U.S. ENVIRONMENTAL PROTECTION AGENCY 

OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

Special Report 

EPA’s Human Resources Management 

System Did Not Deliver Anticipated 

Efficiencies to the 

Shared Service Centers 

Report No. 09-P-0206 

 August 11, 2009 
 

 

 

Report Contributors:	 Eric Lewis 

Dwayne Crawford 

 Rae Donaldson 

Abbreviations 

DFAS Defense Finance Accounting Service 

EPA U.S. Environmental Protection Agency 

FY Fiscal Year 

HR Human Resources 

HR-LoB Human Resources Line of Business 

IT Information Technology 

OARM Office of Administration and Resources Management 

OCFO Office of the Chief Financial Officer 

OIG Office of Inspector General 

OMB Office of Management and Budget 

OPM Office of Personnel Management 

SSC Shared Service Center 
 

 

What We Recommend

U.S. Environmental Protection Agency 09-P-0206 

August 11, 2009 Office of Inspector General 

At a Glance
 

Catalyst for Improving the Environment 

Why We Did This Review 

We assessed the capability of 

the U.S. Environmental 

Protection Agency’s (EPA’s) 

human resources (HR) 

management system to provide 

the information technology (IT) 

support necessary for successful 

implementation of EPA’s shared 

service center (SSC) initiative. 

Background 

In June 2008, EPA began 

consolidating HR transactional 

services under three EPA SSCs. 

EPA expected the consolidated 

SSCs to provide better results at 

a lower cost. EPA had 

documented the necessity of 

upgrades to its HR management 

system to achieve these 

efficiencies. The Office of 

Management and Budget 

(OMB) has mandated that 

agencies migrate to an Office of 

Personnel Management (OPM)-

certified shared service center 

(certified SSC) unless an agency 

can show that it can maintain its 

own operations at a lesser cost. 

For further information, 

Contact our Office of 

Congressional, Public Affairs 

and Management at 

(202) 566-2391. 

To view the full report, 

click on the following link: 

www.epa.gov/oig/reports/2009/ 

20090811-09-P-0206.pdf 

EPA’s Human Resources Management System 

Did Not Deliver Anticipated Efficiencies to the 

Shared Service Centers 

What We Found 

The EPA SSC initiative lacked the necessary management controls to achieve 

efficiency and effectiveness. In our draft report, we noted that EPA’s Office of 

Administration and Resources Management (OARM) lacked necessary cost 

analysis and OMB approval to upgrade PeoplePlus with an automated workflow 

feature in support of the establishment of the EPA SSCs. These actions were 

contrary to OARM’s own 2007 Business Case Study (Shared Service Center for 

Human Resources) that stated EPA needed to upgrade its HR management system 

to make the SSCs successful. EPA launched the SSCs in June 2008 before 

obtaining the necessary upgrades. Subsequent to the release of our draft report in 

April 2009, EPA changed its approach to achieving anticipated efficiencies at its 

SSCs. EPA has determined that it is not cost-effective to update PeoplePlus. 

Further, EPA’s testing of an automated workflow feature to help improve HR 

processing in support of EPA SSCs has proven unsuccessful, causing the Agency, 

in part, to abandon the project. 

EPA now looks to find an OPM-certified HR Line of Business (LoB) provider who 

can provide the required HR IT support. This decision would be in agreement with 

the previous recommendation included in our draft report pending a detailed cost 

analysis for migration. However, EPA spent considerable time and funds pursuing 

the former options. We concur with the Agency’s decision to migrate to a certified 

HR-LoB provider since it cannot justify upgrading PeoplePlus. However, we 

believe that EPA must seek approval from OMB regarding its current hybrid 

approach whereby the Agency would retain its current HR personnel who would 

use an OPM-certified provider’s HR system. 

What We Recommend 

Going forward, EPA needs to have the appropriate analysis, actions and approvals 

in place to ensure the effective management of the Agency’s HR function. 

Therefore, we recommend that the Assistant Administrator for OARM: (1) obtain 

approval from OMB for the level of migration intended by EPA; (2) develop a 

baseline cost estimate to determine and secure necessary funding for migration to a 

certified SSC; (3) establish realistic milestones with OMB for migration to a 

certified SSC; and (4) document the risk of using PeoplePlus until EPA migrates to 

a certified SSC. 
 

 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

August 11, 2009 

MEMORANDUM 

SUBJECT:	 EPA’s Human Resources Management System Did Not Deliver 

Anticipated Efficiencies to the Shared Service Centers 

 Report No. 09-P-0206 

FROM:	 Bill A. Roderick

 Acting Inspector General 

TO: Craig Hooks 

 Assistant Administrator 

 Office of Administration and Resources Management 

This is the final report of the Office of Inspector General (OIG) of the U.S. Environmental 

Protection Agency (EPA) assessing the capability of EPA’s human resources management 

system to help achieve anticipated efficiencies from EPA’s shared service centers. This report 

represents the opinion of the OIG and does not necessarily represent the final EPA position. 

Final determination on matters in this report will be made by EPA managers in accordance with 

established audit resolution procedures. The Office of Administration and Resources 

Management provided comments to our draft audit report on May 29, 2009. The OIG evaluated 

these comments, and where appropriate has made necessary changes in this report. We have 

included the response and the OIG’s evaluation in Appendix A. 

The estimated cost of this project – calculated by multiplying the project’s staff days by the 

applicable daily full cost billing rates in effect at the time is – $152,524.00. 

Action Required 

In accordance with EPA Manual 2750, you are required to provide a written response to this 

report within 90 calendar days. You should include a formal corrective action plan for agreed 

upon actions, including milestone dates. We have no objection to the further release of this 

report to the public. This report will be available at http://www.epa.gov/oig. 

Should you have any questions, please contact Eric Lewis, Director, Special Reviews, at 

202-566-2664 or lewis.eric@epa.gov. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPA’s Human Resources Management System Did Not 09-P-0206 

Deliver Anticipated Efficiencies to the Shared Service Centers 

Table of Contents 

Chapters 

1 Introduction ........................................................................................................... 1 

Purpose .......................................................................................................... 1 

Background .................................................................................................... 1 

Scope and Methodology................................................................................. 2 

2 EPA’s Human Resources Management System
 

Did Not Deliver Anticipated Efficiencies............................................................. 4 

 EPA Options................................................................................................... 4 

 Former Approach ........................................................................................... 5 

New Plan and Challenges .............................................................................. 8 

Conclusion...................................................................................................... 9 

 Recommendations ......................................................................................... 10 

Summary of Agency Response and OIG Evaluation...................................... 11 

Status of Recommendations and Potential Monetary Benefits................................. 12 

Appendices 

A Agency Response to Draft Report and OIG Evaluation .................................... 13 

B Distribution ............................................................................................................ 20 
 09-P-0206 

Chapter 1

Introduction 

Purpose 

The Office of Inspector General (OIG) assessed the capability of the human 

resources (HR) management system of the U.S. Environmental Protection 

Agency (EPA). We sought to determine whether the system could provide the 

information technology (IT) support necessary for successful implementation 

of the Agency’s shared service center (SSC) initiative and to achieve 

anticipated efficiencies. 

Background 

The Office of Administration and Resources Management (OARM) is 

responsible for managing EPA’s human resources functions as well as 

developing Agency-wide policy, planning strategically, and directing EPA's 

human resources programs. As such, in June 2006, EPA’s Chief Financial 

Officer directed OARM and Region 9 to develop a plan to study consolidating 

and streamlining EPA’s human resources functions. These functions were 

processed at 15 human resources offices located throughout the country. 

Senior managers from OARM and Assistant Regional Administrators, who 

oversee human resources functions in the 10 regional offices, directed the 

study. 

In May 2007, OARM issued EPA’s draft Business Case Study entitled Shared 

Service Center for Human Resources (2007 Business Case Study), based on 

the results of the internal analysis by OARM senior managers and Assistant 

Regional Administrators. The Business Case Study suggested consolidating 

the Agency’s HR transactional-type functions into two or three EPA SSCs. 

In January 2008, the former Assistant Administrator for OARM announced 

that EPA would be consolidating HR transactional services under three EPA 

SSCs to improve the timeliness and quality of customer service and to 

standardize work processes within EPA. The selected SSC locations were Las 

Vegas, Nevada; Research Triangle Park, North Carolina; and Cincinnati, 

Ohio. The former Assistant Administrator announced that transition to the 

EPA SSCs would begin in June 2008, with consolidation efforts expected to 

last from 12 to 24 months. According to the Agency’s SSC Implementation 

Plan, the final phase of transition is targeted for completion on December 31, 

2009. 

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09-P-0206 

The Agency’s 2007 Business Case Study indicated significant IT upgrades to 

the Agency’s HR management system would be necessary if the EPA SSCs 

were to succeed and operate efficiently. The IT upgrades listed were: 

•	 Converting to an automated standard form 52 (Request for Personnel 

Action) feature, known as “workflow.” 1 

•	 Processing automated awards. 

•	 Implementing EZhire XI options to track staffing actions. 

•	 Implementing PeoplePlus modules for Employee Relations and Health 

and Safety. 

•	 Establishing a standardized benefit system with regional and field 

office input. 

•	 Purchasing learning management system modules for training and 

development. 

EPA stated that the SSC effort is also intended to align the Agency with the 

HR-Line of Business (HR-LoB) initiative of the Office of Management and 

Budget (OMB). OMB launched this initiative in 2004, to create a 

government-wide, modern, cost-effective, standardized, and interoperable HR 

solution, to provide common core functionality to support strategically 

managing human capital through establishing certified public or private sector 

SSCs.2

 OMB selected the Office of Personnel Management (OPM) as the 

HR-LoB managing partner due to its core mission and prior experience 

managing E-Government initiatives. 

Scope and Methodology 

We conducted our audit between December 2007 and April 2009 in 

accordance with generally accepted government auditing standards. Those 

standards require that we adequately plan for the audit; properly supervise 

audit staff; obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions; and prepare audit documentation 

related to planning, conducting, and reporting for each audit. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objective. Our audit objective was to 

determine the feasibility of OARM implementing the proposed EPA SSC 

initiative from an IT perspective, given the critical support necessary from the 

1

 The Agency describes workflow as an automated set of relationships between the activities in a business 

process from start to finish. Such capabilities would enable EPA to efficiently automate the flow of 

information throughout the Agency, crossing both application and functional boundaries. The goal of 

Workflow was to obtain a high return on investment by automating manual, time intensive or paper 

intensive processes. 2

 The five certified public sector SSCs are the Defense Department, U.S. Department of Agriculture’s 

National Finance Center, the U.S. Department of Health and Human Services, the Interior Department’s 

National Business Center, and the Treasury Department. The private sector SSC contracts have been 

awarded to Accenture, Allied, Carahsoft, and IBM. 

2
 
 

 

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Agency’s HR management system for these SSCs to succeed. To achieve our 

objective, our field work analysis involved the following: 

•	 Interviewing senior Agency officials involved with the planned 

implementation of the EPA SSCs. 

•	 Interviewing program officials involved with ensuring IT capabilities 

necessary to support the EPA SSCs. 

•	 Interviewing the PeoplePlus Project Officer and Contracting Officer to 

discuss IT support for the EPA SSCs. 

•	 Interviewing OMB officials involved in implementing the certified 

public/private sector SSC concept. 

•	 Obtaining and reviewing OMB criteria relative to the Governmentwide HR-LoB initiative. 

•	 Obtaining and reviewing documentation supporting the Agency’s 

decision to implement EPA SSCs that included EPA’s May 2007 

Business Case Study, SSC Implementation Plan, IT Workflow 

Implementation Plan, Performance Work Statements under the 

PeoplePlus operations and maintenance contracts, EPA’s June 2007 

HR-LoB Analysis, and OARM’s Reorganization Proposal for EPA 

SSCs. 

•	 Analyzing OARM’s responses to OIG questionnaires regarding the 

overall aspects of EPA’s SSC initiative. 

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Chapter 2

EPA’s Human Resources Management System 

Did Not Deliver Anticipated Efficiencies 

The EPA SSC initiative lacked the necessary management controls to achieve 

efficiency and effectiveness. Through consolidating HR transactional services 

under EPA SSCs, the Agency’s anticipated efficiencies included improving 

the timeliness and quality of customer service, standardizing work processes, 

and positioning the Agency for migration via OMB’s HR-LoB initiative. To 

achieve these efficiencies, EPA was relying on critical IT support from 

PeoplePlus and deployment of an automated business processing feature 

known as “workflow.” However, PeoplePlus faced increased risks to its 

security and stability because the software vendor no longer supported the 

current version and had required that the Agency upgrade to a newer software 

version.3 

EPA Options 

In December 2008, an OARM manager told us that EPA was considering two 

options. The first option was to upgrade the current PeoplePlus-HR software 

to PeopleSoft v. 9.0 to meet requirements by the software vendor. For this 

option, we recommended that EPA obtain OMB approval to upgrade HR 

systems. Under the HR-LoB initiative, OMB stated that no agency could 

upgrade HR systems without OMB approval. The second option was to 

migrate Agency HR IT services to a certified public or private sector HR SSC 

provider. According to OARM management, that migration would require 

EPA to use the providers systems. OMB guidance indicates that the providers 

have the IT staff to operate the systems and the agencies should develop their 

competitions based upon the number of full time equivalents to be replaced. 

For this option, we recommended that EPA develop a baseline cost analysis to 

determine the cost of the option and to obtain the funding necessary for 

migration. We concluded that EPA must obtain documented approval from 

OMB to perform the limited migration. The baseline cost estimate could be 

used to determine if EPA’s plan was less expensive than full migration. 

In response to our draft report, EPA stated it was not in the best interest of the 

Agency and cost-prohibitive to update the PeoplePlus system. OARM 

management also stated that the testing of an automated workflow model 

proved unsuccessful, prompting the Agency, in part, to abandon that project. 

The Agency indicated it will now pursue the second option, to find an OMBcertified HR-LoB provider for the necessary HR IT support. However, EPA 

3 PeoplePlus is based on the Federal PeopleSoft commercial off-the-shelf (COTS) application version 8.3. 

4
 
 

 

 

 

 

09-P-0206 

spent considerable time and funds pursuing the former option. We concur 

with the Agency’s decision to migrate to a certified HR-LoB provider since it 

cannot justify upgrading PeoplePlus. However, we believe that EPA must 

seek approval from OMB regarding its current hybrid approach whereby the 

Agency would retain its current HR personnel who would use an OPMcertified provider’s HR system. 4 Joint OMB/OPM guidance requires that 

agencies consult with OMB if they pursue a migration involving more than 10 

full-time equivalents.5

 This guidance is designed to help agencies describe, 

prepare for, and manage migrations. However, neither OMB nor EPA could 

produce documentation stating that OMB had approved any EPA migration 

plan. Consequently, until EPA migrates to a certified SSC, the Agency will 

continue to operate on outdated and unsupported application software, which 

will not produce the efficiencies anticipated from the EPA SSCs. 

Former Approach 

EPA began consolidating its HR transactional-type functions under Agency 

SSCs in June 2008 to improve the timeliness and quality of customer service 

and to standardize work processes within EPA. Although EPA management 

determined significant IT upgrades to the Agency’s HR management system 

would be necessary if the EPA SSCs were to succeed, the Agency created the 

SSCs before obtaining the upgrades. These upgrades included enhancements 

to PeoplePlus and the development of an automated business processing 

feature known as workflow. EPA’s stated its consolidation efforts were also 

to align the Agency with OMB’s HR-LoB initiative for later migration to an 

OPM-certified SSC. 

EPA’s launch of its SSCs was risky given that it had no assurances that the 

upgrades were achievable. Further, EPA could not produce documentation 

showing that OMB approved EPA’s migration plan. OARM management 

stated that EPA chose this plan for migration because EPA wanted to maintain 

its own HR staff. The ultimate nature of the EPA migration rests with OMB; 

however, EPA has not developed the baseline cost estimate to show the cost 

of this option and has not obtained documented approval from OMB that the 

limited migration would be acceptable. We contacted OMB and could not get 

OMB to state that any EPA migration plan was acceptable. Therefore, we 

consider EPA’s former migration plan to be high risk because no evidence 

exists to show it is cost-effective or that OMB would approve the specific 

action. 

4

 Rather than showing that an EPA option is cost effective, EPA favors a hybrid approach where the 

Agency keeps its HR personnel who would use an OMB/OPM-approved HR system. PeoplePlus would be 

a necessary interface to the approved system because of EPA Superfund requirements. 5

 Joint guidance issued by the Deputy Director for Management, OMB, and Director, OPM, May 21, 2007. 

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09-P-0206 

Plans for System Upgrades 

EPA Requirements for Efficient SSCs. The Agency’s 2007 Business Case 

Study indicated conversion to an automated standard form 52 (SF-52) feature, 

known as “workflow,” and upgrades noted by Agency human resource 

officers, were necessary to realize greater efficiencies under EPA SSCs in the 

long run. EPA’s June 2007 HR-LoB SSC analysis recommended that EPA 

deploy workflow to facilitate and enable the internal operation of EPA SSCs. 

This analysis also indicated the Agency should consider the remainder of any 

prospective Fiscal Year (FY) 2008 development, modernization, and 

enhancement funding to address immediate workflow needs in preparing for 

migration 

PeoplePlus Limitations. EPA’s 2007 HR-LoB SSC analysis revealed 

another important factor confronting EPA in selecting a certified SSC: the 

ability to operate the PeoplePlus Time Reporting and Labor Distribution 

system as a “stand-alone” module within EPA while outsourcing the 

remainder of its HR IT systems to an outside provider. However, according to 

this analysis, employing this approach for migration would pose significant 

costs and technical risks to EPA. According to the HR-LoB SSC analysis, the 

risks would be driven by the required development of two-way interfaces 

between: (1) EPA’s retained PeopleSoft Time Reporting and Labor 

Distribution System; (2) the certified SSC HR IT system; (3) the Defense 

Finance Accounting Service (DFAS)-Defense Civilian Payroll System 

(assuming that EPA was to maintain DFAS as its payroll provider); and (4) 

the new EPA Financial Management system. This analysis also showed 

building and maintaining multiple interfaces and associated data feeds would 

exponentially increase the cost and technical burdens to EPA. 

Therefore, since 2007, OARM knew the risks of this strategy. The Assistant6 

Administrator’s May 2009 memorandum stated OARM is currently working 

with the Office of the Chief Financial Officer (OCFO) to meet requirements 

related to the Agency’s HR management system and expect to make a 

decision on a service provider and next steps during the fourth quarter of 

FY 2009. In June 2009, OARM management stated that EPA would continue 

to use PeoplePlus until OARM and OCFO could find an alternative for the 

system. 

OMB Requirements. Joint OMB/OPM guidance prohibits federal agencies 

from upgrading their HR management systems without first getting a waiver. 

The only exceptions are (1) for migrating to a certified public or private sector 

SSC under its HR-LoB initiative; or (2) if the agency can demonstrate that 

investing in a system limited to the agency’s own use and associated support 

represent a better value and lower risk alternative than migrating to a certified 

SSC. 

6 He was the Acting Assistant Administrator when he issued the comments. 

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09-P-0206 

OARM Pursued Upgrades Without Approval. An OARM manager 

acknowledged that the list of upgrades from the human resource officers did 

contain some items considered development, modernization, or enhancement, 

and that these upgrades would not be implemented. However, this manager 

stated that according to OARM, workflow features did not constitute 

development, modernization, or enhancement, and the areas of PeoplePlus 

that EPA would be customizing were operations and maintenance. However, 

under OMB Circular A-11, Part 2, Section 53, the definition for development, 

modernization, or enhancement covers “...the program cost for new 

investments, changes or modification to existing systems to improve 

capability or performance, changes mandated by... agency leadership...for... 

direct support.” When informed, OARM’s former Assistant Administrator 

disagreed with our assessment, stating in memorandum that his office did not 

consider the work associated with enabling the workflow module in 

PeopleSoft to be development, modernization, or enhancement, since the 

Agency already owned it. However, based on OMB’s definition for 

development, modernization, or enhancement, regardless of when the Agency 

purchased the PeopleSoft software, OMB guidelines would prohibit changes 

or modifications to improve PeoplePlus capability and performance through 

developing the workflow module. 

Results of HR Systems Upgrades. EPA pursued HR systems upgrades 

although it did not obtain OMB approval to do so. As such, the success of 

EPA’s SSCs was dependent on upgrades that the Agency did not have 

permission to obtain. The failure to produce the upgrades leaves the EPA 

SSCs without the tools to perform efficiently. In June 2009, OARM managers 

stated that upgrading PeoplePlus was not cost-effective and OARM efforts to 

develop the workflow module were unsuccessful. These managers also told 

us that although the EPA SSCs were operational, they were not efficient 

because they did not have some IT upgrades recommended in the 2007 study. 

Specifically, OARM managers stated the SSCs were still performing manual 

procedures to accomplish their mission. 

Software Costs and Projected Savings 

Workflow Costs. OARM’s initial costs for developing the workflow module 

was $245,000, with deployment scheduled for May 2008. By September 

2008, EPA’s estimated costs for development of the workflow module had 

increased to $485,000, with deployment moved to early 2009. However, by 

December 2008, OARM management began dismissing the importance of the 

workflow module from earlier assessments but did not provide any 

documented evidence or updated analysis supporting these assertions. We 

found these assertions from OARM management to be unsubstantiated and 

contradicted statements found in the Agency’s 2007 Business Case Study and 

OARM’s own HR-LoB SSC analysis. Currently, OARM states that the 

7
 
 09-P-0206 

selection criteria for a certified SSC will be the ability of a service provider to 

deliver anticipated automated workflow functionality. OARM has not 

provided the final costs incurred to develop workflow. 

PeoplePlus Costs. According to the PeoplePlus Contracting Officer 

Representative, EPA’s annual maintenance fee of $156,000 paid to the 

software vendor no longer included patches and fixes normally provided by 

the vendor to update or address new issues regarding security or stability 

problems with the existing software. Rather, the annual maintenance fees 

mainly afford the Agency the ability to “ask questions” on the functionality 

and limitations of the outdated PeopleSoft software. The Contracting Officer 

Representative stated the vendor requires that EPA upgrade its PeopleSoft 

software to version 8.9 or higher to maintain full vendor support and obtain 

access to patches and fixes. 

According to an OARM manager, regardless of the limitations of vendor 

support, the Agency still would need an operations and maintenance contract 

until the Agency decides that it would migrate PeoplePlus to a certified SSC. 

EPA issued a new operations and maintenance contract with a period of 

performance from August 29, 2008, through September 30, 2013. According 

to the contracting officer, the total award is $10,328,937 for the base period 

and four option years. There is also an additional $2,309,387 for optional 

systems development. 

Projected Savings. The Agency stated the consolidation effort was intended 

to align the Agency OMB’s HR-LoB initiative with an agreement with OMB 

to migrate to an OPM-certified public or private sector SSC providers starting 

in FY 2009. EPA’s June 2007 HR-LoB SSC analysis indicated the Agency 

may be able to reduce costs by $40-60 million over 10 years by outsourcing it 

HR management system to a certified SSC. OARM did not detail how it 

would achieve the savings. Currently, the Assistant Administrator stated that 

subsequent analysis (currently in draft) shows a significantly lower reduction 

in future IT costs as a result of a potential migration. The Assistant 

Administrator also stated OARM was finalizing its analysis of costs 

associated with migration, and expects to make a final decision on how to 

proceed in the fourth quarter of FY 2009. 

New Plan and Challenges 

The OARM Assistant Administrator’s memorandum concluded that OARM 

and OCFO agreed that upgrading the EPA’s current system is not in the best 

interest of the Agency. EPA is now seeking to migrate the Agency’s HR IT 

services to an OPM-certified SSC provider. 

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09-P-0206 

Selection Challenges 

According to EPA’s 2007 HR-LoB SSC Analysis, a certified SSC would need 

to provide functionality in the following critical areas: 

•	 Personnel Action Request Processing, 

•	 Integrated Workflow, including manager self-service, 

•	 Time Reporting and Labor Distribution, including an unlimited 

number of time reporting codes, and, 

•	 Payroll (currently with the Defense Finance Accounting Service -

Defense Civilian Payroll System but EPA would consider integration 

with another provider as an option). 

Funding Challenges 

Baseline Cost Estimate. OMB criteria requires federal agencies to develop 

comprehensive baseline cost estimates for investments to measure cost 

savings and plan for future costs associated with IT investments. 7 According 

to OARM management, both they and OCFO are still analyzing costs 

associated with migrating its HR-IT system capabilities to an OPM approved 

service provider. The Agency’s final decision on how to proceed is not 

expected until the fourth quarter of FY 2009. Prior Agency documentation in 

response to this OMB requirement was outdated (most recent was 2007), and 

did not represent current cost analysis associated with the Agency’s migration 

of its HR management system to an OPM-certified SSC. 

Migration is Not Funded. A significant issue facing the Agency with 

migration is funding. OARM managers told us funding for migration to a 

public or private sector SSC provider would probably not occur in FY 2009 

because no funding for it exists in the Agency’s FY 2009 budget. These 

managers stated that given the anticipated changeover in EPA’s 

administration, there were no assurances that funding for migration would be 

included in EPA’s FY 2010 budget plan. Consequently, the Agency needs to 

produce the baseline cost estimate to support migration funding in FY 2010. 

Otherwise EPA will continue to operate the current inefficient HR 

configuration for the foreseeable future. 

Conclusion 

OARM lacked effective management controls over implementing SSCs. 

Although a previous EPA study had forecasted the risks of implementing the 

SSCs without adequate IT support, OARM chose the risky implementation 

strategy. OARM could provide no documented analysis showing that this and 

7

 OMB Memorandum M-06-22, issued August 8, 2006. 

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09-P-0206 

another study was incorrect or no longer warranted. Rather, OARM managers 

stated that it had made the decision to implement the EPA SSCs to keep its 

own personnel. The OMB HR-LoB process allows agencies to keep their 

internal HR systems if they can show that it is more cost-effective than 

migration. However, EPA never produced documentation stating that OMB 

approved EPA’s limited migration plan or a baseline cost estimate that could 

show that EPA’s HR plan was cost effective. Consequently, OARM’s high 

risk attempt to provide the SSCs with the necessary HR IT has failed. 

In response to our draft report, the Agency responded that it is not in the best 

interest of the Agency nor cost effective to update the PeoplePlus system, its 

primary HR system. OARM management also informed us that the testing of 

an automated workflow model that was supposed to help achieve anticipated 

HR efficiencies has proven unsuccessful. The Agency has since abandoned 

this project. EPA spent considerable time and funds pursuing this former 

option. OARM management now indicates that the Agency still looks to find 

an OPM-approved HR-LoB vendor who can provide the required HR support. 

Recommendations 

Therefore, we recommend that the Assistant Administrator for Administration 

and Resources Management: 

2-1 Obtain approval from OMB for the level of migration intended by 

EPA to ensure that future EPA resource efforts are not spent on a 

concept that OMB could reject. 

2-2 Develop an updated baseline cost estimate to determine and secure 

necessary funding for migration to a certified SSC. The Agency 

must fund the migration, which cannot occur without the baseline 

cost estimate. Currently, OARM states there is no data to support 

funding in EPA’s FY 2010 budget. 

2-3 Establish realistic milestone dates with OMB for migration to an 

OPM- certified SSC. The FY 2009 date is not realistic because no 

funding for migration exists. 

2-4 Document the risk of using PeoplePlus until EPA migrates to a 

certified SSC. Due to budget issues, EPA may not migrate until 

FY 2011. 

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09-P-0206 

Summary of Agency Response and OIG Evaluation 

The Assistant Administrator for OARM provided a memorandum of response to 

our draft report on May 29, 2009. The memorandum concluded that OARM and 

OCFO agreed that upgrading the EPA’s current system is not in the best interest 

of the Agency, and that it would be cost prohibitive to both upgrade the current 

system and migrate to a service provider in response to our draft 

recommendation.8 As such, the Agency is currently analyzing the costs associated 

with migrating its HR IT system capabilities to an OPM-approved service 

provider. The memorandum stated that OARM agreed that there may be 

increased risks to PeoplePlus security and stability because the vendor no longer 

supports the current version. However, the memorandum stated OARM 

management believes the overall security of PeoplePlus is sound and represents 

only a minimal acceptable risk to the Agency as it assesses the HR-LoB service 

center options. OARM management expects to make a final decision on a service 

provider and next steps for migration in the fourth quarter of FY 2009. 

As noted in our draft report, OARM lacked the analysis and OMB approvals to 

support its position to upgrade its HR systems. In 2007, the Agency had 

identified that an upgrade to PeoplePlus and other IT initiatives were necessary 

for the long-term success of the EPA SSCs. In June 2008, OARM established 

the EPA SSCs without obtaining the necessary IT upgrades. A key upgrade 

was the development of an automated business processing feature known as 

workflow to realize greater efficiencies under EPA SSCs. However, in 

June 2009, OARM managers stated their efforts to develop the workflow 

module were unsuccessful. These managers also told us that: 

•	 Although the EPA SSCs were operational, without the IT upgrades they 

were not efficient. Specifically, OARM managers stated the SSCs were 

performing manual procedures to accomplish their mission. 

•	 The Agency is now directing its attention toward selecting a certified SSC 

provider to achieve HR efficiencies once expected from PeoplePlus and 

the workflow module. 

•	 They were still seeking only to use the providers systems because the 

Agency still wanted to keep HR IT jobs at EPA. 

•	 OMB was aware of EPA’s limited migration plans but could not provide 

documentation that OMB had approved this concept. 

Where necessary, we made revisions to this report based on OARM’s comments. 

We have included the Agency’s entire response and the OIG’s evaluation as 

Appendix A. 

8

 Our recommendation required OARM to (1) seek a waiver from OMB to upgrade PeoplePlus to regain 

access to patches and fixes to ensure system security and stability; and, (2) to develop a baseline cost 

estimate to determine and secure necessary funding for migration to a public or private sector SSC on a 

revised date negotiated with OMB. 

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Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Planned 

Completion 

Date 

Claimed 

Amount 

Agreed To 

Amount 

2-1 

2-2 

2-3 

2-4 

10 

10 

10 

10 

Obtain approval from OMB for the level of 

migration intended by EPA to ensure that future 

EPA resource efforts are not spent on a concept 

that OMB could reject. 

Develop an updated baseline cost estimate to 

determine and secure necessary funding for 

migration to a certified SSC. The Agency must 

fund the migration, which cannot occur without the 

baseline cost estimate. Currently, OARM states 

there is no data to support funding in EPA’s FY 

2010 budget. 

Establish realistic milestone dates with OMB for 

migration to an OPM certified SSC. The FY 2009 

date is not realistic because no funding for 

migration exists. 

Document the risk of using PeoplePlus until EPA 

migrates to a certified SSC. Due to budget issues, 

EPA may not migrate until FY 2011. 

O 

O 

O 

O 

Assistant Administrator 

for Administration and 

Resources Management 

Assistant Administrator 

for Administration and 

Resources Management 

Assistant Administrator 

for Administration and 

Resources Management 

Assistant Administrator 

for Administration and 

Resources Management 

1 O = recommendation is open with agreed-to corrective actions pending 

C = recommendation is closed with all agreed-to actions completed 

U = recommendation is undecided with resolution efforts in progress 

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Appendix A 

Agency Response to Draft Report and 

OIG Evaluation
 

May 29, 2009 

MEMORANDUM 

SUBJECT: Response to Draft Report: Outdated Software Could Jeopardize 

Anticipated Efficiencies from EPA’s Human Resources Shared Service 

Centers 

FROM: Craig E. Hooks /s/ 

Acting Assistant Administrator 

TO: Eric Lewis 

 Product Line Director 

Office of Inspector General 

I appreciate the opportunity for OARM to comment on the Office of Inspector 

General’s draft report dated April 29, 2009 and titled “Outdated Software Could 

Jeopardize Anticipated Efficiencies from EPA’s Human Resources Shared Service 

Centers”. While we recognize the issues you raise, we believe the overall security of 

PeoplePlus is sound and represents a minimal risk to the Agency as we assess the Human 

Resources Line of Business service center options. OARM is currently working closely 

with OCFO to identify the best course of action for the Agency to meet requirements 

related to HR, time and attendance, payroll, and labor distribution. We both agree that 

upgrading PeoplePlus is not in the best interest for EPA and expect to make a decision on 

a service provider and next steps during the 4th quarter of FY2009. 

Below are specific comments on the draft report: 

At a Glance Section 

Under background, the OIG writes “EPA has determined that upgrades to PeoplePlus 

are paramount to successful implementation of the Agency’s SSC initiative.” 

We agree that upgrades to PeoplePlus would be beneficial and add to the success 

of the Shared Service Center implementation in terms of further streamlining 

business processes and reducing the total “time to hire”. Unfortunately, OMB and 

OPM restrictions have prevented OARM from enhancing or adding functionality. 

The Agency’s decision to consolidate HR transactional services under three 

Shared Service Centers was based on the expectations of not only improving 

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efficiencies but also improving the overall timeliness and quality of customer 

service by streamlining business processes and enacting standardized operating 

procedures. We believe that when the transition is complete, all of these goals 

will be met and we will provide Agency customers and the public they serve, a 

more efficient, cost effective, customer-oriented organization. 

OIG Evaluation 

EPA pursued HR systems upgrades ( i.e., the workflow module and other 

listed in the Agency’s 2007 Business Case Study deemed necessary if the 

EPA SSCs were to succeed and operate efficiently) although it did not 

obtain OMB approval to do so. As such, the successes of EPA’s SSCs 

were dependent on upgrades that the Agency did not have permission to 

obtain. The failure to produce the upgrades, in particular the workflow 

module, leaves the EPA SSCs without the tools to perform efficiently. 

Chapter 2 

• In the 1st paragraph the OIG states, “However, PeoplePlus faces increased 

risks to its security and stability because the software vendor no longer supports 

the current version, and has required that the Agency upgrade to a newer 

software version.” 

OARM Comment: While we agree that there may be increased risks to 

PeoplePlus security and stability because the vendor no longer supports the 

current version, we believe the increased risk is minimal and therefore acceptable 

at this time. Even though EPA is currently running the 8.3 version of PeopleSoft 

HRMS application software, the underlying component software is being patched, 

and kept at current release levels. These components are the focus of Computer 

Security Incident Response Capability (CSIRC) notices and result in system patch 

application. In addition, the PeoplePlus system is wholly contained behind the 

EPA firewall and Agency security systems. OARM believes the overall security 

of PeoplePlus is sound and running the current version represents a minimal risk 

to the Agency as we explore the various options for moving to an HR-LoB service 

center. 

OIG Evaluation 

OARM management is in agreement that there may be increased risks to 

PeoplePlus security and stability because the vendor no longer supports 

the current version. OARM management believes the increased risk is 

minimal and therefore acceptable at this time. During the exit conference 

with OARM managers in June 2009, the OIG requested a copy of the 

most recent risk assessment of PeoplePlus supporting this statement. 

These managers stated a risk assessment was almost finished and that 

the OIG would be provided a copy. However, the OIG had not received a 

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09-P-0206 

copy by the time this final report was issued. We have recommended that 

EPA document the risk of using PeoplePlus until EPA migrates to a 

certified SSC. 

• In the Funding Challenges section on page 10, the OIG states, “However, 

OMB issued criteria in August 2006 that required Federal agencies to develop 

comprehensive baseline cost estimates for investments to measure cost savings 

and plan for future costs associated with IT investments. Further, this 

memorandum provides an IT investment framework for determining the total cost 

of projects, both government and contractor costs, based on costing 

methodologies provided in OMB-Circular A-76. The Agency could not provide 

documentation that they had met this requirement.” 

OARM Comment: We have located in our files documentation that reflects the 

Agency responded to this requirement. A copy of the submission to OMB is 

attached. 

OIG Evaluation 

A review of the file documentation submitted to OMB revealed this 

information was outdated (most recent was 2007), and did not represent 

current cost analysis associated with the Agency’s migration to an OPMcertified SSC. Consequently, the Agency needs to produce an updated 

baseline cost estimate to support migration funding in FY 2010 or beyond. 

Otherwise, EPA will continue to operate the current inefficient HR 

configuration for the foreseable future. 

• In the Conclusion and Recommendation section on page 11, the OIG 

states, “...not realize $40-60 million in reduced costs through outsourcing its HR 

management systems to a certified SSC, which according to EPA’s own analysis 

can be achieved by eliminating heavy reliance on external contractors.” 

OARM Comments: Since that initial analysis, EPA has continued to research and 

update the costs associated with migrating to a certified line of business provider. 

These subsequent analyses (currently in draft) show a significantly lower 

reduction in future IT costs as a result of a potential migration. We are finalizing 

our analysis at this time and are working with OCFO to determine the best system 

for the Agency. 

OIG Evaluation 

EPA spent considerable time and funds pursuing their former option. 

OARM management now indicates that the Agency still looks to find an 

OPM-approved HR-LoB vendor who can provide the required HR support. 

To help avoid a repeat occurrence, we have recommended that OARM 

obtain documentation from OMB specifying the level of migration required 

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09-P-0206 

from EPA to ensure that future EPA resource efforts are not spent on a 

concept that OMB could reject. 

• In the Conclusion and Recommendation section on page 11, the OIG 

states, “Therefore, we recommend that the Assistant Administrator OARM: 

1. Seek a waiver from OMB to upgrade PeoplePlus to regain access to 

patches and fixes to ensure system security and stability. 

2. Develop a baseline cost estimate to determine and secure necessary 

funding for migration to a public or private sector SSC on a revised date 

negotiated with OMB.” 

OARM Comments: We are currently analyzing the costs associated with 

migrating our HR IT system capabilities to an OPM approved service provider. 

We expect the Agency will make a final decision on how to proceed in the 4th 

quarter FY 2009. OARM and OCFO agree that upgrading our current system is 

not in the best interest of the Agency. Therefore, we do not agree with the 

recommendation to both upgrade our current system and migrate to a service 

provider. The resources needed to perform both of these tasks are cost prohibitive 

and represent a duplicative effort, as well as doubling the time required to achieve 

a final solution. 

OIG Evaluation 

In December 2008, OARM managers told us that EPA was considering 

two options. The first option was to upgrade the current PeoplePlus-HR 

software to PeopleSoft v. 9.0 to meet requirements by the software 

vendor. For this option, we recommended that EPA obtain OMB approval 

to upgrade HR systems. The second option was to migrate Agency HR IT 

services to a public or private sector HR SSC provider. For this option, we 

recommended that EPA develop a baseline cost analysis to determine the 

cost of the option and to obtain the funding necessary for migration. The 

Agency indicated it will now pursue the second option, to find an OMBcertified HR-LoB provider for the necessary HR IT support. Because of 

this decision the original 1st recommendation has been removed. We 

concur with the Agency’s decision to migrate to a certified HR-LoB 

provider since it cannot justify upgrading PeoplePlus. We have developed 

recommendations to assist the Agency in this effort to ensure that future 

EPA resource efforts are not spent on a concept that OMB could reject; 

develop an updated baseline cost estimate to determine and secure 

necessary funding for migration to an OPM-certified SSC; and establish 

realistic milestone dates with OMB for migration to an OPM-certified SSC. 

If you have any questions, please contact Sherry Kaschak, Director, Office of 

Policy and Resources Management or Susan Kantrowitz, Deputy Director, Office 

of Human Resources. I look forward to discussing this issue further during the 

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exit conference and working with the Office of Inspector General to ensure the 

Agency moves forward in the best approach. 

Attachments (2) 

1- Actual Cost Reporting September 2007 

2- Baseline Cost Reporting - August 2006 

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Appendix B 

Distribution 

Office of the Administrator 

Assistant Administrator for Administration and Resources Management 

Acting Chief Financial Officer 

Agency Follow-up Official (the CFO) 

Agency Follow-up Coordinator 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for Public Affairs 

Audit Follow-up Coordinator, Office of Administration and Resources Management 

Audit Follow-up Coordinator, Office of the Chief Financial Officer 

Acting Inspector General 

20