EXECUTIVE OFFICE OF THE PRESIDENT 

OFFICE OF MANAGEMENT AND BUDGET 


WASHINGTON, D.C. 20503 


March 25, 2013 

M-13-08 

XECUTIVE DEPARTMENTS AND AGENCIES 

FROM: 	 Danny Werfi 

Controller 

SUBJECT: 	 Improving Financial Systems Through Shared Services 

The traditional approach to agency-specific, large-scale financial systems modernization 

projects in the Federal Government has often led to poor results in terms of cost, quality, 

performance, and reporting. In many cases, these projects-designed to meet agency-specific 

business processes and system requirements-have resulted in substantial cost overruns, systems 

that are so large and complex that they cannot be easily updated and lengthy delays in planned 

deployments or needed improvements. In addition, the highly fragmented nature offinancial 

management systems across Federal agencies has contributed to inconsistencies in fmancial data, 

making it challenging to provide transparency into Federal fmances. 

Building on existing policies including OMB's Memorandum M-10-26, Immediate 

Review ofFinancial Systems IT Projects, the Shared Services Strategy of May 2, 2012 ("Shared 

First"), and Circular A-130, Management ofFederal Information Resources, this memorandum: 

• 	 directs all executive agencies to use, with limited exceptions, a shared service 

solution for future modernizations of core accounting or mixed systems; 

• 	 describes the process through which OMB and the Department ofthe Treasury 

will conduct an assessment ofthe capabilities and gaps ofthe existing Federal 

Shared Service Providers ("FSSPs"); 

• 	 initiates the process under which the Treasury Department's Office of Financial 

Innovation and Transformation ("FIT") will evaluate new agency proposals for 

alignment with this guidance and provide feedback to agencies and 

recommendations to OMB; and 

• 	 outlines the manner in which FIT will work with OMB, FSSPs, and the broader 

Federal financial management community to design and implement improvements 

to the current FSSP framework, including expansion ofFSSPs' capabilities and an 

enhanced governance model to ensure FSSP accountability. 

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A Shared Services Approach 

Traditional approaches to financial systems implementations have left agencies exposed 

to significant risks in cost, quality and performance. Large-scale modernization efforts have 

frequently resulted in cost over-runs, poor return on investment, underperforming systems, and 

required upgrades that add little value. These system weaknesses can also lead to broader 

challenges in the overall financial operations at agencies. New approaches are needed that will 

allow the government to lower the costs of new systems and realize more value :from each 

implementation. 

The cost, quality, and performance ofFederal financial systems can be improved by 

focusing government resources on fewer, more standardized solutions that are implemented and 

operated by more experienced staff. This can be achieved through the Federal Government 

making wider use of shared services for common system and transaction processing needs. Use 

of shared services, with standardized financial systems, will: 

• 	 better enable the Government to strategically source software providers, hosting, 

and (potentially) transaction processing, 

• 	 reduce system implementation risks and timelines, and 

• 	 improve data quality and provide greater transparency into Federal finances, 

including through the production of auditable fmancial statements at the 

government-wide level. 

Finally, use of shared services will also allow agencies to focus on their core missions. 1 

Therefore, to leverage existing investments and infrastructure at FSSPs, agencies must consider, 

as part oftheir alternatives analysis, the use of a FSSP with respect to all new agency proposals2 

for core accounting3 and mixed system4 upgrades. Analysis should not be limited only to an 

evaluation of commercial SSPs. Instead, the preferred approach is for an agency to evaluate 

solutions offered by both FSSPs and commercial SSPs as part of a robust market research 

process. As part oftheir market research, agencies may find that FSSPs have a good track record 

1 GAO-l 0-808: Experience with Prior Migration and Modernization Efforts Provides Lessons Learned for New 

Approach, September 8, 2010. 2 Proposals that began implementation in FY12 or earlier, or were specifically approved by the Financial System 

Advisory Board (FSAB) as part ofthe M-10-26 process, should continue with their current plans but ensure that 

their solution can be transitioned to an SSP in the future. OMB will work with agencies to provide oversight and 

review ofthese on-going projects to ensure that these systems continue to provide the best value for the 

Government. 

3 "Core accounting" includes the basic functions needed to account for, track, and control budgetary funds in the 

Federal Government. It includes the business processes related to the general ledger, funds management, cost 

management, accounts payable, and accounts receivable. 4 A mixed system is an information system that can support both the financial and non-financial functions ofthe 

Federal government or components thereof. The following are examples ofmixed systems: payment and invoice 

systems, procurement systems, receivable systems, loan systems, grants systems, payroll systems, budget 

formulation systems, billing systems, property management systems, travel systems, or other mission operational 

systems that impact a financial system. 

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of successfully servicing Federal agencies and can provide many ofthe advantages of 

commercial SPPs through their existing partnerships with private vendors. To determine the best 

value source, each agency is expected to develop an appropriately detailed alternatives analysis 

of SSP solutions based on their needs, risk performance and cost. 

OMB's guiding principle will be to support plans that offer the best value for the Federal 

Government. OMB will consider funding the use of commercial SSPs as an appropriate solution 

if, after reviewing the available Federal SSP and commercial SSP solutions and using standard 

requirements, the agency's business case demonstrates that a commercial SSP can provide a 

better value for the Federal Government. In addition, agency-specific approaches are 

discouraged and will be considered for funding only in the rare situation in which an agency 

demonstrates, through its alternatives analysis, that exceptional circumstances exist (e.g., 

legitimately unique agency requirements or adequate scale within the organization) that make the 

agency-specific approach clearly preferable to an SSP solution with respect to what is the best 

value for the Federal Government. Agencies approved for agency-specific solutions must still 

participate in government-wide benchmarking and governance. 

OMB will work with agency Chief Financial Officers (CFOs), Chieflnformation Officers 

(CIOs) and FSSPs to ensure use of common standards and requirements, to the maximum extent 

practicable, so that agencies retain the flexibility to migrate to another SSP in the future. In 

order to leverage the Government's buying power, reduce administrative burden, and achieve the 

best value for the Federal Government, OMB's Office of Federal Financial Management and 

Office of Federal Procurement Policy will also work with agencies to ensure that management 

and acquisition strategies promote the Federal Government's "Cloud First" policy5 and the 

strategic sourcing principles outlined in OMB Memorandum M-13-02, Improving Acquisition 

through Strategic Sourcing. 

Laying the Groundwork (or Success(ul Shared Services 

Ensuring that the FSSPs are capable ofmeeting the needs of all agency customers will 

take several years. OMB and Treasury will help ensure each agency's future financial system 

needs are met by supporting the expansion ofFSSP offerings and capabilities. We recognize 

that, to be able to meet agency needs, the FSSPs will need to enhance service offerings, expand 

technology and transaction processing capabilities, and have a strong governance structure. 

Furthermore, in order to fully realize the benefits of using a FSSP, it will be necessary for 

agencies to adjust and. adopt standardized processes. To promote those changes, OMB and 

Treasury will: 

• 	 Analyze the landscape of existing SSPs to identify capability gaps; 

• 	 Evaluate agencies' current financial and related mixed system needs; 

• 	 Identify the need and interest in additional FSSPs; and 

• 	 Develop a blueprint for a strategy to address gaps and identify a limited number 

of approved FSSPs that are capable ofmeeting agency needs. 

5 See the 25 Point Implementation Plan to Reform Federal Information Technology Management (December 9, 

2010). 

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Each designated FSSP will offer at least one core financial management system that will 

fully interf~ce with subsidiary systems-such as payroll, travel, and procurement systems-as 

well as Treasury's payment, collection, and central reporting systems. The FSSP will offer these 

subsidiary systems either directly or through a sub-contract with other SSPs or agency systems. 

In certain limited cases, if a common solution is not available, FSSPs may propose to create new 

interfaces with existing agency solutions. FSSPs must also have the ability to provide reporting 

capabilities on core accounting data that is sufficient for each agency to manage its funds. 

As FSSPs begin to support the needs of larger Federal agencies, it is essential to have a strong 

governance mechanism in place to ensure that agency interests are reflected in key decisions 

affecting FSSPs services and operations. OMB and Treasury will work with agencies in the 

coming months to develop a new FSSP governance model. 

Treasury's Office o{Financial Innovation and Transformation (FIT) 

In Spring 2010, OMB announced the closure ofthe Financial Systems Integration Office 

(FSI0)6 and the creation ofTreasury's Office ofFinancial Innovation and Transformation 

("FIT") to help set a new course for federal financial management. FIT supports that mission by 

incubating new automated solutions, reducing duplicate work at multiple agencies, and assisting 

OMB in ensuring consistency with a long-term financial management systems strategy. FIT will 

provide oversight in four key areas: 

1. 	 Evaluating any new agency systems modernization plans and requirements, in 

conjunction with OMB, to ensure that each agency is positioned to adopt a shared 

service approach; · 

2. 	 Establishing a strategy and framework for agency migrations to a shared service 

model for financial systems across the Federal Government; 

3. 	 Maintaining core government-wide financial management requirements while 

limiting expansion and impact on financial system requirements; and 

4. 	 Identifying and facilitating the implementation of government-wide operational 

capabilities (e.g., invoice processing and centralized receivables management) 

that help reduce cost and improve performance. 

FIT will play a significant role in evaluating agency financial system modernization 

investments when they are proposed and will provide recommendations to OMB on whether 

agency systems strategies and modernization requests align with the government-wide shared 

service approach. These recommendations will help guide OMB's funding determinations. 

Planning (or Agency Financial System Modernizations 

It remains in the Government's best interest to sustain existing functions and operations 

until it is necessary for an agency to replace its existing financial system or when a significant 

upgrade is required. Accordingly, OMB will continue to support limited investments in existing 

6 OMB Memorandum of March 16, 2010, Update on the Financial Systems Integration Office. 

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financial management systems within an agency when the agency provides an adequate business 

justification and the proposal costs less than a shared services alternative. The requested 

investments must be a targeted enhancement or modular improvement that resolves critical 

issues and extends the life of an agency's existing financial system. OMB and FIT will evaluate 

these requests based on their individual merits, as well as the broader framework for financial 

system modernization investments outlined in prior memoranda and clarified in this 

memorandum. 

In addition to funding some small-scale, modular enhancements going forward, OMB 

will work with agencies to prioritize funding for modernization proposals that are consistent with 

a shared services approach. New investments will be needed for both FSSPs to improve their 

ability to support new and more complex agencies and for agencies planning migrations to SSPs. 

Next Steps 

In the coming months, OMB will issue new guidance on both technology and business 

requirements for financial systems currently contained in OMB Circular No. A-127 that is 

consistent with this memo. FIT will work with OMB to review and evaluate proposals for new 

systems projects. In addition, agencies with near-term financial systems modernization needs 

should begin planning to adopt a shared-services approach, consistent with this guidance, that 

will provide the agency with future fmancial systems infrastructure, application, or transactional 

processing services. OMB and Treasury will begin working with these agencies immediately to 

develop plans consistent with this guidance. 

If you have any q~estions regarding this memorandum, please contact Mike Wetklow, 

Chief Accountability, Performance, and Reporting Branch within OMB's Office of Federal 

Financial Management (mwetklow@omb.eop.gov). 

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