughout the District. Comparative and accurate cost

information would enable stakeholders to make more informed decisions,

eventually providing better service to the citizens of the District. District

officials anticipated that performance measures, once they were

developed for programs in the District, could be maintained and tracked

easily and accurately in the module.

At the time of our review, the District had decided to suspend the

implementation of the Performance Budgeting module. District officials

told us that in addition to the need for reengineering the budget process,

the current design of the Performance Budgeting system does not fully

support the District’s information needs. Specifically,

• the Performance Budgeting module is not a fully integrated product of the

core accounting system and will require multiple and frequent updates to

the two systems in order to maintain a fully integrated system as updates

or upgrades occur to one or both systems;

• the current, nonintegrated design of the Performance Budgeting module

limits both agency budget staff and the Office of Budget and Planning

(OBP) from fully using information from the core accounting system; and

 7

Barry W. Boehm and Philip N. Papaccio, Understanding and Controlling Software Costs,

IEEE Transactions on Software Engineering, Volume 14, Number 10, October; Charting the

Seas of Information Technology, The Standish Group, 1994; Capers Jones, Assessment and

Control of Software Risks, (Yourdon Press), 1994; and Dean Leffingwell, Calculating the

Return on Investment from More Effective Requirements Management, American

Programmer, 1997.

Performance Budgeting

Module Put on Hold
Page 11 GAO-01-489 District of Columbia Financial Management System

• inadequate reporting tools within the Performance Budgeting module

prevent OBP from generating essential budget reports on a timely basis to

the stakeholders.

In addition to the above financial system issues, District officials stated

that use of the Performance Budgeting module at this time presents a

number of other technical support system challenges and the current

condition of the District’s financial support systems needs to be stabilized

before implementation. For example,

• The lack of a stable unified Wide Area Network (WAN) precludes District

agencies from accessing the system and developing their fiscal year 2002

budgets. However, according to the SOAR Project Plan, the necessary

infrastructure analysis was completed on January 6, 1998.

• Current client server resources prevent agency budget staff from

concurrently accessing the Performance Budgeting module during peak

budget season, which can result in users being locked out or knocked off

the system.

In addition to the above factors, further review by OBP has resulted in a

decision by the District to reengineer the budget formulation process and

develop a requirements definition8

 for the new process and then select a

new software solution to deliver the results.

The Fixed Assets module was intended to track the acquisition, transfer,

disposition, and maintenance of the District’s capitalized assets (such as

personal property, equipment, and buildings) and support accounting,

management, and control over these assets, which totaled a reported

$3.1 billion in fiscal year 2000. The District’s implementation schedule for

this module has continually been revised. For example, originally

scheduled to be implemented in February 1999, the Fixed Assets module is

now planned to be implemented by the end of fiscal year 2001—over 2

years after the initially planned implementation. According to the SOAR

 8

Requirements are the blueprint that system developers and program managers use to

design and develop a system. It is critical that requirements be carefully defined and flow

from the concept of operations (how the organization’s day-to-day operations are or will be

carried out to meet mission needs). Ill-defined or incomplete requirements have been

identified by many system developers and program managers as a root cause of system

failure. Without adequately defined and organizationally approved requirements, a system

will need extensive and costly changes before it can become fully operational.

Fixed Assets Module Has

Not Been Implemented
Page 12 GAO-01-489 District of Columbia Financial Management System

Program Management Office (PMO), the delay was the result of multiple

competing priorities such as the Year 2000 conversion and the production

of the Comprehensive Annual Financial Report (CAFR) combined with the

problem of limited personnel resources. Currently, fixed assets are

recorded by each agency using a variety of methods, including manually

updated ledger books and off-line automated tools. Such methods,

however, are error-prone and could lead to incorrect recording and

reporting of assets. Once the Fixed Assets module is implemented,

according to District officials, all District agencies will use this same tool

to account for assets. However, the SOAR PMO does not have a

documented comprehensive plan for managing the implementation of the

Fixed Assets module.

Although the financial management system was scheduled to become fully

integrated in April 1999, significant external feeder systems, including

personnel and payroll functions, the procurement system, and the tax

system, are not fully integrated with SOAR as originally planned because

the feeder systems have not been completed.

In addition to the feeder systems not being completed, current monitoring

of interface development is not documented. For example, we asked the

SOAR PMO for an update on the status of the interface development and

we were given the most recent interface status report, which was dated

September 14, 1998. The SOAR PMO was unable to provide an explanation

as to why the status report was not being updated more frequently even

though work was ongoing. In our July 1997 report,9

 we raised concerns

about the District’s failure to focus more broadly on its financial

requirements, such as those stemming from the need to integrate SOAR

with feeder systems. We noted that the District had not defined how the

interfaces would work or what data would be provided for each feeder

system. In addition, as we reported in October 1997,10 the District’s time

frames for implementing its systems seemed to be ambitious in light of the

complex nature of the District’s financial management structure and the

lack of identified and confirmed requirements for several key systems,

such as the feeder systems.

 9

See GAO/AIMD-97-101R, July 9, 1997.

10District of Columbia: Inspector General Independence as Compared to Federal Agencies

and Acquisition of a New Financial Management System (GAO/AIMD-98-27R, October 21,

1997).

Significant Related

Financial Systems Are Not

Fully Operational
Page 13 GAO-01-489 District of Columbia Financial Management System

The District acquired and developed a new personnel and payroll system

in order to improve the quality of its business processes and to replace an

aging legacy system. As we noted in a 1995 testimony,11 personnel

information on the District’s 40,000 employees has long been error-prone

and inconsistent. Beginning in 1991, the District created an action plan to

acquire an automated human resources management information system,

called the Comprehensive Automated Personnel and Payroll System

(CAPPS). CAPPS was estimated to cost about $13 million to develop and

was expected to be deployed by December 1999. The District had

anticipated that CAPPS would provide more robust human resources

capability than the prior legacy system, such as providing on-line funding

data at the agency level, budgetary and spending controls at the position

level, and accurate accounting of expenses, such as overtime.

However, as we reported in December 1999,12 the District did not

effectively plan for CAPPS. We noted that the District did not develop a

project management plan and a risk management plan; obtain agreement

from the acquisition team, system users, and the contractor on detailed

requirements for CAPPS; or establish a configuration control process to

control the changes that were made to data tables connected to the

software package that the District acquired for CAPPS. By not

implementing these critical management processes, the District lacked the

means to establish realistic time frames for CAPPS, track development

along those time frames, and ensure that changes being made to CAPPS

were consistent and in line with business requirements. In fact, since

beginning the CAPPS initiative in 1991, the District has had to continually

revise its CAPPS implementation deadline.

As a result of these delays, some District agencies are using the CAPPS

system, while others continue to use the old personnel and payroll system,

the Unified Personnel and Payroll System (UPPS), until a plan for a new

payroll processing system can be developed. DC Public Schools, the Fire

Department, and a few smaller agencies are using CAPPS to process

payroll, while the remaining District agencies process their payroll

through UPPS. Relying on dual systems in this manner leads to lack of

standardization and creates unnecessary effort and inefficiencies. In

 11District of Columbia: Weaknesses in Personnel Records and Public Schools’ Management

Information and Controls (GAO/T-AIMD-95-170, June 14, 1995).

12District of Columbia: The District Has Not Adequately Planned for and Managed Its New

Personnel and Payroll System (GAO/AIMD-00-19, December 17, 1999).

Weaknesses and

Uncertainties Surround

Personnel/Payroll System
Page 14 GAO-01-489 District of Columbia Financial Management System

addition, CAPPS is not electronically integrated with SOAR, and both

CAPPS and UPPS data must undergo a conversion process before

interfacing with SOAR, creating further inefficiencies in processing and

reporting payroll-related costs.

Furthermore, the District is in the process of determining whether it will

continue with CAPPS or whether an entirely new system is needed. In an

August 11, 2000, letter to the Mayor, the District CFO stated that “the new

CAPPS system, for a number of reasons, is compromised beyond repair.

While it continues to pay people accurately, it has been customized to the

point that its basic architecture has been destroyed. Underlying

calculations necessary to make retirement computations and W-2s are

likely fatally compromised.” This combination of weaknesses and

uncertainties surrounding CAPPS further call into question the District’s

ability to resolve implementation issues and its ability to pay its employees

accurately and on time and account for their retirement and benefits.

According to a District official, the Integrated Tax System (ITS) is

intended to be a complete reengineering of the Office of Tax and

Revenue’s (OTR) business process, at an estimated cost of about

$63 million. It came about because of serious concerns related to business

processes, collection of delinquent accounts, tax compliance/discovery,

data purification, work flow management, and the integration of revenue

management with other key governmental functions (for example,

unemployment compensation, business registration and regulation, and

child support enforcement).

The old system consisted of a stand-alone, nonintegrated system for each

major tax category—business, real property, and individual. For example,

if a taxpayer was due a refund from an individual tax return but owed

property taxes, there was no linkage under the old structure that would

allow these two tax systems to interact to offset one another. District

officials told us that the Integrated Tax System will allow the District to

integrate all tax types under one system. On November 13, 2000, the

District’s Business Tax module became operational and interfaced with

SOAR. The real property and individual tax modules are expected to be

completed and integrated with SOAR in January 2002. Until the real

property and individual tax modules are implemented, the District will

continue the cumbersome practice of manually entering data for property

and individual taxes into SOAR.

Integrated Tax System Is

Not Fully Implemented
Page 15 GAO-01-489 District of Columbia Financial Management System

In July 2000, the District’s Inspector General reported13 that the District

was using two distinctly different procurement systems. The Office of

Contracts and Procurement (OCP) purchased PRISM/OCP Express14 as its

procurement package, while the CFO uses ADPICS for procurement

transactions. As a result, various offices rely on different systems to

process procurements. OCP has spent at least $14 million since it began

the process of implementing a new procurement system 13 years ago. A

July 2000 DC Office of Inspector General report stated that PRISM/OCP

Express and SOAR had interface problems and that procurement data

were being maintained in both systems. Furthermore, reports generated

with procurement data must be developed with the coordination of the

responsible agencies and after reconciliation of data from both systems.

According to a District official, this situation makes it difficult for them to

track procurements and payments, and the use of both systems has

produced inefficiencies, duplication, and waste within the District. An

OCP official told us that they recently hired a contractor to review OCP

Express capabilities and determine what modifications, if any, could be

made to enhance its functionality. According to District officials, until the

District completes its assessment of the procurement system, it plans to

continue using ADPICS to process procurement transactions through

SOAR as ADPICS is the only available mechanism for entering

procurement transactions into SOAR.

We also reported in our January 31, 2001, report15 that serious and

pervasive computer security weaknesses place the DC Highway Trust

Fund and other District financial, payroll, personnel, and tax information

at risk of inadvertent or deliberate misuse, fraudulent use, and

unauthorized alteration or destruction without detection. A primary

reason for the District’s information system control problems was that it

did not have a comprehensive computer security planning and

 13Audit of Procurement Activities Office of Contracting and Procurement, Office of the

Inspector General, Government of the District of Columbia, OIG-20-99PO, July 27, 2000.

14PRISM is an automated commercial off-the-shelf procurement system that tracks and

maintains small purchases and contract records. PRISM has three modules: (1) OCP

Express (small purchases), (2) planning, and (3) contracts. PRISM was intended to allow

District agencies the ability to interface and automate all procurement activities from the

requisition to the receipt of goods or services.

15Information Security: Weak Controls Place DC Highway Trust Fund and Other Data at

Risk (GAO-01-155, January 31, 2001).

The District Relies on Two

Procurement Systems

Computer Security

Weaknesses Place

Information at Risk
Page 16 GAO-01-489 District of Columbia Financial Management System

management program. An effective program includes guidance and

procedures for assessing risks, establishing appropriate policies and

related controls, raising awareness of prevailing risks and mitigating

controls, and evaluating the effectiveness of established controls. Such a

program, if implemented effectively, would provide the District with a

solid foundation for resolving existing computer security problems and

managing its information security risks. District management stated that it

has recognized the seriousness of the weaknesses we identified and

expressed its commitment to improving information system controls.

As discussed earlier, the District has placed the implementation of the

Performance Budgeting system module on hold. A District official told us

that it needs to conduct business process reengineering of the budget

process before making a decision on the appropriate solution for its

budget and related reporting needs. In the meantime, the District

continues to rely on a manual, cumbersome process each year to develop

the budget.

District budget officials have told us that a number of improvements have

been made to the budget process for fiscal year 2002 that they believe will

address some of the problems they faced in developing the fiscal year 2001

budget. Table 1 compares the fiscal year 2001 budget process and results

to the planned fiscal year 2002 budget process, modifications, and

expected results, as provided by the District CFO. However, the District

will enter its budget formulation process for fiscal year 2002 without an

implemented financial system for gathering and formulating its budget

data. Furthermore, the District will not have adequate program-level cost

and budget results data for fiscal year 2001 for use in formulating its fiscal

year 2002 budget.

Status of District Efforts to

Improve Its Budget

Process
Page 17 GAO-01-489 District of Columbia Financial Management System

Table 1: Comparison of Fiscal Year 2001 and 2002 Budget Processes and Results

FY 2001

process FY 2001 results

FY 2002

process

FY 2002

modifications

FY 2002

expected

results

Budget

developed

without goals

Agency budget

allocation

decisions and

programmatic

narratives did not

support Mayor’s

priorities or

Citizen Summit

goals a

Budget will

be guided by

goals

FY 2002 budget

manual articulates

Mayor’s priorities,

includes

performance

measures, and

establishes clear

funding targets

that agencies

must achieve

during the

baseline budget

development

Budget

development

and

presentation

will clearly

support goals

Top-down

development

of budget

Budget failed to

completely

account for onetime costs only

known to the

agency for FY

2000 and FY

2001

Bottom up

development

of budget

Agency baseline

budgets will be

requested at the

detail level.

Changes from FY

2001 reallocated

budget will be

identified during

the agency

baseline

submission

Budget will be

developed with

clear

explanation for

each change

from the FY

2001

congressional

budget at the

responsibility

center level

Unilateral Baseline budget

did not receive

acceptance by

executive or

legislative

branch

Collaborative Draft copies of the

budget manual

were distributed to

all agency

directors and

CFOs along with

stakeholders.

Input was

requested and

used to finalize

the FY 2002

budget manual

Agency

directors and

District

stakeholders

will be active

participants in

developing

and shaping

the FY 2002

budget

Reactive Fostered a

perception of

incompetence,

detracted from

substantive

issues, and

jeopardized the

FY 2001 Mayor’s

budget

Proactive and

guiding

FY 2002 budget

manual provides

“forward thinking”

process that

anticipates

stakeholder

requests for

detailed

information. This

process provides

information

needed to

develop a sound

The budget

process will

provide a

structured

format for

policy

development

and will

anticipate

inquiries on

the content

and

development
Page 18 GAO-01-489 District of Columbia Financial Management System

FY 2001

process FY 2001 results

FY 2002

process

FY 2002

modifications

FY 2002

expected

results

baseline budget

that will allow

stakeholders to

focus on policy

issues

of the budget

a

On November 20, 1999, as part of Mayor Williams’ Neighborhood Action initiatives, more than 3,000

residents came together at this summit to review and comment on the Mayor’s Draft City-Wide

Strategic Plan and identify citywide goals.

Source: Office of the Chief Financial Officer, District of Columbia Government.

Because the District was in the early stages of budget formulation, we

were not able to assess whether these improvements will achieve their

intended results. Further, the District was unable to provide us with any

documentation to support that it had undertaken a structured and

disciplined approach to implementing these actions.

In order to address its budget processes and systems, the District

contracted with the Government Finance Officers Association (GFOA), a

leader in state and local budgeting and finance, to help evaluate how well

OBP was structured to carry out its budget and financial functions. The

report,16 which GFOA issued on November 2, 2000, focused on an

organizational review of the budget office internally and as it related to

other District agencies.

GFOA found that OBP faced organizational and personnel management

issues. For example, the study cited the following issues: organizationally,

there is little communication or coordination between OBP divisions

during major budget cycle periods; OBP lacks clear organizational and

management policies regarding budget development and execution; staff

need training on the current financial management system and the

acquisition of analytical tools to perform financial analyses; and OBP staff

have not had fiscal analyses sufficiently incorporated into their typical

duties, such as expenditure and revenue analyses, cost-benefit analyses,

and program outcome analyses. OBP officials stated that, as a result of the

GFOA recommendations, they have made a number of staffing and

organizational changes, which were consistent with many of the initiatives

 16The District of Columbia Government, Final Report: Organizational Review of the Office

of Budget and Planning (Government Finance Officers Association, Report 2000-52,

November 2, 2000).
Page 19 GAO-01-489 District of Columbia Financial Management System

for change they had already started. OBP officials stated that they have

taken the following actions:

• created the position of Chief Operating Officer to increase overall program

efficiency and accountability in three programs: data management,

organization management, and communications;

• realigned the Associate Deputy CFO (ADCFO) position to sharpen OBP’s

quality of forecasting and long-term fiscal planning ability with ADCFO

assuming responsibility for the functions of economic analysis, budget

execution and reporting, and legislative affairs, which are three new

branches;

• assigned the Economic Analysis Branch the lead on improving

performance-based budgeting for the District;

• designated the Legislative Affairs Branch as the leading provider of

legislative support to OCFO and other stakeholders, providing legislative,

legal, and policy analysis to ensure that the goals of District stakeholders

are achieved;

• gave the Organizational Management Branch responsibility for supervising

and coordinating general office operations and building morale and

reducing attrition through reform, orientation, recruitment, outreach

efforts, training, and career development; and

• reorganized the Operating and Capital Budget divisions, which under the

old structure functioned independently of each other with little or no

collaboration or interaction, into a two-pronged division that strategically

links operating and capital budget operations.

According to District OBP officials, the above changes have improved

budget forecasting activities as well as provided greater control over

budget execution and fiscal oversight.

We agree that OBP needed to address personnel and related organizational

issues in order to better align its operations and facilitate and enhance its

ability to carry out its budgetary and financial responsibilities. However,

because these efforts were only in the early stages of implementation, we

could not assess their impact on OBP’s operations or on its ability to

successfully implement a budgeting system in the future.

Until the District develops a disciplined and structured approach to its

business process reengineering efforts for its budget process, it will

continue to develop its budget using a process that is cumbersome and

inefficient. Until a budget formulation and execution system is

implemented and fully integrated with its financial systems, the District’s

budget is not likely to reflect the cost of services at the program level
Page 20 GAO-01-489 District of Columbia Financial Management System

because the District currently does not have a way of measuring those

costs.

As originally envisioned, SOAR was expected to provide general ledger,

grants management, fixed assets management, budget execution, cash

management, and budget formulation functionality. SOAR was expected to

strengthen control over appropriations and spending, provide enhanced

tracking of grants and projects, automate and streamline the financial

management process, record obligations as incurred, track payments and

disbursements, monitor performance measures by program and

organization, prepare timely, accurate, and reliable financial reports,

expedite the month-end closing process, and provide the ability to input

and control data on-line. Overall, the District and its residents were

expected to benefit from improved financial management and reporting of

public services and resources. Our discussions with SOAR pilot agencies

indicate that these expectations have not been realized.

Five District agencies were used as pilot agencies during the systems

implementation— the District of Columbia Public Schools (DCPS),

Department of Public Works (DPW), Department of Human Services

(DHS), Metropolitan Police Department (MPD), and Financial and

Technical Services. The pilot program provided an opportunity for

agencies with unique requirements to customize the implementation of

SOAR in their agencies. The pilot program also provided a test and

“exercise” of the implementation process as well as a test of the function

of the new system. The pilot was designed to identify problems and

develop solutions prior to full implementation.

We contacted each pilot agency to obtain officials’ views on SOAR’s

current operational status. In conjunction with our discussion with the

pilot agencies, we reviewed the expectations communicated in a

December 1997 presentation in which the OCFO provided a detailed list of

the former financial management system’s deficiencies along with the

anticipated capabilities of the new financial management system that were

expected to remedy these deficiencies. The following are examples of

current operational issues identified by officials at the pilot agencies

where anticipated resolutions did not materialize.

• All five pilot agencies reported that they need more recent data to more

fully use the SOAR EIS, a high-level management tool capable of

generating ad hoc reports. Currently, data in EIS is updated weekly, even

SOAR User

Expectations Have

Not Been Fully Met

SOAR Currently Does Not

Meet Financial

Information Needs
Page 21 GAO-01-489 District of Columbia Financial Management System

though the expectation for the new system was that users would have

“real time, on-line information.”

• Four of the five pilot agencies indicated that the lack of full integration

between the core accounting system and feeder systems is a problem. For

example, two agencies said that they have to spend extra time reconciling

payroll transactions between CAPPS and SOAR in order to ensure that the

payroll data in both systems is accurate and complete.

• Four of the five pilot agencies indicated that the help desk facility needs

improvement because it does not provide adequate assistance.

• Four of the five pilot agencies indicated that the SOAR training was not

tailored to their specific needs.

• Three out of the five pilot agencies indicated that they need enhanced

project costing capabilities. According to one agency official, SOAR does

not provide cost information on specific programs or activities. This

results in agencies having to maintain information outside the system in an

attempt to track program costs.

Our work as well as other studies have shown that problems associated

with requirements management are key factors in software projects that

do not meet their cost, schedule, and performance goals. By not clearly

identifying and defining user requirements up front, the financial

management system is currently not able to fulfill the financial

management and reporting needs of its users.

Training is a critical component of successful implementation of a new

financial management system and can be accomplished through a formal

program, on-the-job training, and the use of experts assigned to each

agency. We previously reported17 that from January 1998 through April

1999, 42 percent of SOAR users did not attend scheduled training. In

December 2000, the SOAR PMO identified a core training curriculum

consisting of nine courses. According to the SOAR PMO, less than 50

percent of the SOAR user community had completed the new core training

curriculum.

The SOAR Program Director told us that conflicting priorities contributed

to the low attendance rate, including the large amount of effort needed to

complete the District’s annual financial statements and prepare for its

 17District of Columbia: New Financial Management System (GAO/AIMD-99-217R, June 18,

1999).

SOAR Training Was Not

Comprehensive
Page 22 GAO-01-489 District of Columbia Financial Management System

annual audit. According to the same official, another factor was the lack of

complete buy-in by the users of the new system. In addition, a District

official stated that many reported transaction errors resulted from a lack

of understanding of the impact of transactions and their effect on general

ledger accounts, coupled with the learning curve experienced with the

implementation of the new system. Furthermore, several pilot agency

officials stated that the overall training was generic and not specific to the

District’s needs.

In our June 1999 report,18 we stated that the District planned to pilot a job

certification program for employees in financial positions. Under this

program, employees would be certified for financial positions based on

training and testing. In November 2000, the SOAR PMO told us that they

are still reviewing the details of implementing a certification program. The

SOAR PMO also said that a comprehensive training plan for financial

management personnel for fiscal year 2001 does not exist. The SOAR

Steering Committee had determined that there was a need for more

District user access to individuals with enhanced SOAR expertise.

At the same time, the District is in the process of implementing a new

program called the “Super Users” program. The goal of the program is to

develop a team of “super users,” individuals with advanced SOAR skills, to

serve as mentors and providers of on-the-job training to users. District

officials said they had recently selected eight individuals for this program,

and a recruitment effort is underway to identify eight more individuals for

the program.

The current system does not have the capability to capture the costs of

specific District programs or activities. Project cost accounting is

important in determining whether specific programs or activities are

achieving their goals within budget. To compensate for the lack of a

project cost accounting capability, agencies are capturing and maintaining

information outside SOAR manually or by using other software

applications. According to District officials, there are no plans to

implement a separate module, such as activity-based costing. Comparative

and accurate cost information would enable stakeholders to make more

informed decisions, which would, in turn, provide better service to the

citizens of the District through improved service delivery. Currently,

 18See GAO/AIMD-99-217R, June 18, 1999.

SOAR Does Not Capture

Cost of Specific Programs
Page 23 GAO-01-489 District of Columbia Financial Management System

various District activities, such as the cost of trash collections, motor

vehicle inspection, clinical care, and street repairs, must be calculated

manually, which is inefficient, time-consuming, and prone to error. District

officials anticipated that the performance measures featured in the

performance budget module would be able to provide comparative and

cost information for all levels of programs throughout the District.

However, it is unlikely that the District will have a solution for its program

cost needs until after a budgeting system is implemented and integrated

with SOAR.

In September 1997, the District planned to spend $26 million (plus related

costs for personnel and space) to implement SOAR. According to the

Deputy CFO, as of March 8, 2001—almost 3-1/2 years later—the actual

cost had climbed to about $41 million, an increase of about $15 million.

According to the PMO, one of the reasons for the increased costs was the

need to provide knowledge transfer (this refers to agency-specific

implementation assistance, enhanced training, and help desk operations)

at the major agencies and transition assistance, which were not originally

included in the contract. According to another District official, the

increase in implementation costs also resulted from the District initially

not completely understanding user requirements. Consequently, the

District found it necessary to implement additional requirements after the

fact. For example, after the SOAR contract was awarded, the University of

the District of Columbia (UDC) determined that SOAR could satisfy its

requirements for higher education accounting and opted to install SOAR,

rather than a separate new system, at a cost of $1 million. Also, according

to a District official, the District underestimated the level of support and

time required to implement SOAR. Accordingly, the District contracted for

additional implementation support. Further, additional District users

required access to EIS and thus required the purchase of additional EIS

licenses, licenses which cost the District approximately $900,000.

SOAR Project Costs

Have Significantly

Exceeded Original

Estimates
Page 24 GAO-01-489 District of Columbia Financial Management System

Acquiring an effective information system must begin with a clear

definition of the organization’s mission and strategic goals. To assure a

solid foundation for the District’s system, we offered a structured

approach in our July 1997 report19 based on three building blocks

especially important in the early stages of a project: concept of operations,

requirements definition, and alternatives analysis. A concept of

operations— the panorama of a system’s purpose and the environment in

which it will function—is the basis on which specific requirements—

functions the system must be able to perform—are developed. With a

complete set of well-defined requirements based on a clear concept of

operations, District leaders could make an accurate analysis of how well

available alternatives would meet the needs of the government and its

citizens.

In April 1998,20 after the District had contracted for and begun

development of its new system, a more detailed study led us again to the

conclusion that the District’s process, while strong in some areas, was

undisciplined and immature. Our conclusion was based on a wellrecognized model of software process assessment, the Software

Engineering Institute’s Software Acquisition Capability Maturity Model

(SA-CMM). In our recommendations, we stressed the need for written

policy and documentation, the development of a management plan, the

assignment of responsibility for areas of planning and development, and

requirements development in the key process areas of software acquisition

planning, requirements development and management, project

management, contract tracking and oversight, evaluation, and acquisition

risk management.

Although the processes spelled out in the SA-CMM model and our

recommendations are detailed, rigorous, and time-consuming, they are, in

the long run, cost-effective and vital elements of success. Unfortunately, in

its efforts to meet an overly ambitious time schedule, the District has

spent considerably more money than planned to acquire a system that—6

years after we began our review and started making recommendations—

now serves as yet another cautionary example of the risks entities run

when they choose to short-cut a disciplined approach to the planning,

acquisition, and management of a financial management system.

 19See GAO/AIMD-97-101R, July 9, 1997.

20See GAO/AIMD-98-88, April 30, 1998.

District Did Not

Follow a Structured

Approach
Page 25 GAO-01-489 District of Columbia Financial Management System

Another key component of successful financial management for the

District is conducting a comprehensive assessment of its human capital

needs for its financial management functions. In our Executive Guide:

Creating Value Through World-class Financial Management,

21 we outlined

three critical elements for developing first-rate financial management staff

teams. These elements were: (1) determining required skills and

competencies, (2) measuring the gap between what the organization needs

and what it has, and (3) developing strategies and detailed plans to

address current or expected future deficiencies. We reported that having

staff with appropriate skills is key to achieving financial management

improvements, and managing an organization’s employees is essential to

achieving results. Entities that focus on valuing employees and aligning

their policies to support organizational performance goals start with a

human capital assessment. The results of such an assessment could help

to determine the resources needed to successfully implement financial

management improvements. And, as we reported in September 2000,22

performing a self-assessment of human capital needs helps organization

leaders understand the strengths and limitations of their human capital

information systems. These data can help an organization develop a profile

of its human capital. Further, because human capital information can

spotlight areas of concern before they develop into crises, gathering these

data is an indispensable part of effective risk management. Without a

formal assessment of its requirements and needs, and a strategy for

addressing them, the District’s efforts can become piecemeal, incomplete,

and ineffective. The challenges the District already faces in implementing

its financial management system could be exacerbated by its lack of a

human capital assessment for its financial management functions. By not

identifying staff with the requisite skills to implement such a system and

by not identifying gaps in needed skills and filling them, the District has

reduced its chances for successful implementation.

 21Executive Guide: Creating Value Through World-class Financial Management

(GAO/AIMD-00-134, April 2000).

22Human Capital: A Self-Assessment Checklist of Agency Leaders (GAO/OCG-00-14G,

September 2000 Version 1).
Page 26 GAO-01-489 District of Columbia Financial Management System

In reports dating back to 1995, we have reported on the District’s financial

situation and efforts to improve its financial management, including the

implementation of SOAR. For example, in 1995, we recommended that the

Mayor clean up existing data in the financial systems and place special

emphasis on ensuring that basic accounting policies and procedures are

followed and that the Authority study the accounting and financial

management information needs of the District.23 In a July 9, 1997, status

report,24 we noted that the District had not completed three key elements

of its system acquisition: concept of operations, requirements definition,

and alternatives analysis. We also noted that the time frames for

completing several of these important tasks were unknown and that the

District had adopted an overly ambitious schedule.

On April 30, 1998, we reported25 that the District’s software acquisition

processes, while having some strengths, were not mature when compared

to standards established by the Software Engineering Institute.

Weaknesses noted in the report included: (1) requirements definition

problems; (2) project management and oversight weaknesses; (3) lack of

an effective evaluation process; (4) lack of a formal risk management

process; and (5) failure to meet some milestones. In that report, we made

six recommendations for strengthening the processes that relate to the

SOAR project and improving future software acquisition efforts. As

discussed earlier, in our December 1999 report on the CAPPS system,26 we

noted that by not implementing critical management processes, the

District lacked the means to establish realistic time frames for CAPPS,

track development along those time frames, and ensure that changes being

made to CAPPS were consistent and in line with business requirements.

We made six recommendations to the District that focused on the need to

implement effective management controls and processes for maintaining,

operating, and protecting CAPPS.

Together, those reports established a framework for actions the District

needed to take in order to (1) improve its financial management and

(2) avoid costly failure when acquiring a new financial management

system that would successfully meets its needs. In our reports, we

 23See GAO/T-AIMD-95-176, June 21, 1995.

24See GAO/AIMD-97-101R, July 9, 1997.

25See GAO/AIMD-98-88, April 30, 1998.

26See GAO/AIMD-00-19, December 17, 1999.

Most of Our Prior

Recommendations

Related to the

Financial

Management System

Have Not Been

Implemented
Page 27 GAO-01-489 District of Columbia Financial Management System

indicated that major improvements in the District’s financial management

and other management information can only be realized if they are part of

an overall assessment of processes, people, and equipment.

As of April 3, 2001, the District had implemented 3 of the 16

recommendations we made since 1995, and critical recommendations have

yet to be fully addressed. The District had action in process on another 13

recommendations. Table 2 in appendix I provides the implementation

status of recommendations made in our reports and testimony on SOAR

implementation covering fiscal years 1996 through 2000.

The District continues to face significant challenges in its efforts to put in

place a financial management framework that ensures timely and reliable

financial data on the cost of the District’s operations. In its efforts to meet

an overly ambitious schedule, the District has spent considerably more

money than planned to acquire a system that—6 years after we began our

review and started making recommendations —now serves as yet another

cautionary example of the risks involved in not following a disciplined

approach to the planning, acquisition, and implementation of a financial

management system.

Almost 4 years after the District’s acquisition of its core financial

management system, SOAR and related systems are in various stages of

implementation and some elements have been put on hold. The current

mix of components involves duplication of effort and requires

cumbersome manual processing instead of automated interfaces. Staff

members who use the system are inadequately trained. In its current state,

the system is unable to produce relevant, useful, timely, and reliable

information adequate to the needs of government officials for assessing

the costs of programs, measuring program performance, and making wellinformed decisions in forming the city’s budget and in providing city

services.

With a system that is still incomplete more than 2 years after the planned

date for citywide implementation, the District has already spent over 50

percent more than originally planned for SOAR implementation. The

project continues to experience implementation delays, and the final cost

of the complete financial management system cannot yet be determined.

Disciplined acquisition and implementation processes are designed to

prevent the types of problems experienced by the District in its financial

management systems implementation. The key to a disciplined system

Conclusions
Page 28 GAO-01-489 District of Columbia Financial Management System

development effort is the use of disciplined processes in multiple areas,

including requirements management, project planning, project tracking

and oversight, quality assurance, configuration management, and risk

management. These key areas have been the focus of our

recommendations in reports dating back to 1995. The District has not yet

completed action on most of these recommendations and has failed to

institute the disciplined approach needed to ensure the successful

implementation and management of a financial management system.

The District’s difficulties reflect the experience of other entities that have

attempted to build a financial management system without first laying a

solid foundation. Essential to that foundation is the definition of

requirements. A system cannot be counted on to fill needs that have not

been clearly defined. When those needs are later identified, retrofitting

software can cost significantly more than the same work done during

original development. The District continues to develop its system without

clearly defined user requirements.

Although the District recently received its fourth consecutive unqualified

or “clean” audit opinion on its financial statements, the financial

information needed by decisionmakers to measure and manage

performance requires greater precision and more timely access than that

needed to satisfy a financial audit. Furthermore, to continue achieving

clean opinions without the support of an efficient financial management

system, officials and staff will be forced each year to devote extraordinary

effort at the expense of other city government operations. As the city

moves toward greater financial independence, the weakness of its

financial management system may become increasingly difficult to

overcome.

As we recently reported in our Executive Guide,27 to provide meaningful

information to decisionmakers, entities must develop systems that support

the partnership between finance and operations. Entities must ensure that

the systems accurately measure the program costs and that they provide

decisionmakers and line managers with timely, accurate financial

information on the quality and efficiency of business processes and

performance. Entities must also identify their human capital needs by

conducting a human capital assessment in order to develop human capital

strategies to address current and future risks faced by the entity. Such an

 27See GAO/AIMD-00-134, April 2000.
Page 29 GAO-01-489 District of Columbia Financial Management System

assessment is critical to helping entities establish the systems and

processes needed to successfully improve financial management and

accountability.

District officials need to take time now to assess the current status of the

city’s financial management system, to identify problems, and to establish

a disciplined process to address these problems through the completion of

its financial systems implementation. As we discussed in our Executive

Guide, financial management improvement needs to be an entitywide

priority—in this case, the District—overseen by leadership that is in

control of the process and accountable for its success. Financial and

program managers need to be able to rely on the system for adequate,

timely cost and performance information needed to manage costs,

measure performance, make program funding decisions, and analyze

outsourcing or privatization options. With such information District

decisionmakers will have the tools they need to meet the demands of

managing the city’s finances efficiently and serving its citizens effectively.

Before moving forward on the implementation of the District’s financial

management system, we recommend that the Mayor, in concert with the

Chief Financial Officer, take the following actions:

• Assess the status of current financial management operations, including

financial management policies and procedures and systems acquisition

and development policy and procedures, and determine whether the

current systems have the capability of meeting the District’s financial

management needs.

• Develop an overall concept of operations which clearly articulates overall

quantitative and qualitative system characteristics to the user, developer,

and other organizational elements and which facilitates understanding of

the user organizations, missions, and organizational objectives from an

integrated systems point of view.

• Develop an action plan based on that assessment and the overall concept

of operations that addresses any identified weaknesses, including the

necessary systems and procedural changes, and that specifies a disciplined

process with milestones and clear accountability.

• Incorporate our prior, open recommendations in the action plan to

address the key areas of requirements development and management,

project planning, project tracking and oversight, quality assurance, and

training as they apply to components of the system that are not yet fully

implemented, including the fixed asset module, performance budgeting,

personnel and payroll, procurement, integrated tax, and all interfaces.

Recommendations
Page 30 GAO-01-489 District of Columbia Financial Management System

• Determine the competencies required at leadership, management, and

functional levels for financial and nonfinancial managers and develop

appropriate training. Strictly enforce the implementation of the training

curriculum and mandate attendance at user training sessions.

• Conduct an assessment of the District’s human capital needs for financial

management in order to strategically develop its financial management

team to successfully address the current weaknesses in financial

management systems, as well as to support the District’s overall mission,

goals, and objectives.

• Complete the reengineering of the budget process in conjunction with the

implementation of a budget and project costing system.

In commenting on a draft of this report, the Chief Financial Officer of the

District agreed with our recommendations and provided additional details

on four areas: (1) our prior recommendations, (2) our recommendation

about assessing human capital needs, (3) our recommendation regarding

the budget process, and (4) implementation of SOAR. With respect to the

CFO’s comments on SOAR, the results of our work showed that the CFO’s

characterization of the progress made to date was overly optimistic. The

CFO’s comments are reprinted in appendix II. A representative from the

Mayor’s Office also reviewed this draft, along with the CFO’s comments,

and stated that the Mayor’s Office had no further comments.

In regard to implementing our prior recommendations, the CFO stated that

the District is taking action as described in a March 12, 2001, letter to us.

This letter was in response to our recent request that the District provide

us an update on the actions it had taken to address recommendations from

our December 1999 report.28 As part of our ongoing work in the District,

we will be evaluating these actions to determine whether they

satisfactorily address our prior recommendations.

Concerning our recommendation that the District assess its human capital

needs, the CFO noted that the District had taken the initial step in

conducting a human capital assessment by engaging a professional

services firm to help review the District’s organizational structure and

identify performance measures and best practices. However, as the CFO

noted, the professional services firm review provides the groundwork for

the first phase of the CFO’s financial management performance measures

 28See GAO/AIMD-00-19, December 17, 1999.

Agency Comments

and Our Evaluation
Page 31 GAO-01-489 District of Columbia Financial Management System

program. A complete human capital assessment will be an essential part of

the CFO’s improved financial management leadership and support.

Although the CFO agreed with our recommendation that the District

complete the reengineering of the budget process in conjunction with the

implementation of a budget and project costing system, the CFO took

exception to certain statements pertaining to our finding. Specifically, the

CFO disagreed with our statement that the fiscal year 2002 budget

formulation process did not have the benefit of an “implemented financial

system gathering and formulating its budget data” and that it would not

have “adequate program-level cost and budget results data for fiscal year

2001.” The CFO stated that the fiscal year 2002 budget process did in fact

integrate data from several financial systems: CAPPS, UPPS, and SOAR.

However, this reliance on compiling data generated from multiple,

nonintegrated systems contributed to our finding that the District relies on

a cumbersome process to generate financial information. Instead of

relying on one unified system to reliably and routinely provide information

as needed, the District must compile information from various different

systems, which creates inefficiencies and rework.

The CFO also stated that the District has an updated timetable and

comprehensive plan for fully implementing the SOAR system. However, at

the time we had finalized our report, the District had not provided us with

a plan. In addition, as discussed in our report, the District’s performance

budget module has been put on hold and the fixed asset module is

incomplete. Both of these modules are key components of the SOAR

system. Further, the implementation of systems that feed into SOAR—

personnel and payroll, procurement, and tax —is incomplete and the

systems lack electronic interfaces with SOAR. Also, it is uncertain whether

the currently envisioned successor to the personnel and payroll system—

CAPPS—will be retained or whether an entirely new system is needed,

and we were unable to obtain updated timetables and comprehensive

plans for the implementation of these key feeder systems. As we

recommended, the District needs to formulate a comprehensive plan that

includes details of estimated dates, actions needed, and assignment of

responsibilities for the completion of these modules and related systems.

The CFO also stated that the District’s annual financial statements are an

output of the SOAR system and thus reliable, auditable financial data is

available from SOAR and the Executive Information System. However, as

we noted in our report, the financial information needed by

decisionmakers to measure and manage performance requires greater

precision and more timely access than that needed to satisfy a financial
Page 32 GAO-01-489 District of Columbia Financial Management System

audit. Financial and program managers need to be able to rely on the

system for adequate, timely cost and performance information needed to

manage costs, measure performance, make program funding decisions,

and analyze outsourcing or privatization options.

The CFO also stated that the core SOAR implementation was delivered on

schedule and performs as intended. He further noted that the increased

costs of the SOAR implementation were directly associated with changes

in scope not cost overruns. As we noted in our report, however, the

District’s performance budget module has been put on hold and the fixed

asset module is incomplete. Both of these modules are key components of

the SOAR system. Further, as discussed above, the implementation of

systems that feed into SOAR—personnel and payroll, procurement, and

tax—is incomplete and the systems lack electronic interfaces with SOAR.

As we also discussed, many of the cost increases were also the result of

additional requirements and the District not completely identifying user

requirements up-front.

Finally, in regard to the CFO’s comment that not all SOAR users are

required to complete all core modules, according to the SOAR PMO, less

than 50 percent of the SOAR user community had completed the new core

training curriculum.

We are sending copies of this report to Senator Mike DeWine, Senator

George Voinovich, Senator Mary Landrieu, Senator Richard J. Durbin,

Representative Chaka Fattah, Representative Constance A. Morella, and

Representative Eleanor Holmes Norton in their capacities as Chairmen or

Ranking Minority Members of Senate and House Subcommittees. We are

also sending copies of this report to Anthony A. Williams, Mayor of the

District of Columbia; Natwar Gandhi, Chief Financial Officer of the

District of Columbia; Charles Maddox, Inspector General of the District of

Columbia; Deborah K. Nichols, District of Columbia Auditor; Suzanne

Peck, Chief Technology Officer; and Alice Rivilin, Chairman of the District

of Columbia Financial Responsibility and Management Assistance

Authority. Copies will be made available to others upon request.
Page 33 GAO-01-489 District of Columbia Financial Management System

Please contact me at (202) 512-2600 or Jeanette Franzel at (202) 512-9406

or by e-mail at franzelj@gao.gov if you have any questions about this

report. Other major contributors to this report were Richard Cambosos,

Linda Elmore, Maxine Hattery, Jeffrey Isaacs, John C. Martin, Meg Mills,

and Norma Samuel.

Sincerely yours,

Jeffrey C. Steinhoff

Managing Director, Financial Management and Assurance
Appendix I: Status of Prior Years’

Recommendations Pertaining to SOAR

Implementation

Page 34 GAO-01-489 District of Columbia Financial Management System

Date and report number Recommendation

Status as reported by District

officials

To the District of Columbia Financial

Responsibility and Management Assistance

Authority (Authority)

June 21, 1995

GAO/T-AIMD-95-176

1. Study the accounting and financial

management information needs of the District

of Columbia government.

Completed. The Authority has

(1) performed site visits and

benchmarking analysis of

accounting and financial

management information systems

similar to that used in the District;

(2) hired a consultant with

extensive business process

reengineering and systems

implementation experience to

analyze the District’s financial

management information systems

implementation effort; and

(3) created a System of

Accounting and Reporting

(SOAR) Steering Committee,

headed by the Chair of the

Authority, which includes the

Mayor, CFO, Chief Technology

Officer, Inspector General, and a

DC Council member.

June 21, 1995

GAO/T-AIMD-95-176

2. The Authority should ensure that any

improvements to management information be

consistent with both the financial plan and the

performance plan which are required by the

Authority Act, Fiscal Year 1995 Appropriation

Act, and Federal Payment Reauthorization Act

of 1994.

Action in process. According to

the Authority, it is (1) assessing

the functionality of the SOAR

Performance Budgeting module;

and (2) including performance

budgeting as an agenda item for

the SOAR Steering Committee.

April 30, 1998

GAO/AIMD-98-88

Direct the District’s Chief Financial Officer to

(1) take the following actions for the six key

process areas we reviewed to ensure that the

current financial management system

acquisition and implementation is satisfactorily

completed and (2) apply these actions to any

future software acquisitions.

See items 3 through 8 below.

April 30, 1998

GAO/AIMD-98-88

3. Software Acquisition Planning:

(1) document decisions and update planning

documents to ensure that large acquisitions

such as FMS can be effectively managed;

(2) designate responsibility for software

acquisition planning activities; (3) determine

required resources for acquisition planning;

(4) ensure that measurements of software

acquisition activities are taken; (5) ensure that

the software acquisition planning

documentation is updated as well as make

program changes regarding outsourcing of the

data center and upgrading the current system

versus buying off-the-shelf; (6) ensure that the

software acquisition planning documentation

Action in process. The Authority

is working with the following:

(1) SOAR program management

office and the District’s Chief

Technology Officer to develop

performance metrics and reports

that enhance accountability and

project management control; and

(2) the District’s CFO to

determine resources required for

acquisition planning. In addition,

the Authority worked with the

District’s data center manager

and information technology

consultant in structuring an

Appendix I: Status of Prior Years’

Recommendations Pertaining to SOAR

Implementation
Appendix I: Status of Prior Years’

Recommendations Pertaining to SOAR

Implementation

Page 35 GAO-01-489 District of Columbia Financial Management System

Date and report number Recommendation

Status as reported by District

officials

addresses life-cycle support of the software;

and (7) develop a written policy for software

acquisition planning.

alternatives and cost-benefit

analysis of out-sourcing the data

center and upgrading versus

replacing the current system.

April 30, 1998

GAO/AIMD-98-88

4. Requirements Development and

Management: (1) develop an organizational

policy for establishing and managing softwarerelated requirements; (2) clearly assign

responsibility for requirements development

and management; (3) document other

resource requirements or resources expended

for requirements development activities;

(4) develop the capability to trace between

contractual requirements and the contractor’s

work products; and (5) develop

measurements to determine the status of the

requirements development and management

activities.

Action in process. The Authority

is: (1) emphasizing the

importance of implementing and

enforcing clear policies and lines

of accountability through the

SOAR Steering Committee;

(2) requiring that the District

provide documentation and

justification for resources

requested or expended; and

(3) emphasizing the importance

of explicitly linking contractor

payments to specific deliverables

through the use of work

breakdown structures.

April 30, 1998

GAO/AIMD-98-88

5. Project Management: (1) develop a written

policy for the execution of the software

project; (2) authorize the project manager to

independently alter either the performance,

cost, or schedule; and (3) require that

measurements be taken to determine the

status of project management activities.

Action in process. The Authority

has emphasized developing

quantitative measures of project

performance. Examples include

emphasis on the internal

transactions files and timeliness

and accuracy of payroll data.

April 30, 1998

GAO/AIMD-98-88

6. Contract Tracking and Oversight:

(1) develop written policy for contract tracking

and oversight activities for the financial

management system project; (2) support the

project team with contracting specialists;

(3) require that the project team review the

contractor’s planning documents (for example,

the project management plan, software risk

management plan, software engineering plan,

configuration management plan); (4) assign

someone responsibility for maintaining the

integrity of the contract; and (5) take

measurements to determine the status of

contract tracking and oversight activities.

Action in process. The Authority

has emphasized to the SOAR

PMO the importance of

developing clear project

deliverables and matching these

to costs through the development

of work breakdown structures.

April 30, 1998

GAO/AIMD-98-88

7. Evaluation: (1) develop written policy for

managing the evaluation of acquired software

products and services; (2) develop a

documented evaluation plan; (3) develop

evaluation requirements in conjunction with

system requirements; (4) assess the

contractor’s performance for compliance with

evaluation requirements; (5) develop

measurements to determine the status of

evaluation activities; and (6) ensure that the

Authority and project manager review the

status of evaluation activities.

Action in process. Utilizing

benchmarking performance

management and best practices,

the District is establishing a

program to ensure adherence to

best technology practices for all

future critical systems software

acquisitions. Policies and plans

are being developed within the

framework of a long-term

technology blueprint.
Appendix I: Status of Prior Years’

Recommendations Pertaining to SOAR

Implementation

Page 36 GAO-01-489 District of Columbia Financial Management System

Date and report number Recommendation

Status as reported by District

officials

April 30, 1998

GAO/AIMD-98-88

8. Acquisition Risk Management:

(1) develop written policy for software

acquisition risk management;

(2) designate a group to be responsible for

coordinating software acquisition risk

management activities; (3) define resource

requirements for acquisition risk management;

(4) ensure that individuals designated to

perform software acquisition risk management

have adequate experience and training;

(5) integrate software acquisition risk

management activities; (6) develop a software

acquisition risk management plan in

accordance with a defined software

acquisition process; (7) develop a

documented acquisition risk management

plan and conduct risk management as an

integral part of the solicitation, project

performance management, and contract

performance management processes;

(8) track and control software acquisition risk

handling actions until the risks are mitigated;

and (9) ensure that risk management activities

are reviewed by the Authority and the project

manager.

Action in process. The Authority

has: (1) created the SOAR

Steering Committee, responsible

for coordinating a variety of

activities including software

acquisition risk management;

(2) emphasized the importance of

ensuring that information

technology employees within the

District are properly screened,

certified, and qualified; and

(3) hired a consultant to review

and assess overall SOAR

acquisition and implementation

performance, including risk

management.

To the Mayor

June 21, 1995

GAO/T-AIMD-95-176

9. Clean up existing data in the financial

systems and place special emphasis on

ensuring that basic accounting principles and

procedures are followed.

Completed. The District has

cleaned up its financial data and

has continued to place an

emphasis on accounting

principles and policies. The

OCFO obtained contractual

assistance to work with the

District agencies, identify required

adjustments to the SOAR system

balances, and ensure that these

adjustments were properly

recorded and reflected in SOAR.

In addition, the District

reestablished the Committee for

Financial Excellence charged to

build an infrastructure that

supports a strong financial base.

June 21, 1995

GAO/T-AIMD-95-176

10. Establish a process of accountability for

implementation of management initiatives.

Action completed. According to

the then- Interim Chief Financial

Officer, all management reform

and the reporting of initiatives is

done by the Chief Management

Officer. This monthly reporting

process captures information by

agency, including funding;

expense; cost saving; and project

activity, including phase, duration,
Appendix I: Status of Prior Years’

Recommendations Pertaining to SOAR

Implementation

Page 37 GAO-01-489 District of Columbia Financial Management System

Date and report number Recommendation

Status as reported by District

officials

start date, and completion date.

To the Chief Financial Officera

December 17, 1999

GAO/AIMD-00-19

Direct the CAPPS program office to do the

following:

See items 11 through 15 below.

11. Develop and maintain a risk management

plan.

According to the Director,

Enterprise Office, action is in

process to address this

recommendation.

12. Develop a requirements baseline and

obtain agreement between the program office

and the system users.

According to the Director,

Enterprise Office, action is in

process to address this

recommendation.

13. Implement a configuration control process

to control and document further modifications

being made to CAPPS. The process should

(1) clearly define and assess the effects of

modifications on future product upgrades

before the modification is approved,

(2) clearly document the software products

that are placed under configuration

management, and (3) maintain the integrity

and traceability of the configuration throughout

the system life cycle.

According to the Director,

Enterprise Office, action is in

process to address this

recommendation.

14. Develop and implement a life-cycle

support plan, assign responsibility for lifecycle maintenance, and develop an estimate

of maintenance and operation costs for

CAPPS.

According to the Director,

Enterprise Office, action is in

process to address this

recommendation.

15. Develop and implement a security plan

based on a realistic risk assessment of

CAPPS security vulnerabilities.

According to the Director,

Enterprise Office, action is in

process to address this

recommendation.

16. Develop a centralized file for contract task

orders and other contract documentation

related to CAPPS.

According to the Director,

Enterprise Office, action is in

process to address this

recommendation.

a

As discussed in the report body, CAPPS, while not a component of SOAR, is a critical interface to

the system.

Source: District of Columbia OCFO and the Authority, September and October 2000, and January

and March 2001.
Appendix II: Comments From the District of

Columbia

Page 38 GAO-01-489 District of Columbia Financial Management System

Appendix II: Comments From the District of

Columbia

Note: GAO comments

supplementing those in

the report text appear at

the end of this appendix.

See comment 1.

See comment 1.
Appendix II: Comments From the District of

Columbia

Page 39 GAO-01-489 District of Columbia Financial Management System

See comment 1.

See comment 1.

See comment 1.

See comment 1.
Appendix II: Comments From the District of

Columbia

Page 40 GAO-01-489 District of Columbia Financial Management System

See comment 1.

See comment 1.

See comment 1.

See comment 2.
Appendix II: Comments From the District of

Columbia

Page 41 GAO-01-489 District of Columbia Financial Management System
Appendix II: Comments From the District of

Columbia

Page 42 GAO-01-489 District of Columbia Financial Management System

The following are GAO’s comments on the District of Columbia’s April 3,

2001 letter.

1. See the “Agency Comments and Our Evaluation” section of this report.

2. The report has been changed to show 9 instead of 10 training modules.

As stated in our report, according to the SOAR PMO, less than 50

percent of the SOAR user community had completed the new core

training curriculum.

GAO Comments

(916321)
The first copy of each GAO report is free. Additional copies of reports are

$2 each. A check or money order should be made out to the

Superintendent of Documents. VISA and MasterCard credit cards are also

accepted.

Orders for 100 or more copies to be mailed to a single address are

discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

Orders by visiting:

Room 1100

700 4th St., NW (corner of 4th and G Sts. NW)

Washington, DC 20013

Orders by phone:

(202) 512-6000

fax: (202) 512-6061

TDD (202) 512-2537

Each day, GAO issues a list of newly available reports and testimony. To

receive facsimile copies of the daily list or any list from the past 30 days,

please call (202) 512-6000 using a touchtone phone. A recorded menu will

provide information on how to obtain these lists.

Orders by Internet

For information on how to access GAO reports on the Internet, send an email message with “info” in the body to:

Info@www.gao.gov

or visit GAO’s World Wide Web home page at:

http://www.gao.gov

Contact one:

• Web site: http://www.gao.gov/fraudnet/fraudnet.htm

• E-mail: fraudnet@gao.gov

• 1-800-424-5454 (automated answering system)

Ordering Information

To Report Fraud,

Waste, and Abuse in

Federal Programs

United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Presorted Standard

Postage & Fees Paid

GAO

Permit No. GI00