Financial Management Systems: Additional Efforts Needed to Address Key Causes of Modernization Failures
Published: 2006-03-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Billions of dollars have been spent governmentwide to modernize financial management systems that have often exceeded budgeted cost, resulted in delays in delivery dates and did not provide the anticipated system functionality when implemented. GAO was asked to identify (1) the key causes for financial management system implementation failures, and (2) the significant governmentwide initiatives currently under way that are intended to address the key causes of financial management system implementation failures. GAO was also asked to provide its views on actions that can be taken to help improve the management and control of agency financial management system modernization efforts.
section_title: What GAO Found
paragraphs: GAO's work has linked financial management system implementation failures to three recurring themes: (1) disciplined processes, (2) human capital management, and (3) other information technology (IT) management practices. The predictable result of not effectively addressing these three areas has been numerous agency systems throughout the federal government that did not meet their cost, schedule, and performance objectives. Problems related to disciplined processes included requirements management, testing, data conversion and system interfaces, and risk and project management. Human capital management issues included strategic workforce planning, human resources, and change management. Other areas of IT management identified as problems included enterprise architecture, investment management, and information security. The Office of Management and Budget (OMB) has undertaken a number of initiatives to reduce the risks associated with acquiring and implementing financial management systems and addressing long-standing financial management problems. Some of these initiatives are in collaboration with others and are broad-based attempts to reform financial management operations governmentwide. First, OMB has developed and continues to evolve Federal Enterprise Architecture products and has required a mapping of agency architectures to this federal architecture. Another key OMB initiative is referred to as the financial management line of business which established centers of excellence to consolidate financial management activities for major agencies through cross-servicing arrangements. Finally, certain financial management activities and responsibilities have been reassigned to OMB, the Financial Systems Integration Office, and a Chief Financial Officers Council Committee. OMB's initiatives for reforming financial management systems governmentwide could help address the key causes of system implementation failures, but further actions are needed to fully define and implement the processes necessary to successfully complete these initiatives. OMB has correctly recognized the need to implement financial management systems as a governmentwide solution, rather than individual agency stove-piped efforts designed to meet a given entity's needs. Based on industry best practices, GAO believes that four concepts are integral to OMB's approach and key to successfully implementing financial management systems: a concept of operations provides the foundation, standard business processes promote consistency, a strategy for implementing the financial management line of business, and disciplined processes to help ensure successful implementations. GAO recognizes that implementing these concepts is a complex undertaking and raises a number of issues that have far-reaching implications for the government and private sector application service providers.

section_title: Letter
paragraphs: The federal government has long been plagued by financial management  system modernization efforts that have failed to meet their cost, schedule,  and performance goals. While agencies anticipate that the new systems  will provide reliable, useful, and timely data to support managerial  decision making, our work and that of others has shown that has often not  been the case. Modernizing financial management systems is expensive  but critical to instituting strong financial management as called for by the  Chief Financial Officers (CFO) Act of 1990, Federal Financial  Management Improvement Act of 1996 (FFMIA), and other financial  management reform legislation. The CFO Act calls for the improvement of  financial management systems in departments and major agencies  throughout the federal government to achieve the systematic  measurement of performance, the development of cost information, and  the integration of program, budget, and financial information for  management reporting. FFMIA builds on the foundation laid by the CFO  Act by reflecting the need for CFO Act agencies to have financial  management systems that can generate reliable, useful, and timely  information with which to make fully informed decisions and to ensure  accountability on an ongoing basis.
Billions of dollars have been spent on developing and implementing  financial management systems throughout the federal government. These  systems support the interrelationships and interdependencies between  budget, cost, and management functions. Financial management systems  are critical for producing complete, reliable, timely, and consistent  financial information for use by the executive branch of the federal  government and the Congress in the financing, management, and  evaluation of federal programs. Many efforts are under way to implement  new core financial systems and supporting financial management systems  such as logistics, acquisition, and human resources. However, recent  efforts to modernize financial management systems have often exceeded  budgeted cost, resulted in delays in delivery dates, and did not provide the  anticipated system functionality and performance. For example, as we  testified in May 2004, the National Aeronautics and Space Administration  (NASA) was on its third attempt in 12 years to modernize its financial  management processes and systems and has spent about $180 million on  two failed prior attempts to implement core financial systems. NASA’s  current effort is estimated to cost about $983 million. In another case, the  Navy largely wasted approximately $1 billion on four pilot Enterprise  Resource Planning (ERP) program efforts, without marked improvement  in its day-to-day operations, which resulted in four more stove-piped  systems that did not enhance overall efficiency at the Department of  Defense (DOD). The Navy is now working on a new project to consolidate  these four systems into one at an additional cost of $800 million.
Because of your concern about failures at some agencies to successfully  modernize or implement financial management systems, you asked us to  identify (1) the key causes for financial management system  implementation failures, which we define as financial management system  improvement efforts that did not meet cost, schedule, or performance  goals, and (2) the significant governmentwide initiatives currently under  way that are intended to address the key causes of financial management  system implementation failures. You also asked us to provide our views on  actions that can be taken to help improve the management and control of  agency financial management system modernization efforts.
This report is based on our prior reports over the last 5 years that focused  on financial management system implementation efforts. We also  reviewed selected inspector general (IG) reports dealing with financial  management system implementations. We interviewed key CFO Council  and Office of Management and Budget (OMB) officials and reviewed their  existing oversight policies related to financial management systems as  well as related current initiatives under way. We did not evaluate the  federal government’s overall information technology (IT) strategy or  whether a particular agency selected the most appropriate financial  management system. Our work for this report was performed in  Washington, D.C., from January 2005 through October 2005 in accordance  with U.S. generally accepted government auditing standards. Details on  our scope and methodology are included in appendix I and a list of related  IG reports that we reviewed are included in appendix II. The background  section describes elements of IT management, including certain  disciplined processes, human capital and other IT management practices,  and appendix III provides additional information on the disciplined  processes. Other related GAO reports are listed at the end of this report.
subsections: section_title: Background
paragraphs: OMB plays a central role in setting federal financial management policy  and guidance. The CFO Act of 1990 established OMB’s Office of Federal  Financial Management (OFFM), which has responsibility to provide  overall direction and leadership to the executive branch on financial  management matters by establishing financial management policies and  requirements, and by monitoring the establishment and operation of  federal government financial management systems. Among the key issues  OFFM addresses in addition to financial management systems, are agency  and governmentwide financial reporting, asset management, grants  management, improper payments, performance measurement, single  audits, and travel and purchase cards. Within OFFM, the Federal Financial  Systems Branch is responsible for orchestrating all of the elements of the  financial systems governmentwide into a coherent, coordinated  architecture. These elements include    agency financial management systems and JFMIP standards;  interfaces between agency financial systems and other systems that  support business processes (e.g., human resources systems,  procurement systems, databases supporting performance  management);    common financial management services, including e-Travel, e-Learning,  Contractor Central Registry, Intragovernmental Payment and  Collection System, and Electronic Certification System; and    governmentwide accounting and other data consolidation systems.
Another office in OMB, the Office of Electronic Government and  Information Technology, has responsibility for providing overall  leadership and direction to the executive branch on electronic  government. In particular, this OMB office oversees implementation of IT  throughout the federal government, including monitoring and consulting  on agency technology efforts; advising the OMB Director on the  performance of IT investments, as well as identifying opportunities for  joint agency and governmentwide IT projects; and overseeing the  development of enterprise architectures within and across agencies, which  is being fulfilled through the Federal Enterprise Architecture. This office  also shares statutory IT management responsibilities with the Office of  Information and Regulatory Affairs, which OMB was required to establish  under the Paperwork Reduction Act of 1995.
Finally, OMB is the preparer of the President’s budget and provides  instructions to executive branch agencies to submit budget-related  information in accordance with the requirements of OMB Circular   No. A-11, Preparation, Submission and Execution of the Budget. OMB is  responsible for reviewing and evaluating IT spending across the federal  government and uses the IT spending information submitted by the  agencies during the budget formulation process to review requests for  agency financial management systems and other IT spending. Major  agency IT investments are reported to OMB individually. OMB Circular   No. A-11 defines a major IT investment as a system or project that requires  special management attention because of its importance to an agency’s  mission, or has significant program or policy implications, among other  criteria. Financial management systems costing more than $500,000  annually are considered major IT investments. OMB Circular No. A-11 also  requires agencies to use Exhibit 300, Capital Asset Plan and Business  Case, to describe the business case for the investment, which serves as the  primary means of justifying IT investment proposals as well as managing  IT investments once they are funded.
subsections: section_title: Elements of IT Management
paragraphs: Best practices are tried and proven methods, processes, techniques, and  activities that organizations define and use to minimize risks and maximize  chances for success. As we have previously reported, using best practices  related to IT acquisitions can result in better outcomes—including cost  savings, improved service and product quality, and ultimately, a better  return on investment. We and others, such as the Software Engineering  Institute (SEI), have identified and promoted the use of a number of best  practices associated with acquiring IT systems. For the purposes of this  report, we have identified various elements of IT management and  categorized them as disciplined processes, human capital and other IT  management practices that are critical elements for minimizing the risks  related to financial management system implementations. These areas are  interrelated and interdependent, collectively providing an agency with a  comprehensive understanding both of current business approaches and of  efforts (under way or planned) to change these approaches and a means to  implement those changes. Understanding the relationships among these  areas can help an agency determine how it is applying its resources,  analyze how to redirect these resources in the face of change, implement  such redirections, and measure success. With this decision-making  capability, the agency is better positioned to deploy financial management  systems and direct appropriate responses to unexpected changes in its  environment. The following sections provide additional background  information on the key elements of IT management discussed in this  report, including disciplined processes, human capital and other IT  management practices.
subsections: section_title: Disciplined Processes
paragraphs: Disciplined processes are fundamental to successful systems  implementation efforts and have been shown to reduce the risks  associated with software development and acquisition to acceptable  levels. A disciplined software development and acquisition process can  maximize the likelihood of achieving the intended results (performance)  within established resources (costs) on schedule. Although there is no  standard set of practices that will ever guarantee success, several  organizations, such as the SEI and the Institute of Electrical and  Electronic Engineers (IEEE), as well as individual experts, have  identified and developed the types of policies, procedures, and practices  that have been demonstrated to reduce development time and enhance  effectiveness. The key to having a disciplined system development effort is  to have disciplined processes in multiple areas, including requirements  management, testing, data conversion and system interfaces,  configuration, risk and project management, and quality assurance.  Effective processes should be implemented in each of these areas  throughout the project life cycle because change is constant. Effectively  implementing the disciplined processes necessary to reduce project risks  to acceptable levels is difficult to achieve because a project must  effectively implement several best practices, and inadequate  implementation of any one may significantly reduce or even negate the  positive benefits of the others.
Figure 1 shows how organizations that do not effectively implement the  disciplined processes lose the productive benefits of their efforts as a  project continues through its development and implementation cycle.  Although undisciplined projects show a great deal of what appears to be  productive work at the beginning of the project, the rework associated  with defects begins to consume more and more resources. In response,  processes are adopted in the hopes of managing what later turns out, in  reality, to have been unproductive work. Generally, these processes are  “too little, too late” because sufficient foundations for building the systems  were not done or not done adequately. Experience in both the private  sector and the government has shown that projects for which disciplined  processes are not implemented at the beginning then must be  implemented later, when it takes more time and they are less effective.
As shown in figure 1, a major consumer of project resources in  undisciplined efforts is rework (also known as thrashing). Rework occurs  when the original work has defects or is no longer needed because of  changes in project direction. Disciplined organizations focus their efforts  on reducing the amount of rework because it is expensive. Fixing a  requirements defect after the system is released costs anywhere from 10 to  100 times the cost of fixing it when the requirements are defined. Projects  that do not successfully address rework will eventually spend even more  effort on rework and the associated processes rather than on productive  work. In other words, the project will continually require reworking items.
section_title: Human Capital Management
paragraphs: People—human capital—are a critical element to transforming  organizations to meet the challenges of the 21st century. Recognizing this,  we first added strategic human capital management as a governmentwide  high-risk issue in January 2001, and although progress has been made,  continued to include it on the latest high-risk list issued in January 2005.  Strategic human capital management for financial management projects  includes organizational planning, staff acquisition, and team development.  Human capital planning is necessary for all stages of the system  implementation. It is important that agencies incorporate strategic  workforce planning by (1) aligning an organization’s human capital  program with its current and emerging mission and programmatic goals  and (2) developing long-term strategies for acquiring, developing, and  retaining an organization’s total workforce to meet the needs of the future.  This incorporates a range of activities from identifying and defining roles  and responsibilities, to identifying team members, to developing individual  competencies that enhance performance. It is essential that an agency  take the necessary steps to ensure that it has the human resources to  design, implement, and operate a financial management system. In  addition, organizational change management, which is the process of  preparing users for the business process changes that usually accompany  implementation of a new system, is another important human capital  element.
Strategic workforce planning is essential for achieving the mission and  goals of financial management system projects. As we have reported,  there are five key principles that strategic workforce planning should  address:  Involve top management, employees, and other stakeholders in  developing, communicating, and implementing the strategic workforce  plan.
Determine the critical skills and competencies that will be needed to  achieve current and future programmatic results.
Develop strategies that are tailored to address gaps in the number,  deployment, and alignment of human capital approaches for enabling  and sustaining the contributions of all critical skills and competencies.    Build the capability needed to address administrative, educational, and  other requirements important to support workforce planning strategies.
Monitor and evaluate the agency’s progress toward its human capital  goals and the contribution that human capital results have made  toward achieving programmatic results.
Having adequate and sufficient human resources with the requisite  training and experience to successfully implement a financial management  system is another critical success factor. According to OMB, qualified  federal IT project managers are our first line of defense against the cost  overruns, schedule slippage, and poor performance that threaten agencies’  ability to deliver efficient and effective services to citizens. In July 2004,  OMB issued a memorandum to help agencies comply with fiscal year  2005 budget guidance that instructed agencies to ensure “by September 30,  2004, all major projects are managed by project managers qualified in  accordance with CIO Council guidance.” The CIO Council’s Federal IT  Project Manager Guidance Matrix and Federal IT Project Management  Validation define levels of complexity for IT projects/systems, identify  appropriate competencies and experience, suggest education and training  sources, and serve as a tool for validating IT project manager credentials.  IT project managers are expected to achieve and demonstrate baseline  skills in applicable competency areas listed in the Office of Personnel  Management (OPM) Interpretive Guidance for Project Manager  Positions. The OMB memorandum also required agencies to submit a plan  to meet the guidance on project manager qualifications and document the  approach, milestones, and schedule. The plans should also follow OPM’s  Workforce Planning Model and Human Capital Assessment and  Accountability Framework.
Changing an organization’s business processes is not an easy task.  Managing culture and process change in large, diverse, organizationally  and geographically decentralized agencies is a much greater challenge.  Frequently, the greatest difficulties lie not in managing the technical or  operational aspects of change, but in managing the human dimensions of  change. Some experts caution that unless planning and accountability for  change management are given a separate focus, the efforts will not be  managed well. Management roles in implementing a new system include  establishing business goals, realistic expectations, accountability, and  leading cultural change necessary to accept the capabilities of a new  system. During the implementation phase especially, agency executives  must be in the forefront in dealing with the social, psychological, and  political resistance to changing the way work is done. Executives must  also recognize that their own roles and responsibilities may need to  undergo change as well.
section_title: Other IT Management Practices
paragraphs: Weaknesses in other IT management processes also increase the risks  associated with financial management system implementation efforts.  Developing an enterprise architecture, establishing IT investment  management policies, and addressing information security weaknesses are  critical to ensuring successful system implementation.
OMB Circular No. A-130, which establishes executive branch policies  pursuant to the Paperwork Reduction Act of 1995 and the Clinger-Cohen  Act of 1996 among other laws, requires agencies to use architectures. A  well-defined enterprise architecture provides a clear and comprehensive  picture of the structure of any enterprise by providing models that  describe in business and technology terms how the entity operates today  and predicts how it will operate in the future. It also includes a plan for  transitioning to this future state. Enterprise architectures are integral to  managing large-scale programs. Managed properly, an enterprise  architecture can clarify and help optimize the interdependencies and  relationships among an organization’s business operations and the  underlying IT infrastructure and applications that support these  operations. Employed in concert with other important management  controls, architectures can greatly increase the chances that organizations’  operational and IT environments will be configured to optimize mission  performance. To aid agencies in assessing and improving enterprise  architecture management, we issued guidance establishing an enterprise  architecture management framework. The underpinning of this  framework is a five-stage maturity model outlining steps toward achieving  a stable and mature process for managing the development, maintenance,  and implementation of an enterprise architecture.
IT investment management provides for the continuous identification,  selection, control, life-cycle management, and evaluation of IT  investments. The Clinger-Cohen Act lays out specific aspects of the  process that agency heads are to implement to maximize the value of the  agency’s IT investments. In addition, OMB and GAO have issued guidance  for agencies to use in implementing the Clinger-Cohen Act requirements  for IT investment management. For example, we issued guidance  establishing an IT investment management framework. This framework is  also a maturity model composed of five progressive stages of maturity that  an agency can achieve in its IT investment management capabilities. These  stages range from creating investment awareness to developing a  complete investment portfolio to leveraging IT for strategic outcomes. The  framework can be used both to assess the maturity of an agency’s  investment management processes and as a tool for organizational  improvement.
The Federal Information Security Management Act of 2002 provides the  overall framework for ensuring the effectiveness of information security  controls that support federal operations and assets and requires agencies  and OMB to report annually to the Congress on their information security  programs. OMB Circular No. A-130 also requires agencies to protect  information commensurate with the risk and magnitude of the harm that  would result from the loss, misuse, or unauthorized access to or  modification of such information. The reliability of operating  environments, computerized data, and the systems that process, maintain,  and report these data is a major concern to federal entities that have  distributed networks that enable multiple computer processing units to  communicate with each other. Such distributed networks increase the risk  of unauthorized access to computer resources and possible data  alteration. Effective departmentwide information security controls will  help reduce the risk of loss due to errors, fraud, and other illegal acts,  disasters, or incidents that cause systems to be unavailable. Inadequate  security and controls can adversely affect the reliability of the operating  environments in which financial management systems and their  applications operate.
section_title: Agencies’ Failure to Follow Best Practices in Three Key Areas Has Hampered Successful Implementation of Financial Management Systems
paragraphs: We reviewed numerous prior GAO and IG reports and identified several  problems related to agencies’ implementation of financial management  systems in three recurring and overarching themes: disciplined processes,  human capital and other IT management practices. Simply put, the  agencies were not following best practices in these three critical areas.  The predictable result of not effectively addressing these three areas has  been numerous agency systems throughout the federal government that  did not meet their cost, schedule, and performance objectives. We have  issued governmentwide reports on other IT management practices  including agencies’ enterprise architecture, IT investment management,  and information security and therefore will not be addressing those  issues further in this report. However, broad-based actions are needed to  address the problems repeatedly experienced at the agencies as they  continue to struggle to implement new financial management systems.  Many of the systems we reviewed had at least one problem in each of the  three critical areas. While there was some overlap in these three areas, we  selected examples that best illustrate the specific problems in each area.
subsections: section_title: Disciplined Processes Have Not Been Fully Used
paragraphs: From our review of over 40 prior reports, we identified a number of key  problem areas in disciplined processes related to requirements  management, testing, data conversion and system interfaces, risk  management, and project management activities. Inadequate  implementation of disciplined processes can manifest itself in many ways  when implementing a financial management system and the failure to  properly implement disciplined processes in one area can undermine the  work in all the other areas and cause significant problems. Table 2  summarizes and provides examples for some of the problems we identified  from prior reports that can be expected when agencies do not effectively  implement the disciplined processes necessary to manage their financial  management system implementation projects.
The following provides more specific details on three of the examples of  financial management system implementation problems related to the lack  of disciplined processes.
In May 2004, we first reported our concerns with the requirements  management and testing processes used by the Army in the  implementation of the Logistics Modernization Program and the  problems being encountered after it became operational in July 2003.
At the time of our initial report, the Army decided that future  deployments would not go forward until they had reasonable assurance  that the deployed system would operate as expected for a given  deployment. However, as we reported in June 2005, the Army had not  effectively addressed its requirements management and testing  problems and data conversion weaknesses had hampered the Army’s  ability to address the problems that need to be corrected before the  system can be fielded to other locations. For example, the system  cannot properly recognize revenue nor bill customers. Data conversion  problems resulted in general ledger account balances that were not  properly converted to the new system in July 2003, and these  differences remained unresolved almost 18 months later. These  weaknesses adversely affected the Army’s ability to set the prices for  the work performed at the Tobyhanna Army Depot. In addition, data  conversion problems resulted in excess items being ordered and  shipped to Tobyhanna. As noted in our June 2005 report, three  truckloads of locking washers (for bolts) were mistakenly ordered and  received, and subsequently returned, because of data conversion  problems. As a result of the problems, the Army has implemented  error-prone, time-consuming manual workarounds as a means to  minimize disruption to critical operations; however, the depot’s  financial management operations continue to be adversely affected by  systems problems.
NASA has struggled to implement a modern integrated financial  management system. After two failed efforts over 12 years and about   $180 million, NASA embarked on a third effort that is expected to cost  about $983 million. We have previously identified problems and made  recommendations to NASA related to requirements, testing, and project  management as well as problems with human capital and other IT  management issues related to this effort. For example, NASA had not  implemented quantitative metrics to help gauge the effectiveness of its  requirements management process. Such metrics would be particularly  important for NASA to address the root causes of system defects and  be reasonably assured that its processes would result in a system that  meets its business needs. However, in our September 2005 report, we  found that overall progress implementing our recommendations had  been slow. From our perspective, of the 45 recommendations we made  in prior reports, NASA had taken sufficient action to close 3  recommendations and had partially implemented 13, but 29  recommendations remained open. Furthermore, in November 2004,  NASA’s independent auditor reported that NASA’s new financial  system, which was implemented in June 2003, could not produce  auditable financial statements for fiscal year 2004 and did not comply  with the requirements of FFMIA. Key areas of concern included the  core financial module’s inability to (1) produce transaction-level detail  in support of financial statement account balances, (2) identify  adjustments or correcting entries, and (3) correctly and consistently  post transactions to the right accounts.
In August 2004, the VA IG reported that the effect of transferring  inaccurate data to its new core financial system at a pilot location  interrupted patient care and medical center operations. This raised  concerns that similar conversion problems would occur at other VA  facilities if the conditions identified were not addressed and resolved  nationwide prior to roll out. Some of the specific conditions the IG  noted were that contracting and monitoring of the project were not  adequate, and the deployment of the new system encountered multiple  problems including those related to software testing, data conversion  and system interfaces, and project management. When the new  financial system was deployed at the pilot location in October 2003, it  did not function as project managers had expected because of  inaccurate or incomplete vendor and inventory system data. As a result  of these problems, patient care was interrupted by supply outages and  other problems. The inability to provide sterile equipment and needed  supplies to the operating room resulted in the cancelation of 81 elective  surgeries for a week in both November 2003 and February 2004. In  addition, the operating room was forced to operate at two-thirds of its  prior capacity. Because of the serious nature of the problems raised  with the new system, VA management decided to focus on transitioning  back to the previous financial management software at the pilot  location and assemble a senior leadership team to examine the results  of the pilot and make recommendations to the VA Secretary regarding  the future of the system.
section_title: Human Capital Management Problems Impede Financial Systems Development and Deployment
paragraphs: Effective human capital management is critical to the success of systems  implementations. As we previously reported in our Executive Guide:  Creating Value Through World-class Financial Management, having  staff with the appropriate skills is key to achieving financial management  improvements, and managing an organization’s employees is essential to  achieving results. By not identifying staff with the requisite skills to  implement such systems and by not identifying gaps in needed skills and  filling them, agencies reduce their chances of successfully implementing  and operating new financial management systems. For example, in our  prior report on building the IT workforce, we found that in the 1990s the  initial rounds of downsizing were set in motion without considering the  longer-term effects on agencies’ IT performance capacity. Additionally, a  number of individual agencies drastically reduced or froze their hiring  efforts for extended periods. Consequently, following a decade of  downsizing and curtailed investments in human capital, federal agencies  face skills, knowledge, and experience imbalances, especially in their IT  workforces. Without corrective action, this situation will worsen,  especially in light of the numbers of federal civilian workers becoming  eligible to retire in the coming years. In this regard, we are emphasizing  the need for additional focus on key problem areas we identified from  prior reports including strategic workforce planning, human resources,  and change management. Examples for some of the human capital  management problems we identified in prior reports that hamper the  implementation of new financial management systems are summarized in  table 3.
The following provides more specific details on two of the examples of the  types of human capital management problems we found.
In May 2002, we first reported that the Customs Modernization Office  did not have the people in place to perform critical system acquisition  functions and did not have an effective strategy for meeting its human  capital needs. Customs had decided to compress its time frame for  delivering its new system from 5 to 4 years and was taking a schedule- driven approach to acquiring the system because of the system’s  national importance. This exacerbated the level of project risk by  introducing more overlap among incremental system releases and  stretching critical resources. In our most recent report issued in March  2005, we found that although Customs had developed a staffing plan,  it had not been approved and was already out of date because the  modernization office subsequently implemented a reorganization that  transferred government and contractor personnel to the modernization  office. We also observed that changes in roles and responsibilities had  the modernization office and the contractor sharing development  duties of the new system. Finally, Customs developed a revised  organizational change approach with new change management  activities, but key actions associated with the revised approach were  not planned for implementation because the funding request for fiscal  year 2005 did not fully reflect the revised approach. In July 2004,  Customs extended delivery of the last release from fiscal year 2007 to  fiscal year 2010, adding a new release for screening and targeting, and  increasing the life-cycle cost estimate by about $1 billion to   $3.1 billion. The new schedule reflected less overlap between future  releases. While Customs, which is now under the Department of  Homeland Security, has taken important actions to help address  release-by-release cost and schedule overruns that we previously  identified, we concluded that it was unlikely that these actions would  prevent the past pattern of overruns from recurring because the  Department of Homeland Security had relaxed system quality  standards, so that milestones were being passed despite material  system defects, and because correcting these defects will ultimately  require the program to expend resources, such as people and test  environments, at the expense of later system releases (some of which  are now under way).
We reported, in September 2004, that staff shortages and limited  strategic workforce planning resulted in HHS not having the resources  needed to effectively design and operate its new financial management  system. HHS had taken the first steps in strategic workforce planning.  For example, the Centers for Disease Control and Prevention (CDC),  where the first deployment was scheduled, was the only operating  division that had prepared a competency report, but a skills gap  analysis and training plan for CDC had not been completed. In addition,  many government and contractor positions on the implementation  project were not filled as planned. For example, an independent  verification and validation contractor reported that some key personnel  filled multiple positions and their actual available time was inadequate  to perform the allocated tasks. As a result, some personnel were  overworked, which, according to the independent verification and  validation contractor could lead to poor morale. The organization chart  for the project showed that the project team was understaffed and that  several integral positions were vacant or filled with part-time detailees.  While HHS and the systems integrator had taken measures to acquire  additional human resources for the implementation of the new  financial management system, we concluded that scarce resources  could significantly jeopardize the project’s success and lead to several  key deliverables being significantly behind schedule. In September  2004, HHS decided to delay its first scheduled deployment at CDC by 6  months in order to address these and other issues identified with the  project.
section_title: Other IT Management Practices Were Not Fully Implemented
paragraphs: We identified a number of key problems related to other IT management  practices. Specifically, we found that in planning and developing new  financial management systems, agencies had not adequately considered  their existing IT management processes and framework. Through our  research into IT management best practices and our evaluation of agency  IT management performance, we have identified a set of essential and  complementary management disciplines. These include key areas where  we found problems such as enterprise architecture, investment  management, and information security, among others. Using the results of  this research and evaluation, we have developed various management  frameworks and guides and reported on numerous IT management  weaknesses at individual agencies. Table 4 summarizes and provides  examples for some of the key problems we found described in prior  reports on financial management system implementations related to other  IT management areas not previously discussed.
The following provides more specific details on two of the examples of  other problems related to IT management that have had an impact on  financial management system implementation projects.
For several years, we have reported that deficiencies in DOD’s  enterprise architecture and IT investment management policies are  contributing factors to DOD’s stovepiped, duplicative, and  nonintegrated systems environment. In May 2004, we reported that we  had not seen any significant change in the content of DOD’s  architecture or in DOD’s approach to investing billions of dollars  annually in existing and new systems. Few actions had been taken to  address prior recommendations, which were aimed at improving  DOD’s plans for developing the next version of the architecture and  implementing the institutional means for selecting and controlling both  planned and ongoing business systems investments. In April 2005, we  reported that DOD still did not have an effective departmentwide  management structure for controlling business investments despite  DOD requesting over $13 billion in fiscal year 2005 to operate,  maintain, and modernize its existing duplicative business systems. In  addition, because DOD lacked a well-defined business enterprise  architecture and transition plan, billions of dollars continued to be at  risk of being spent on systems that would be duplicative, not  interoperable, cost more to maintain than necessary, and would not  optimize mission performance and accountability. In July 2005, we  reported that despite spending almost 4 years and about $318 million,  DOD still did not have an effective architecture program, and as a  result its modernization program remained a high risk.
We reported, in February 2005, that OPM had implemented selected  processes in the areas of systems acquisition, investment management,  and information security; however, many processes were not  sufficiently developed, were still under development, or were planned  for future development. Although OPM had an executive steering  committee chaired by the deputy associate director of the Center for  Retirement and Insurance Services that acted as an IT investment  management board for the new retirement system, program officials  were not aware of formal policies or procedures guiding the board’s  oversight responsibilities or activities. Agency officials stated that they  would define such a governance structure for the retirement system  project during the contract award process. In addition, the agency had  not yet developed security plans for the licensed technology and data  conversion portions of the new system. Agency officials said they did  not have detailed security requirements for the licensed technology  portion of the new system, although the request for proposals  identified the need for high-level security requirements. They planned  to develop detailed security requirements after awarding the licensed  technology contract to a vendor. Without fully developed security plans  and security requirements for the licensed technology and data  conversion portions of the new system, OPM increased the risk that  both it and its vendors would not meet information security needs for  these portions of the program expected to be implemented in fiscal  year 2008.
section_title: Federal Initiatives Under Way to Improve System Implementations
paragraphs: As the federal organization with key responsibility for federal financial  management systems, OMB has undertaken a number of initiatives related  to acquiring and implementing financial management system capabilities.  Some of these initiatives are in collaboration with the CIO and CFO  Councils and are broad-based attempts to reform financial management  operations across the federal government. While reforming federal  financial management is an undertaking of tremendous complexity, it  presents great opportunities for improvements in financial management  system implementations and related business operations.
Notably, OMB has developed and continues to evolve governmentwide  Federal Enterprise Architecture products and has required a mapping of  agency architectures to this federal architecture as part of the budget  review process. Another key OMB initiative is referred to as the lines of  business and promotes streamlining common systems to enhance the  government’s performance and services, such as establishing centers of  excellence to consolidate financial management activities for major  agencies through cross-servicing arrangements. The advantages of this  approach are many, including the implementation of standard business  processes and focusing system acquisition, development, and maintenance  activities at select agencies or entities with experience that have the  necessary resources to reduce the risks associated with such efforts.  Furthermore, certain activities and responsibilities performed by JFMIP  prior to its termination have been reassigned to OMB’s OFFM, the  Financial Systems Integration Office, and a CFO Council Committee  providing guidance and oversight. However, as discussed in the next  section, we identified four key concepts that are not yet fully developed  and integrated in OMB’s initiatives and related processes. Table 5  highlights some of the foremost initiatives under way at OMB and their  potential strengths.
subsections: section_title: Federal Enterprise Architecture
paragraphs: In 2002, OMB established the Federal Enterprise Architecture Program  Management Office to develop a Federal Enterprise Architecture  according to a collection of five reference models. These models are  intended to facilitate governmentwide improvement through cross-agency  analysis and the identification of duplicative investments, gaps, and  opportunities for collaboration, interoperability, and integration within  and across government agencies. According to OMB, the result will be a  more citizen-centered, customer-focused government that maximizes  technology investments to better achieve mission outcomes. The Federal  Enterprise Architecture reference models are summarized in table 6.
In May 2005, the five reference models were combined into the  Consolidated Reference Model document to compose a framework for  describing important elements of the Federal Enterprise Architecture in a  common and consistent way. OMB views the Federal Enterprise  Architecture not as a static model, but as a program, built into the annual  budget process to repeatedly and consistently improve all aspects of  government service delivery. OMB officials acknowledged that they are  still mapping out the Federal Enterprise Architecture and making it more  robust and recognized that some lines of business have fleshed out their  areas in more detail than others. In prior testimony on the Federal  Enterprise Architecture, we recognized that OMB and the CIO Council  have made important progress, but that hard work lies ahead to ensure  that the Federal Enterprise Architecture is appropriately described,  matured, and used. The development of the Federal Enterprise  Architecture has continued to evolve and OMB has been promoting the  adoption of the Federal Enterprise Architecture. For example, for the  fiscal year 2007 budget submission, agencies will be required to use  predetermined codes to link their major IT investments on Exhibit 53 to  the Federal Enterprise Architecture. For fiscal year 2005, agencies were  required to use the Federal Enterprise Architecture Performance  Reference Model to identify performance measurements for each new  major IT investment. As we have previously testified, questions remain  regarding the nature of the Federal Enterprise Architecture, the  relationship of agency enterprise architectures to the Federal Enterprise  Architecture, and the security aspects of the Federal Enterprise  Architecture. Therefore, we will not be addressing these issues further  from a governmentwide perspective in this report.
section_title: Lines of Business
paragraphs: Building upon the efforts of the Federal Enterprise Architecture program,  OMB and designated agency task forces have launched the lines of  business initiative. This initiative seeks to develop business-driven  common solutions for six lines of business that span across the federal  government. OMB and the lines of business task forces plan to use  enterprise architecture-based principles and best practices to identify  common solutions for business processes or technology-based shared  services to be made available to government agencies. Driven from a  business perspective rather than a technology focus, the solutions are  expected to address distinct business improvements to enhance the  government’s performance and services for citizens. The end results of the  lines of business efforts are expected to save taxpayer dollars, reduce  administrative burden, and significantly improve service delivery.
We have long supported and called for such initiatives to standardize and  streamline common systems, which can reduce costs and, if done  correctly, can also improve accountability. OMB officials from both OFFM  and the Electronic Government office told us that they worked  collaboratively to develop the financial management line of business along  with an interagency task force. The interagency task force recommended  the establishment of governmentwide service providers in the areas of  financial management and human resources management. The financial  management line of business raises a number of issues that have far- reaching implications for the government and private sector application  service providers. This concept has commonly been used in the private  sector where application service providers provide services such as  payroll, sales force automation, and human resource applications to many  corporate clients. The interagency task force analysis estimated that  savings of more than $5 billion can be expected over a 10-year time frame  through consolidation of financial management and human resources  systems and the standardization and optimization of associated business  processes and functions. To help realize these benefits, OMB evaluated  agencies’ business cases submitted as part of the fiscal year 2006 budget  process. On the basis of the review, the following four agencies were  designated as governmentwide financial management application service  providers, which OMB refers to as centers of excellence.
Department of the Interior (National Business Center)    General Services Administration    Department of the Treasury (Bureau of the Public Debt’s  Administrative Resource Center)
Department of Transportation (Enterprise Services Center)
The National Business Center, the General Services Administration, and  the Bureau of the Public Debt have significant experience providing  financial management services to other federal entities. For a number of  years, these entities have provided financial management services— primarily to smaller federal agencies such as the Nuclear Regulatory  Commission, the Office of Government Ethics, and the Panama Canal  Commission. The Department of Transportation plans to utilize its newly  implemented financial management system to provide services to other  agencies. OMB officials told us that, at a minimum, centers of excellence  must be able to support, or must use, core financial system software that  has passed the most recent qualification test of the Financial Systems  Integration Office, which is the current entity that performs many of the  roles and responsibilities of the former JFMIP Program Management  Office as we discuss below. Centers of excellence may provide related  maintenance, interfaces with feeder systems, and transaction processing.
Other services may also be offered, including hosting and other financial  applications such as payroll and travel. OMB also indicated that it plans to  explore using private sector application service providers to serve as  centers of excellence.
OMB expects to manage the migrations of agencies to centers of  excellence using the agencies’ business cases submitted as part of the  annual budget process. According to OMB, agencies that submit business  cases with proposals to develop new financial systems or significantly  update or enhance current financial systems are prime candidates for  moving to a financial management center of excellence. The general  principle OMB plans to follow is that agencies should migrate to a  financial management center of excellence when it is cost effective to do  so and they have maximized the return on investment in the current  system, which averages about 5 to 7 years. OMB officials told us that  several major executive branch agencies are considering moving to a  financial management center of excellence.
In August 2005, OPM was the first large agency to announce its plans to  move to a designated center of excellence. At the time of our review, OPM  was still in the planning phase; although it had selected the Bureau of the  Public Debt as the provider, it did not yet have a project plan. OPM  officials recognized that moving to a center of excellence at the beginning  of a fiscal year and not converting mid-year was a best practice they  planned to follow. In addition, at the time of our review, the  Environmental Protection Agency was in the planning and acquisition  phase of its Financial System Modernization Project. As part of its best- value determination, the Environmental Protection Agency was  considering the designated centers of excellence as well as private sector  providers for software, integration, and hosting and had issued a draft  request for quotations. Also, OMB officials stated that they helped the  National Gallery of Art in preparing its solicitation for a new system, and  the agency recently selected a private sector firm as its application service  provider. OMB expects that most agencies will move to a center of  excellence or private sector firm within the next 7 to 8 years. In OMB  Circular No. A-11, for fiscal year 2007 OMB has asked agencies to provide  an overview of their current and future financial management systems  framework, including migration strategies for moving to a financial  management center of excellence.
section_title: JFMIP Realignment
paragraphs: In an effort to eliminate duplicative roles and streamline financial  management improvement efforts, the four principals of JFMIP agreed to  realign JFMIP’s responsibilities for financial management policy and  oversight as described in a December 2004 OMB memorandum. Some of  the former responsibilities of JFMIP, such as issuing systems  requirements, were to be placed under the authority of OFFM and a  renamed CFO Council committee—the Financial Systems Integration  Committee. As a result of the realignment, JFMIP ceased to exist as a  separate organization, although the principals will continue to meet at  their discretion consistent with the Budget and Accounting Procedures  Act of 1950 (codified, in part, at 31 U.S.C. §3511(d)).
Under the realignment announced in December 2004, the JFMIP Program  Management Office was to report to the chair of the CFO Council’s  Financial Systems Integration Committee. This reporting relationship  subsequently changed. At the request of the OMB Controller, the CFO at  the Department of Labor now chairs the Financial Systems Integration  Committee and is the leading agency sponsor of the financial management  line of business. Two subcommittees were also established under the  announced realignment:    Configuration Control Subcommittee—to focus on interface    Transaction Processing Standardization Subcommittee—to support  interagency development of functional requirements for the software  certification process.
OMB officials indicated that the roles and responsibilities of the two  subcommittees under the Financial Systems Integration Committee will  likely continue to evolve. However, the full committee will periodically  evaluate the subcommittees and whether they are well aligned and still  needed or if additional subcommittees are needed.
Other significant responsibilities of the former JFMIP Program  Management Office, which was previously managed by the JFMIP  executive director using funds provided by the CFO Council, were shifted  to the Financial Systems Integration Office (FSIO), which was established  with staff from the original JFMIP Program Management Office. The FSIO  will now report to the FSIO executive director, who will report to the OMB  Controller. Before the realignment, the JFMIP Program Management  Office was responsible for the testing and certification of commercial off- the-shelf (COTS) core financial systems for use by federal agencies and  coordinating the development and publication of functional requirements  for financial management systems, among other things. OMB officials  expect that the FSIO will continue to focus on core financial systems and  still be responsible for certification and testing of core systems, but they  plan to evaluate the effectiveness of the certification and testing function.  In addition, OMB has recognized the need for standardization and the  inclusion of key stakeholders in developing systems requirements and  processes, but considers it a long-term goal. The FSIO will develop  systems requirements and the Financial Systems Integration Committee  will be responsible for advising OFFM on the systems requirements. OFFM  will now be responsible for issuing new systems requirements.
According to OMB officials, the FSIO is reassessing the realignment plan  described in the December 2004 OMB memorandum and recently  developed foundational materials including the mission statement, goals,  objectives, performance indicators, scope of activities, prioritization of  work, budget, organizational chart, and communication plan. According to  OMB officials, resources at FSIO will be aligned under the priorities  identified and the office will be structured according to the new priorities.  The FSIO will identify its needs for additional staff and determine how  many are needed and what skill sets are appropriate. The FSIO will  continue defining its priorities and evaluating the effectiveness of  processes and its plans will continue to evolve. While OMB has taken  steps to accomplish the Federal Enterprise Architecture, lines of business,  and JFMIP realignment initiatives, as discussed in the next section, it is  generally at the early stages of implementation and a firm foundation has  not yet been established to address the long-standing problems that have  impeded success.
section_title: Broad-Based Actions Needed to Implement Financial Management Systems Governmentwide
paragraphs: The key for federal agencies to avoid the long-standing problems that have  plagued financial management system improvement efforts is to address  the foremost causes of those problems and adopt solutions that reduce the  risks associated with these efforts to acceptable levels. Although OMB has  articulated an approach for reforming financial management systems  governmentwide under its financial management line of business and  JFMIP realignment initiatives, implementing these initiatives will be  complex and challenging. OMB has correctly recognized that enhancing  the government’s ability to implement financial management systems that  are capable of providing accurate, reliable, and timely information on the  results of operations needs to be addressed as a governmentwide solution,  rather than as individual agency stove-piped efforts designed to meet a  given entity’s needs. However, OMB has not yet fully defined and  implemented the processes needed to successfully complete these  initiatives. Specifically, based on industry best practices, we identified  four key concepts that are not yet fully developed and integrated in OMB’s  initiatives and related processes. While OMB has addressed certain  elements of these best practices in its initiatives, many specific steps are  not yet completed. Careful consideration of these four concepts, each one  building upon the next, will be integral to the success of OMB’s initiatives  and will help break the cycle of failure in implementing financial  management systems. The four concepts are (1) developing a concept of  operations, (2) defining standard business processes, (3) developing a  strategy for ensuring that agencies are migrated to a limited number of  application service providers in accordance with OMB’s stated approach,  and (4) defining and effectively implementing disciplined processes  necessary to properly manage the specific projects. The following sections  highlight the key issues to be considered for each of the four areas.
subsections: section_title: Concept of Operations Provides Foundation
paragraphs: What is considered a financial management system?
Who will be responsible for developing a governmentwide concept of operations and  what process will be used to ensure that the resulting document reflects the  governmentwide solution rather than individual agency stove-piped efforts?
How will the concept of operations be linked to the Federal Enterprise Architecture?
How can the federal government obtain reliable information on the costs of its financial  management systems investments?
A concept of operations defines how an organization’s day-to-day  operations are (or will be) carried out to meet mission needs. The concept  of operations includes high-level descriptions of information systems, their  interrelationships, and information flows. It also describes the operations  that must be performed, who must perform them, and where and how the  operations will be carried out. Further, it provides the foundation on  which requirements definitions and the rest of the systems planning  process are built. Normally, a concept of operations document is one of  the first documents to be produced during a disciplined development  effort and flows from both the vision statement and the enterprise  architecture. According to the IEEE standards, a concept of operations is  a user-oriented document that describes the characteristics of a proposed  system from the users’ viewpoint. The key elements that should be  included in a concept of operations are major system components,  interfaces to external systems, and performance characteristics such as  speed and volume.
In the case of federal financial management systems, another key element  for the concept of operations would be a clear definition and scope of the  financial management activities to be included. One problem with the  current OMB approach for reporting is that systems that have historically  been considered part of financial management, such as payroll and  inventory management, are not captured under the financial management  line of business when a particular agency reports IT investments to OMB  as part of the annual budget submission for inclusion in the Budget of the  United States Government. This is because the Federal Enterprise  Architecture coding structure for agencies to use when transmitting IT  investment information to OMB calls for only IT investments that support  certain financial system functions to be identified as a financial  management system. An effective concept of operations would help  identify these omissions.
Financial management systems are defined by OMB in Circulars No. A-11  and A-127 in similar terms to that found in statutes such as FFMIA. This  definition is also similar to that used by DOD to define a defense business  system as provided by the fiscal year 2005 Defense Authorization Act.  These various sources generally consider financial management systems  to be financial systems and the financial portion of mixed systems that  support the interrelationships and interdependencies between budget,  cost, and management functions, and the information associated with  business activities. A mixed system is an information system that supports  both financial and nonfinancial functions of the federal government. At  DOD, for example, an estimated 80 percent of the information needed to  prepare annual financial statements comes from mixed systems such as  logistics, personnel, and procurement systems that are outside of the  responsibility of the DOD CFO. In contrast, the Federal Enterprise  Architecture’s Business Reference Model defines a financial management  system as one that uses financial information to measure, operate, and  predict the effectiveness and efficiency of an entity’s activities in relation  to its objectives. These differences illustrate that a consistent definition of  financial management systems is not being used across the federal  government.
One of the key challenges faced by OMB when evaluating financial  management system implementation efforts is capturing all financial  management system investments and their related costs. The fiscal year  2006 budget requests for IT spending totaled about $65.2 billion. Our  analysis showed that, of this amount, only $3.9 billion, less than 6 percent,  is reflected under the financial management mission as defined by OMB  using the definition of a financial management system in its Federal  Enterprise Architecture. A more comprehensive analysis of financial  management system investments using the definition in OMB Circular No.  A-127 that includes mixed systems such as payroll and inventory and  including those considered by DOD as business systems brings the total to  about $20 billion. Payroll and inventory management systems clearly  support financial management activities, but these systems are not  included in the financial management line of business within the Federal  Enterprise Architecture framework. The payroll and inventory systems are  reflected under the human resource management and supply chain  management lines of business, respectively.
Because of these differing definitions, the total number of systems and the  respective costs associated with financial management system  implementation efforts are difficult to capture. OMB officials stated that  they are currently revising OMB Circular No. A-127 and will consider  clarifying the definition to ensure that it is consistent with FFMIA. In  addition, an effective concept of operations would help bridge this gap and  facilitate the monitoring of the activity related to financial management  systems. Addressing this issue would be a key factor in developing a  foundation for the lines of business initiative to consolidate federal  financial management systems under a limited number of application  service providers.
An effective concept of operations would describe, at a high level (1) how  all of the various elements of federal financial systems and mixed systems  relate to each other, and (2) how information flows from and through  these systems. Further, a concept of operations would provide a useful  tool to explain how financial management systems at the agency and  governmentwide levels can operate cohesively. It would be geared to a  governmentwide solution rather than individual agency stove-piped  efforts. Further, it would provide a road map that can be used to   (1) measure progress and (2) focus future efforts. OMB officials told us  that they had developed a concept of operations, but did not know when it  would be released or if it meets the criteria in the IEEE standards.  Because the federal government has lacked such a document, a clear  understanding of the interrelationships among federal financial systems  and how the application service provider concept fits into this framework  has not yet been achieved.
While the Federal Enterprise Architecture, when fully populated, could  provide some of this perspective, a concept of operations document  presents these items from a user’s viewpoint in nontechnical terms. Such a  document would be invaluable in getting various stakeholders, including  those at the agency and governmentwide levels, the software vendors, and  the three branches of the federal government, to understand how the  financial systems are expected to operate cohesively and how they fit into  “the big picture.” A concept of operations from this perspective would  clarify which financial management systems should be operated at an  agency level and which ones would be handled at a governmentwide level  and how those two would integrate. In addition, it could identify the  nature and extent of skills needed to effectively operate these systems.  This would play a part in resolving some of the human capital  management problems discussed previously.
Another key element of a concept of operations is a transition strategy that  is useful for developing an understanding of how and when changes will  occur. Not only is this needed from an investment management point of  view, it is a key element in the human capital problems discussed  previously that revolved around change management strategies.  Describing how to implement OMB’s approach for outsourcing financial  management systems and the process that will be used to deactivate  legacy systems that will be replaced or interfaced with a new financial  management system are key aspects that need to be addressed in a  transition strategy. This, in turn, allows the agencies to begin taking the  necessary actions to integrate this approach into their investment  management and change management processes.
section_title: Standard Business Processes Promote Consistency
paragraphs: How can governmentwide standard business processes be developed to meet the  needs of federal agencies?
How can agencies be encouraged to adopt new processes, rather than selecting other  methods that result in simply automating old ways of doing business?
How will the standard business processes be implemented by the application service  providers to provide consistency across government agencies and among the  application service providers?
What process will be used to determine and validate the processes needed for  agencies that have unique needs?
Business process models provide a way of expressing the procedures,  activities, and behaviors needed to accomplish an organization’s mission  and are helpful tools to document and understand complex systems.  Business processes are the various steps that must be followed to perform  a certain activity. For example, the procurement process would start when  the agency defines its needs, issues a solicitation for goods or services and  would continue through contract award, receipt of goods and services,  and would end when the vendor properly receives payment. The  identification of preferred business processes would be critical for  standardization of applications and training and portability of staff, as well  as for the software vendor community to use for software design and  implementation purposes. Without standard processes, the federal  government will continue to spend funds to develop individual agency  stove-piped efforts that may or may not meet a given entity’s needs.
To maximize the success of a new system acquisition, organizations need  to consider the redesign of current business processes. As we noted in our  Executive Guide: Creating Value Through World-class Financial  Management, leading finance organizations have found that productivity  gains typically result from more efficient processes, not from simply  automating old processes. Moreover, the Clinger-Cohen Act of 1996  requires agencies to analyze the missions of the agency and, based on the  analysis, revise mission-related and administrative processes, as  appropriate, before making significant investments in information  technology used to support those missions. Another benefit of what is  often called business process modeling is that it generates better system  requirements, since the business process models drive the creation of  information systems that fit in the organization and will be used by end  users. Other benefits include (1) providing a foundation for agency efforts  to describe the business processes needed for unique missions, or to  develop subprocesses to support those at the governmentwide level and  (2) describing the business processes of the federal government to the  vendor community for standardization. While in many cases, government  business processes will be identical or very similar to processes used by  the private sector, these standards should also describe processes unique  to federal accounting.
However, according to OMB officials, the lines of business initiative is  moving forward even though this important key issue has not yet been  addressed. OMB officials believed that for standardized processes, it is  important to get buy-in as the processes are developed, and not force the  process from the top. OMB officials we talked with recognized that  standardization of business processes is important, but they did not want  to wait to deploy the financial management line of business initiative until  standard business processes had been developed. OMB planned to task  the newly created CFO Council Transaction Processing Standardization  Subcommittee with the responsibility for developing standard federal  business processes. Because this key issue has not been addressed, and  the other key issues flow from it, little has been done to address those  important considerations. From our perspective, adopting standardized  processes is a fundamental step needed for all financial system  implementations, but especially for making the financial management line  of business initiative successful. Otherwise, we believe that there is a  much greater risk of the continued proliferation of nonstandard business  processes that would not result in a marked improvement from the current  environment.
section_title: Strategy for Implementing the Financial Management Line of Business Initiative Will Be Key
paragraphs: What guidance will be provided to assist agencies in adopting a change management  strategy that reduces the risks of moving to the application service provider  approach?
What processes will be put in place to ensure that agency financial management  system investment decisions focus on the benefits of standard processes and  application service providers?
What process will be used to facilitate the decision-making process used by agencies  to select a given provider?
How will agencies incorporate strategic workforce planning in the implementation of  the application service provider approach?
Although OMB has a goal of migrating agencies to a limited number of  application service providers within the next 7 to 8 years to deliver the  standard business processes, rather than funding individual agency efforts,  it has not yet articulated a clear and measurable strategy for achieving this  goal. This is important because there has been a historical tendency for  agencies and units within agencies to view their needs as urgent and resist  standardization. Decisive action will be needed to ensure that agencies  adopt the application service provider concept and that agencies do not  continue to attempt to develop and implement their own financial  management systems. OMB has been proactive since the beginning of the  financial management line of business initiative in describing the goals of  the initiative by making speeches, discussing the initiative with the media,  including it in the President’s budget request, and highlighting it on its Web  site. However, there are limited tools and guidance available and OMB has  not provided centers of excellence with standard document templates  needed to minimize risk, provide assurance, and develop understandings  with customers on topics such as service level agreements and concept of  operations. A service level agreement is critical for both the application  service providers and the agencies to be held accountable for their  respective parts of the agreement. Much work remains to develop a  change management strategy that addresses key activities needed to  minimize the risk associated with the implementation of the financial  management line of business initiative.
Change management in the context of migrating federal agencies to an  application service provider will need to include activities such as   (1) developing specific criteria for requiring agencies to migrate to an  application service provider rather than attempting to develop and  implement their own stove-piped business systems; (2) providing the  necessary information for an agency to make a selection of an application  service provider; (3) defining and instilling new values, norms, and  behaviors within agencies that support new ways of doing work and  overcoming resistance to change; (4) building consensus among  customers and stakeholders on specific changes designed to better meet  their needs; and (5) planning, testing, and implementing all aspects of the  transition from one organizational structure and business process to  another.
According to leading IT organizations, organizational change management  is the process of preparing users for the business process changes that will  accompany implementation of a new system. An effective organizational  change management process includes project plans and training that  prepare users for impacts the new system might have on their roles and  responsibilities and a process to manage those changes. We have reported  on various problems with agencies’ change management including the  failure to develop transition plans, reengineer business processes, and  limit customization. In addition, one CFO Council member told us that  from his perspective systems do not fail, but there is an implementation  failure because of (1) ineffective coordination and communication  between the CFO and CIO offices, (2) excessive modification of COTS  systems, (3) business processes not being reengineered correctly,  completely, or timely, and (4) a lack of authority and leadership for the  CFO and project management offices to make the implementation work.
With regard to establishing criteria for transitioning agencies to an  application service provider, we note that providing governmentwide  financial services is not a new concept to the federal government. One of  the 24 Presidential Electronic Government initiatives is e-payroll, which  was intended to consolidate 22 federal payroll systems into 4 federal  payroll providers to simplify and standardize federal human  resources/payroll policies and procedures to better integrate payroll,  human resources, and finance functions. Numerous agencies had targeted  their payroll operations for costly modernizations, and according to OMB,  by consolidating duplicative payroll modernization efforts, an estimated  $1.1 billion can be saved over the next decade in future IT investments  given the economies of scale and cost avoidance. Federal agencies already  have or will be migrating to one of the four selected payroll providers to  process payroll and pay employees.
OMB officials told us they learned from the e-payroll initiative that  directing and forcing change as they had done with the e-payroll effort was  not palatable to federal agencies. The agencies preferred having choices  on timing the move and on having options for various providers. As a  result, for the financial management line of business initiative, they do not  plan to establish a migration path or time table. Further, processes have  not been put in place to facilitate agency decisions on selecting a provider  or focusing investment decisions on the benefits of standard processes  and application service providers. It is not clear how this will impact the  adoption of this initiative. Given the pressures to reduce budgets,  discipline with respect to following a clear migration path will be  essential. Without such a migration path, while some agencies may readily  migrate to a center of excellence or application service provider to  minimize the tremendous undertaking of implementing or significantly  upgrading a financial system, other agencies will likely perpetuate the  waste of taxpayer dollars previously described related to failed system  implementation efforts.
The need for clear criteria on migrating agencies to the financial  management line of business initiative is highlighted by the following  example.
In fiscal year 2004, the Department of Justice embarked on  implementing a new core financial system and is not planning to move  to a center of excellence. OMB officials stated that they were not  requiring Justice to move to a center of excellence because it had  unique needs and was already far enough along in its attempt to  modernize and consolidate the financial systems used throughout the  agency. OMB officials also speculated that Justice might eventually  become a center of excellence that focuses on law enforcement  agencies and addresses the law enforcement community’s unique  needs. According to a supporting document of the Analytical  Perspectives, Budget of the United States Government, Fiscal Year  2006, Justice spent about $6.9 million on modernizing its core financial  system in fiscal year 2004. Further, Justice planned to spend $23.1  million for modernization during fiscal year 2005, and expects fiscal  year 2006 modernization costs to more than triple to $72.5 million. In  October 2004, the IG reported that little progress had been made in  implementing the new system and continued to report financial  management and systems as a top management challenge. Thus, it is  not clear why Justice should continue with its financial systems  development project when the cost is expected to significantly escalate  and significant challenges remain.
Further, the application service provider concept will still require that  agencies address long-standing human capital problems by incorporating  elements of strategic workforce planning such as (1) aligning an  organization’s human capital program with its current and emerging  mission and programmatic goals and (2) developing long-term strategies  for acquiring, developing, and retaining an organization’s total workforce  to meet the needs of the future. This includes a range of activities from  identifying and defining roles and responsibilities, to identifying team  members, to developing individual competencies that enhance  performance. To maintain and enhance the capabilities of IT staff,  organizations should develop and implement a human capital strategy  that, among other things, includes assessing competencies and skills  needed to effectively perform IT operations to support agency mission and  goals, inventorying the competencies and skills of current IT staff to  identify gaps in needed capabilities, and developing and implementing  plans to fill the gap between requirements and current staffing.
As we have testified, having sufficient numbers of people on board with  the right mix of knowledge and skills can make the difference between  success and failure. This is especially true in the IT area, where  widespread shortfalls in human capital have contributed to demonstrable  shortfalls in agency and program performance. According to Building the  Work Force Capacity to Successfully Implement Financial Systems, the  roles needed on an implementation team are consistent across financial  system implementation projects and include a project manager, systems  integrator, functional experts, information technology manager, and IT  analysts. Many of these roles require the dedication of full-time staff for  one or more of the project’s phases.
Finally, sustained leadership will be key to a successful strategy for  moving federal agencies towards consolidated financial management  systems. In our Executive Guide: Creating Value Through World-class  Financial Management, we found that leading organizations made  financial management improvement an entitywide priority by, among  other things, providing clear, strong executive leadership. We also  reported that making financial management a priority throughout the  federal government involves changing the organizational culture of federal  agencies. Although the views about how an organization can change its  culture can vary considerably, leadership (executive support) is often  viewed as the most important factor in successfully making cultural  changes. Top management must be totally committed in both words and  actions to changing the culture, and this commitment must be sustained  and demonstrated to staff. In addition, a recent best practice guide on  shared services stated that it is not enough for management to merely  support the financial operations’ shared service implementation—top  management must provide the leadership structure to ensure that the  transition is successful. Because the tenure of political appointees is  relatively short, the current and future administrations must continue a  strong emphasis on top-notch financial management.
section_title: Disciplined Processes Will Help Ensure Successful Implementations
paragraphs: How can existing industry standards and best practices be incorporated into  governmentwide guidance related to financial management system implementation  efforts, including migrating to an application service provider?
What actions will be taken to reduce the risks and costs associated with data  conversion and interface efforts?
What oversight process will be used to ensure that modernization efforts effectively  implement the prescribed policies and procedures?
Once the concept of operations and standard business processes have  been defined and a migration strategy is in place, individual agencies will  have to work closely with the selected application service provider or  systems integrator to help ensure that the implementation is successful.  Although application service providers may provide a COTS solution,  effective implementation and testing processes are still required to ensure  that the system delivers the desired functionality on time and within  budget. As previously discussed, a partnership between the CIO and CFO  offices, as well as with those program management offices responsible for  financial or mixed systems such as payroll and inventory, is critical for  success. Agencies have frequently struggled to implement key best  practices when implementing COTS financial management systems. The  key to avoiding these long-standing implementation problems is to provide  specific guidance to agencies for financial management system  implementations, incorporating the best practices identified by the SEI,  the IEEE, the Project Management Institute, and other experts that have  been proven to reduce risk in implementing systems. Such guidance  should include the various disciplined processes such as requirements  management, testing, data conversion and system interfaces, risk and  project management, and related activities, which have been problematic  in the financial systems implementation projects we reviewed.
Disciplined processes have been shown to reduce the risks associated  with software development and acquisition efforts to acceptable levels and  are fundamental to successful system implementations. The principles of  disciplined IT systems development and acquisition of services apply to  shared services implementation. A disciplined software implementation  process can maximize the likelihood of achieving the intended results  (performance) within established resources (costs) on schedule. For  example, disciplined processes should be in place to address the areas of  data conversion and interfaces, two of the many critical elements  necessary to successfully implement a new system that have contributed  to the failure of previous agency efforts. The former JFMIP provided  guidance on data conversion, and the Configuration Control  Subcommittee under the CFO Council’s Financial Systems Integration  Committee was tasked with focusing on interface requirements.  However, a standard set of practices will be needed to guide the migration  from legacy systems to new systems and application service providers.  Further details on disciplined processes needed can be found in appendix  III.
In addition, oversight to help ensure that the disciplined processes are in  place and operating as intended will be a critical factor in the success of  the implementation of new and consolidated financial management  systems. Currently, OMB guidance requires agencies to have qualified  project managers and to use earned value management tools for major IT  investments. However, OMB only performs limited reviews of agencies’  financial management systems implementations. OFFM officials told us  that these reviews vary considerably in scope and that one of their goals is  to provide more structure to the reviews. OMB’s review depends on the  agency and the phase of the project, and generally does not focus on  implementation of the disciplined processes used. Industry experts agree  that the best indicator of whether risks have been reduced to an  acceptable level is an assessment of the disciplined processes in place. For  example, in the area of requirements management, disciplined processes  would help ensure (1) the requirements document contains all the  requirements identified by the customer, as well as those needed for the  definition of the system, (2) the requirements fully describe the software  functionality to be delivered, (3) the requirements are stated in clear terms  that allow for quantitative evaluation, and (4) traceability among various  documents is maintained. Proper oversight would entail verification of  these requirements-related disciplined processes.
In addition to problems with the structure and scope of OMB’s current  system reviews, we noted that OFFM has a staff of only four employees  dedicated to reviewing federal executive branch agency projects to  implement financial management systems. These four staff also have other  time-consuming duties such as developing a coherent, coordinated  architecture and issuing federal financial system requirements. As a result,  the current level of detail in the existing system reviews is necessarily  limited. Moreover, there is limited follow-up by OMB on suggested  improvements they have made to agency officials, and there is not any  impetus for agencies to implement suggested improvements. For example,  OFFM officials told us that they advised an agency that there were  numerous disadvantages to deploying a new financial management system  mid-year. Nonetheless, the agency deployed the system at mid-year and  has faced problems by doing so. The FSIO also has a limited number of  staff to perform its numerous financial management policy and oversight  activities and is currently reassessing its priorities and available resources.  Given the range of OMB’s leadership roles and its relatively small size as  part of the Executive Office of the President, it is not realistic to expect  OMB to be able to carry out a comprehensive review function. Instead,  agencies could be required to have their financial management system  projects undergo independent verification and validation reviews to  ensure that the projects adequately implemented the disciplined processes  needed to manage the risks to acceptable levels. OMB could then review  reports produced as a result of the independent verification and validation  process to leverage its oversight efforts. Accordingly, OMB could then  focus its oversight efforts on the projects with the greatest risks.
section_title: Conclusions
paragraphs: Because the federal government is one of the largest and most complex  organizations in the world, operating, maintaining, and modernizing its  financial management systems represent a monumental challenge— technically and cost-wise. The past paradigm must be changed from one in  which each federal agency attempts to implement systems that, in many  cases, are to perform redundant functions and have all too often resulted  in failure, have been delayed, and cost too much. Thus, a more holistic  governmentwide approach as OMB has been advocating is necessary to  address the key causes of failure. OMB has recognized the seriousness of  the problems. Its primary initiative related to the use of a limited number  of application service providers is a step in the right direction. This  initiative is in the early stage and does not yet include basic elements that  are integral to its success. Based on industry best practices, the following  four concepts would help ensure a sound foundation for developing and  implementing a governmentwide solution for long-standing financial  management system implementation failures: (1) developing a concept of  operations that ties in other systems, (2) defining standard business  processes, (3) developing a strategy for ensuring that agencies are  migrated to a limited number of application service providers, and   (4) defining and effectively implementing applicable disciplined processes.  As pressure mounts to do more with less, to increase accountability, and  to reduce fraud, waste, abuse, and mismanagement, and efforts to reduce  federal spending intensify, sustained and committed leadership will be a  key factor in the successful implementation of these governmentwide  initiatives. However, regardless of the approach taken, the adherence to  disciplined processes in systems development and acquisition will be at  the core of successfully addressing the key causes of financial  management system implementation failures.
section_title: Recommendations for Executive Action
paragraphs: To help reduce the risks associated with financial management system  implementation efforts and facilitate the implementation of the financial  management line of business and JFMIP realignment initiatives across the  government, we recommend that the Director of OMB take the following  18 actions. This would entail placing a high priority on fully integrating  into its approach the following concepts and underlying key issues, all of  which are related to the fundamental disciplines in systems  implementation:    Developing a concept of operations. This would include  identifying the interrelationships among federal financial systems  and how the application service provider concept fits into this  framework,    prescribing which financial management systems should be  operated at an agency level and which should be operated at a  governmentwide level and how those would integrate, and    defining financial management systems in the Federal Enterprise  Architecture to be more consistent with the similar definitions used  in FFMIA and OMB Circulars No. A-11 and No. A-127.
Defining standard business processes. This would include    describing the standard business processes that are needed to meet  federal agencies’ needs,    developing a process to identify those that are needed to meet  unique agency needs,  requiring application service providers to adopt standard business  processes to provide consistency, and    encouraging agencies to embrace new processes.
Developing a strategy for ensuring that agencies are migrated to a  limited number of application service providers in accordance with  OMB’s stated approach. This would include    articulating a clear goal and criteria for ensuring agencies are  subject to the application service provider concept and cannot  continue developing and implementing their own stove-piped  systems,    establishing a migration path or time table for when agencies should  migrate to an application service provider,    providing the necessary information for an agency to select an  application service provider, and    developing guidance to assist agencies in adopting a change  management strategy for moving to application service providers.
Defining and effectively implementing disciplined processes necessary  to properly manage the specific projects. This would include    providing specific guidance to agencies on disciplined processes for    providing a standard set of practices to guide the migrations from  legacy systems to new systems and application service providers,  and    developing processes to facilitate oversight and review that allow  for a more structured review and follow-up of agencies’ financial  system implementation projects.
section_title: Agency Comments and Our Evaluation
paragraphs: We received written comments on a draft of this report from the  Controller of OMB, which are reprinted in appendix IV. The Controller  agreed with our recommendations and described the approach and steps  that OMB is taking to improve financial management system  modernization efforts. As OMB moves forward to address the  recommendations in our report, it is important that it prioritize its efforts  and focus on the concepts and underlying key issues we discussed, such  as adequately defining and implementing disciplined processes. We are  encouraged that OMB plans to issue additional guidance outlining the  fundamental risk-reduction approaches that agencies can implement when  acquiring and implementing financial systems. It will be critical that the  guidance stresses the importance of this standard set of practices. We  continue to believe that careful consideration of all the building blocks  and key issues we identified will be integral to the success of OMB’s  initiatives. OMB also provided additional oral comments which we  incorporated as appropriate.
We are sending copies of this report to the Chairman and Ranking  Minority Member, Senate Committee on Homeland Security and  Governmental Affairs, and other interested congressional committees. We  are also sending a copy to the Director of OMB. Copies will also be made  available to others upon request. The report will also be available at no  charge on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  McCoy Williams, Director, Financial Management and Assurance, who  may be reached at (202) 512-9095 or by e-mail at williamsm1@gao.gov, or  Keith A. Rhodes, Chief Technologist, Applied Research and Methods, who  may be reached at (202) 512-6412 or by e-mail at rhodesk@gao.gov.   Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix V.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the key causes for financial management system  implementation failures, we conducted database searches of GAO and  inspector general (IG) Web sites to identify reports issued by any GAO  teams or IGs that could be relevant. We summarized and analyzed prior  GAO reports on commercial off-the-shelf financial management system  implementations within the last 5 years. We performed a content analysis  of the GAO and IG reports to determine if causes for the financial  management system implementation problems were included. We  discussed the relevant GAO report findings and current status with the key  staff that worked on the reports. In addition, we identified other potential  data sources, such as key industry groups and well-known national  experts for information they had on this topic. We also interviewed key  Office of Management and Budget (OMB) officials and had discussions  with other interested parties such as Chief Financial Officers (CFO)  Council representatives.
To identify the significant governmentwide initiatives that are currently  under way that impact financial management systems implementation  failures, we interviewed key OMB officials and reviewed relevant OMB  policies, guidance, and memorandums related to the initiatives. We also  interviewed CFO Council representatives to discuss the initiatives to  reform federal financial management systems. In addition, we interviewed  Office of Personnel Management officials to discuss their plans to migrate  to a financial management center of excellence. We also reviewed reports  from various authors and governmentwide forums where participants  provided their perspectives on governmentwide initiatives.
To provide our views on actions that can be taken to help improve the  management and control of agency financial management system  modernization efforts, we analyzed the GAO and IG reports we had  identified as relevant to the topic to highlight the actions called for in  those reports. Further, we reviewed material from key industry groups and  national experts to identify any potential solutions posed by those groups,  lessons learned, and relevant best practices. We took into consideration  those governmentwide initiatives that were currently under way and the  perspectives provided by authors and participants in governmentwide  forums. In addition, during our consultations with various GAO  stakeholders, and external groups such as OMB and the CFO Council, we  obtained their perspectives on the actions needed to address the  problems.
We conducted our work in Washington, D.C., from January 2005 through  October 2005, in accordance with U.S. generally accepted government  auditing standards. We did not evaluate the federal government’s overall  IT strategy or whether a particular agency selected the most appropriate  financial management system. Because we have previously provided  agencies with specific recommendations in individual reports, we are not  making additional recommendations to them in this report. We requested  comments on a draft of this report from the Director of OMB or his  designee. Written comments from OMB are reprinted in appendix IV and  evaluated in the Agency Comments and Our Evaluation section.
section_title: Appendix II: IG Reports Reviewed
paragraphs: Department of the Treasury Office of Inspector General. The  Modernization Program Is Establishing a Requirements Management  Office to Address Development and Management Problems. Reference  No. 2005-20-023. Washington, D.C.: January 19, 2005.
Department of Transportation Office of Inspector General. Consolidated  Financial Statements for Fiscal Years 2004 and 2003. Report FI-2005- 009. Washington, D.C.: November 15, 2004.
Department of Housing and Urban Development Office of Inspector  General. Fiscal Year 2004 Review of Information Systems Controls in  Support of the Financial Statements Audit. Report 2005-DP-0001.  Washington, D.C.: October 19, 2004.
Department of Justice Office of Inspector General. The Drug Enforcement  Administration’s Management of Enterprise Architecture and  Information Technology Investments. Report 04-36. Washington, D.C.:  September 2004.
Department of Veterans Affairs Office of Inspector General. Issues at VA  Medical Center Bay Pines, Florida and Procurement and Deployment of  the Core Financial and Logistics System. Report 04-01371-177.  Washington, D.C.: August 11, 2004.
Department of Energy Office of Inspector General. Management of the  Federal Energy Regulatory Commission’s Information Technology  Program. Report DOE/IG-0652. Washington, D.C.: June 2004.
Department of Justice Office of Inspector General. The Federal Bureau of  Investigation’s Implementation of Information Technology  Recommendations. Report 03-36. Washington, D.C.: September 2003.
Small Business Administration Office of Inspector General. Audit of SBA’s  Acquisition, Development and Implementation of the Joint Accounting  and Administrative Management System. Report 3-32. Washington, D.C.:  June 30, 2003.
Department of Energy Office of Inspector General. Audit Report on  Business Management Information System. Report DOE/IG-0572.  Washington, D.C.: November 2002.
Department of the Interior Office of Inspector General. Developing the  Department of the Interior’s Information Technology Capital Investment  Process: A Framework for Action. Report 2002-I-0038. Washington, D.C.:  August 2002.
Department of Defense Office of Inspector General. Development of the  Defense Finance and Accounting Service Corporate Database and other  Financial Management Systems. Report D-2002-014. Washington, D.C.:  November 7, 2001.
Department of Transportation Office of Inspector General. Implementing  a New Financial Management System. Report FI-2001-074. Washington,  D.C.: August 7, 2001.
section_title: Appendix III: Disciplined Processes
subsections: section_title: Disciplined Processes Are Key to Successful Financial Management System Implementation Efforts
paragraphs: Disciplined processes have been shown to reduce the risks associated  with software development and acquisition efforts to acceptable levels and  are fundamental to successful system implementations. A disciplined  software implementation process can maximize the likelihood of  achieving the intended results (performance) within established resources  (costs) on schedule. Although a standard set of practices that will  guarantee success does not exist, several organizations, such as the  Software Engineering Institute (SEI) and the Institute of Electrical and  Electronic Engineers (IEEE), and individual experts, have identified and  developed the types of policies, procedures, and practices that have been  demonstrated to reduce development time and enhance effectiveness. The  key to having a disciplined system development effort is to have  disciplined processes in multiple areas, including requirements  management, testing, data conversion and system interfaces, configuration  management, risk management, project management, and quality  assurance.
subsections: section_title: Requirements Management
paragraphs: Requirements are the specifications that system developers and program  managers use to design, develop, and acquire a system. They need to be  carefully defined, consistent with one another, verifiable, and directly  traceable to higher-level business or functional requirements. It is critical  that they flow directly from the organization’s concept of operations (how  the organization’s day-to-day operations are or will be carried out to meet  mission needs).
According to the IEEE, a leader in defining the best practices for such  efforts, good requirements have several characteristics, including the  following:  The requirements fully describe the software functionality to be  delivered. Functionality is a defined objective or characteristic action  of a system or component. For example, for grants management, a key  functionality includes knowing (1) the funds obligated to a grantee for  a specific purpose, (2) the cost incurred by the grantee, and (3) the  funds provided in accordance with federal accounting standards.
The requirements are stated in clear terms that allow for quantitative  evaluation. Specifically, all readers of a requirement should arrive at a  single, consistent interpretation of it.
Traceability among various requirement documents is maintained.
Requirements for projects can be expressed at various levels  depending on user needs. They range from agencywide business  requirements to increasingly detailed functional requirements that  eventually permit the software project managers and other technicians  to design and build the required functionality in the new system.  Adequate traceability ensures that a requirement in one document is  consistent with and linked to applicable requirements in another  document.
The requirements document contains all of the requirements identified  by the customer, as well as those needed for the definition of the  system.
Studies have shown that problems associated with requirements definition  are key factors in software projects that do not meet their cost, schedule,  and performance goals. Examples include the following:    A 1988 study found that getting a requirement right in the first place  costs 50 to 200 times less than waiting until after the system is  implemented to get it right.
A 1994 survey of more than 8,000 software projects found that the top  three reasons that projects were delivered late, over budget, and with  less functionality than desired all had to do with requirements  management.
A 1994 study found that, on average, there is about a 25-percent  increase in requirements over a project’s lifetime, which translates into  at least a 25-percent increase in the schedule.
A 1997 study noted that between 40 and 60 percent of all defects found  in a software project could be traced back to errors made during the  requirements development stage.
section_title: Testing
paragraphs: Testing is the process of executing a program with the intent of finding  errors. Because requirements provide the foundation for system testing,  they must be complete, clear, and well documented to design and  implement an effective testing program. Absent this, an organization is  taking a significant risk that substantial defects will not be detected until  after the system is implemented. As shown in figure 2, there is a direct  relationship between requirements and testing.
Although the actual testing occurs late in the development cycle, test  planning can help disciplined activities reduce requirements-related  defects. For example, developing conceptual test cases based on the  requirements derived from the concept of operations and functional  requirements stages can identify errors, omissions, and ambiguities long  before any code is written or a system is configured. Disciplined  organizations also recognize that planning the testing activities in  coordination with the requirements development process has major  benefits.
Although well-defined requirements are critical for implementing a  successful testing program, disciplined testing efforts for projects have  several characteristics, which include the following:    Testers who assume that the program has errors are likely to find a  greater percentage of the defects present in the system. This is  commonly called the testing mindset.
Test plans and scripts that clearly define what the expected results  should be when the test case is properly executed and the program  does not have a defect that would be detected by the test case. This  helps to ensure that defects are not mistakenly accepted.
Processes that ensure test results are thoroughly inspected.
Test cases that include exposing the system to invalid and unexpected  conditions as well as the valid and expected conditions. This is  commonly referred to as boundary condition testing.
Testing processes that determine if a program has unwanted side  effects. For example, a process should update the proper records  correctly but should not delete other records.
Systematic gathering, tracking, and analyzing statistics on the defects  identified during testing.
Although these processes may appear obvious, they are often overlooked  in testing activities.
section_title: Data Conversion and System Interfaces
paragraphs: Data conversion is defined as the modification of existing data to enable  them to operate with similar functional capability in a different  environment. It is one of the many critical elements necessary to  successfully implement a new system. Because of the difficulty and  complexity associated with financial systems data conversion, highly  skilled staff are needed. There are three primary phases in a data  conversion:  1.  Pre-conversion activities prior to and leading up to the conversion,  such as determining the scope and approach or method, developing  the conversion plan, performing data cleanup and validation, ensuring  data integrity, and conducting necessary analysis and testing.  2.  Cutover activities to convert the legacy data to the new system, such  as testing system process and data edits, testing system interfaces  (both incoming and outgoing), managing the critical path, supervising  workload completion, and reconciliation.  3.  Post-installation activities such as verifying data integrity,  conducting final disposition of the legacy system data, and monitoring  the first reporting cycle.
There are also specific issues that apply uniquely to converting data as  part of the replacement of a financial system, including  identifying specific open transactions and balances to be established,    analyzing and reconciling transactions for validation purposes, and    establishing transactions and balances in the new system through an  automated or manual process.
Further, consideration of various data conversion approaches and  implications are important. Some considerations to be taken into account  for the system conversion are the timing of the conversion (beginning-of- the-year, mid-year, or incremental) and other options such as direct or  flash conversions, parallel operations, and pilot conversions. In addition,  agencies should consider different data conversion options for different  categories of data when determining the scope and time lines such as    opting not to conduct a data conversion,    processing new transactions and activity only,    establishing transaction balances in the new system for reporting    converting open transactions from the legacy system, and  recording new activity on closed prior year transactions.
Validation and adjustment of open transactions and data in the legacy  system are essential prerequisites to the conversion process and have  often been problematic. When data conversion is done right, the new  system can flourish. However, converting data incorrectly has lengthy and  long-term repercussions.
System interfaces operate on an ongoing basis linking various systems and  provide data that are critical to day-to-day operations, such as obligations,  disbursements, purchase orders, requisitions, and other procurement  activities. Testing the system interfaces in an end-to-end manner is  necessary so agencies can have reasonable assurance that the system will  be capable of providing the intended functionality. Systems that lack  appropriate system interfaces often rely on manual reentry of data into  multiple systems, convoluted systems, or both. According to the SEI, a  widely recognized model for evaluating the interoperability of systems is  the Levels of Information System Interoperability. This model focuses on  the increasing levels of sophistication of system interoperability. Efforts at  the highest level of this model—enterprise-based interoperability—are  systems that can provide multiple users access to complex data  simultaneously, data and applications are fully shared and distributed, and  data have a common interpretation regardless of format. This is in contrast  to the traditional interface strategies that are more aligned with the lowest  level of the SEI model. Data exchanged at this level rely on electronic links  that result in a simple electronic exchange of data.
Configuration Management  According to the SEI, configuration management is defined as a discipline  applying technical and administrative direction and surveillance to   (1) identify and document the functional and physical characteristics of a  configuration item, (2) control changes to those characteristics, (3) record  and report change processing and implementation status, and (4) verify  compliance with specified requirements. The purpose of configuration  management is to establish and maintain the integrity of work products.  Configuration management involves the processes of  identifying the configuration of selected work products that compose  the baselines at given points in time,    controlling changes to configuration items,    building or providing specifications to build work products from the    maintaining the integrity of baselines, and    providing accurate status and current configuration data to developers,  integrators, and end users.
The work products placed under configuration management include the  products that are delivered to the customer, designated internal work  products, acquired products, tools, and other items that are used in  creating and describing these work products.
For COTS systems, configuration management focuses on ensuring that  changes to the requirements or components of a system are strictly  controlled to ensure the integrity and consistency of system requirements  or components. Two of the key activities for configuration management  include ensuring that (1) project plans explicitly provide for evaluation,  acquisition, and implementation of new, often frequent, product releases  and (2) modification or upgrades to deployed versions of system  components are centrally controlled, and unilateral user release changes  are precluded. Configuration management recognizes that when using  COTS products, it is the vendor, not the acquisition or implementing  organization, that controls the release of new versions and that new  versions are frequently released.
section_title: Risk Management
paragraphs: Risk and opportunity are inextricably related. Although developing  software is a risky endeavor, risk management processes should be used  to manage the project’s risks to acceptable levels by taking the actions  necessary to mitigate the adverse effects of significant risks before they  threaten the project’s success. If a project does not effectively manage its  risks, then the risks will manage the project.
Risk management is a set of activities for identifying, analyzing, planning,  tracking, and controlling risks. Risk management starts with identifying  the risks before they can become problems. If this step is not performed  well, then the entire risk management process may become a useless  exercise since one cannot manage something that one does not know  anything about. As with the other disciplined processes, risk management  is designed to eliminate the effects of undesirable events at the earliest  possible stage to avoid the costly consequences of rework.
After the risks are identified, they need to be analyzed so that they can be  better understood and decisions can be made about what actions, if any,  will be taken to address them. Basically, this step includes activities such  as evaluating the impact on the project if the risk does occur, determining  the probability of the event occurring, and prioritizing the risk against the  other risks. Once the risks are analyzed, a risk management plan is  developed that outlines the information known about the risks and the  actions, if any, which will be taken to mitigate those risks. Risk monitoring  is a continuous process because both the risks and actions planned to  address identified risks need to be monitored to ensure that the risks are  being properly controlled and that new risks are identified as early as  possible. If the actions envisioned in the plan are not adequate, then  additional controls are needed to correct the deficiencies identified.
section_title: Project Management
paragraphs: Effective project management is the process for planning and managing all  project-related activities, such as defining how components are  interrelated, defining tasks, estimating and obtaining resources, and  scheduling activities. Project management allows the performance, cost,  and schedule of the overall program to be continually measured,  compared with planned objectives, and controlled. Project management  activities include planning, monitoring, and controlling the project.
Project planning is the process used to establish reasonable plans for  carrying out and managing the software project. This includes   (1) developing estimates of the resources needed for the work to be  performed, (2) establishing the necessary commitments, and (3) defining  the plan necessary to perform the work. Effective planning is needed to  identify and resolve problems as soon as possible, when it is the cheapest  to fix them. According to one author, the average project expends about  80 percent of the time on unplanned rework—fixing mistakes that were  made earlier in the project. Recognizing that mistakes will be made in a  project is an important part of planning. According to this author,  successful system development activities are designed so that the project  team makes a carefully planned series of small mistakes to avoid making  large, unplanned mistakes. For example, spending the time to adequately  analyze three design alternatives before selecting one results in time spent  analyzing two alternatives that were not selected. However, discovering  that a design is inadequate after development can result in code that must  be rewritten, at a cost greater than analyzing the three alternatives in the  first place. This same author notes that a good rule of thumb is that each  hour a developer spends reviewing project requirements and architecture  saves 3 to 10 hours later in the project.
Project monitoring and control help to understand the progress of the  project and determine when corrective actions are needed based on the  project’s performance. Best business practices indicate that a key facet of  project management and oversight is the ability to effectively monitor and  evaluate a project’s actual performance, cost, and schedule against what  was planned. In order to perform this critical task, the accumulation of  quantitative data or metrics is required and can be used to evaluate a  project’s performance. An effective project management and oversight  process uses quantitative data or metrics to understand matters such as  (1) whether the project plan needs to be adjusted and (2) oversight actions  that may be needed to ensure that the project meets its stated goals and  complies with agency guidance. For example, an earned value  management system is one metric that can be employed to better manage  and oversee a system project. An earned value management system  attempts to compare the value of work accomplished during a given  period with the work scheduled for that period. With ineffective project  oversight, management can only respond to problems as they arise.
Agency management can also perform oversight functions, such as project  reviews and participation in key meetings, to help ensure that the project  will meet the agency needs. Management can use independent verification  and validation reviews to provide it with assessments of the project’s  software deliverables and processes. Although independent of the  developer, verification and validation is an integral part of the overall  development program and helps management mitigate risks. This core  element involves having an independent third party—such as an internal  audit function or a contractor that is not involved with any of the system  implementation efforts—verify and validate that the systems were  implemented in accordance with the established business processes and  standards. Doing so provides agencies with needed assurance about the  quality of the system, which is discussed in more detail in the following  section.
section_title: Quality Assurance
paragraphs: Quality assurance is defined as a set of procedures designed to ensure that  quality standards and processes are adhered to and that the final product  meets or exceeds the required technical and performance requirements.  Quality assurance is a widely used approach in the software industry to  improve upon product delivery and the meeting of customer requirements  and expectations. The SEI indicates that quality assurance should begin in  the early phases of a project to establish plans, processes, standards, and  procedures that will add value to the project and satisfy the requirements  of the project and the organizational policies. Quality assurance provides  independent assessments, typically performed by an independent  verification and validation or internal audit team, of whether management  process requirements are being followed and whether product standards  and requirements are being satisfied. Some of the widely used quality  assurance activities include defect tracking, technical reviews, and system  testing.
Defect tracking–keeping a record of each defect found, its source,  when it was detected, when it was resolved, how it was resolved (fixed  or not), and so on.
Technical reviews–reviewing user interface prototypes, requirements  specifications, architecture, designs, and all other technical work  products.
System testing–executing software for the purpose of finding defects,  typically performed by an independent test organization or quality  assurance group.
According to one author, quality assurance activities might seem to result  in a lot of overhead, but in actuality, exactly the opposite is true. If  defects can be prevented or removed early, a significant schedule benefit  can be realized. For example, studies have shown that reworking defective  requirements, design, and code typically consumes 40 to 50 percent of the  total costs of software development projects. An effective quality  assurance approach is to detect as many defects as possible as early as  possible to keep the costs of corrections down. However, enormous  amounts of time can be saved by detecting defects earlier than during  system testing.
section_title: Appendix IV: Comments from the Office of Management and Budget
paragraphs: Appendix IV: Comments from the Office of  Management and Budget  o Facilitate stronger internal controls that ensure integrity in accounting and other  o Reduce costs by providing a competitive alternative for agencies to acquire, develop,  implement, and operate financial management systems through shared service solutions;  o Standardize systems, business processes and data elements; and  o Provide for seamless data exchange between and among Federal agencies by  implementing a common language and structure for financial information and system  interfaces. 3. What are the critical milestones that must be accomplished in order to achieve  the vision and goals of the FMLOB?
Federal agencies have begun implementing the FMLOB initiative by actively migrating to shared  service providers and initiating solutions to integrate financial data among and between agency  business systems.  Nothing in this memorandum changes the expectation that agencies will  continue to take all the necessary steps (in the earliest possible timeframes) to meet FMLOB  objectives.  The milestones described below, therefore, are intended to facilitate, not delay,  agency efforts.
As depicted in Attachment 1, the critical milestones of the FMLOB can be broken down into  three stages – (i) transparency and standardization; (ii) competitive environment and seamless  data integration; and (iii) results.
Stage 1: Transparency and Standardization.   In order to enable a competitive environment  where agencies have more options and leverage in choosing a financial system, and in order to  facilitate seamless integration of financial data among agency business systems, additional  transparency and standardization is required.
Transparency:   In determining the best options available when modernizing financial systems,  the Federal financial community must have clarity on how to evaluate the performance and cost  of shared service alternatives (i.e., Centers of Excellence (COE)) as well as clarity on what steps  Federal agencies are expected to undertake in order to migrate to a COE.  As described in more  detail below, a COE is a shared service solution where a single entity provides financial  management services for multiple organizations.  In order to achieve additional transparency,  two specific projects (with associated milestones) will be undertaken:    Establishment of Common Performance Measures – This project will result in standard  quality and cost measures for agencies to benchmark and compare the performance of  financial system alternatives.
Development of Migration Planning Guidance – This project will result in  comprehensive guidance that helps Federal agencies describe, prepare for, and manage an  agency’s migration to a COE.  This guidance will also include a definition of the full  range of services to be provided by all COEs and a description of the “rules of  2 engagement,” including templates for service level agreements outlining provider and  client responsibilities.
Standardization:  In order to mitigate the cost and risk of migrations to a COE and to ensure that  financial data can be shared across agency business systems, the Federal government must  ensure greater standardization of business processes, interfaces, and data.  To this end, two  specific projects (with associated milestones) will be undertaken:    Development of Standard Business Processes – This project will result in government- wide common business rules, data components, and policies for funds control, accounts  payable, accounts receivable, and fixed assets.
Creation of a Common Government-wide Accounting Code – This project will result in a  uniform accounting code structure, layout, and definitions.
Once established, all agencies will be expected to adopt these common processes on a schedule  agreed upon between the agency and OMB.   See Attachment 2 for additional details on the  priority projects related to the transparency and standardization initiatives described above.
Stage 2: Competitive Environment and Seamless Data Integration.  In order to enable  improved performance of financial systems, the FMLOB envisions more competitive alternatives  for financial systems and an environment where financial data can be more easily compared and  aggregated across agencies.
Competitive Environment:  To enable improved cost, quality, and performance of financial  systems, Federal agencies must have competitive options available for financial systems.  The  COE framework is intended to help achieve these results.  A COE is a shared service solution  where a single entity provides financial management services for multiple organizations.   When  the FMLOB is successful, there will be a limited number of stable and high performing COEs  that provide competitive alternatives for agencies investing in financial system modernizations.    The economies of scale and skill of a COE will allow it to provide Federal agencies with a lower  risk, lower cost, and increased service quality alternative for financial system modernization  efforts.
Notably, a competitive environment is sustainable if Federal agencies have the ability to migrate  from one solution to a more competitive or better performing alternative that is offered.  The  transparency and standardization efforts described above will lay the foundation for facilitating  better portability of agency systems from one solution to another.
Seamless Data Integration:   The standardization efforts, associated with Stage 1 of the FMLOB  initiative, will enable financial data to be easily compared and aggregated across agencies.  For  3 example, the development of a common government-wide accounting code will assist in the  intra-governmental reconciliation process by requiring that all common types of financial data be  accounted for in a similar format.  A common structure will also enable easier transmission of  financial reports to OMB and Treasury and assist these central agencies with aggregating  similar-type data on a government-wide basis.  Seamless and standardized data exchange will  enable the government to streamline operations through more efficient information management  and increased data accuracy.
In addition, seamless data integration will reduce the costs and risks of establishing interfaces  between agency business systems.  By requiring standard core business processes, rules, data  definitions, and a common government-wide accounting code, interfacing systems, such as  travel, will not have to be specifically designed for each agency.  This will save agencies money  and enable them to more easily migrate between different system solutions.
Stage 3: Results.   When the FMLOB is fully realized, agencies’ data will be more timely and  accurate for decision-making and there will be improved government-wide stewardship and  accounting.  More timely and accurate data will result from the standardization and seamless  data integration efforts, including the implementation of centralized interfaces between core  financial systems and other systems.  These efforts will focus on promoting strong internal  controls and ensuring the integrity of accounting data.  The easy exchange of data between  federal agencies will increase federal managers’ stewardship abilities.
There will also be a reduction of government-wide information technology costs and risks.   These benefits will be the result of shared-service solutions, also assisted by the standardization  and seamless data integration efforts.  Shared-service solutions will enable economies of scale by  centrally locating, or consolidating, solution assets and reusing Federal and commercial subject  matter expertise through common acquisitions, interface development, and application  management.  The reduction in the number of agencies implementing their own systems will  reduce the risks, and associated costs, of systems implementations.  4.  What governance structure will be in place to ensure accountability for  successful completion of priority FMLOB initiatives?
As depicted in Attachment 3, FSIO will have direct responsibility for completing priority  projects under the FMLOB.  OMB, in consultation with the Financial Systems Integration  Committee (FSIC) of the CFO Council, will provide oversight and guidance to FSIO on  priorities and expected performance in meeting these priorities.
OMB will continue its role as Executive Sponsors of the FMLOB.  The FSIC chair will be the  lead agency sponsor for the FMLOB.  A liaison from the CIO community and the Executive  Director of FSIO will serve on the FSIC and support the FSIC chair in his/her responsibilities as  they relate to the FMLOB.  Going forward, FSIO will coordinate the collection and expenditure  of FMLOB funds. 4 The FSIC will assist OMB in evaluating and monitoring FSIO’s progress in completing FMLOB  projects and provide feedback to OMB and FSIO.   As appropriate, members of the FSIC will  participate in working groups to assist FSIO with completing deliverables.  The FSIC will  evaluate its current subcommittee structure to assess whether changes are needed to best meet  these objectives.
The updated governance structure ensures that the FSIO, FMLOB, and the FSIC do not operate  in separate stovepipes.  In addition, responsibility for work products will now rest with FSIO,  where full time dedicated staff will be held accountable for achieving FMLOB milestones.   5. What is the status of the realignment of JFMIP to FSIO?
In December of 2004, the JFMIP Principals voted to modify the roles and responsibilities of the  JFMIP Program Office, now FSIO.  As a result, OMB and the FSIC were given an increased  management and oversight role in the activities of FSIO.  OMB and the FSIC have worked  closely with FSIO staff to update FSIO’s mission statement and define FSIO’s scope of activities  and priorities for FY 2006.
In terms of mission and scope, FSIO has three major areas of responsibilities:  (a) continuing its  primary role of core financial system requirements development, testing, and certification; (b)  providing support to the Federal financial community by taking on special priority projects as  determined by the OMB Controller, CFO Council, and the FSIO Executive Director, and (c)  conducting outreach through the annual financial management conference and other related  activities.
Most importantly, the projects that FSIO undertakes will directly reflect the priorities of the CFO  Community and OMB.  As noted above, the priority projects to be undertaken in the near term  will relate to the transparency and standardization initiatives of the FMLOB.  Other projects that  were previously under FSIO’s purview – acquisition, budget formulation, and property system  requirements – have been transitioned to the Chief Acquisition Council, the Budget Officers  Advisory Council, and the Federal Real Property Council, respectively, for their consideration  and completion.
Also, effective January 2006, the FSIO office will be transferred from the General Service  Administration’s (GSA) Office of the Chief Financial Officer to the Office of Government-wide  Policy, Office of Technology Strategy (OTS).   There are several significant benefits of this  move: lower administrative cost through shared resources (rent, supplies, equipment, etc.)  permanent SES in place to  provide leadership to FSIO staff  access to immediate resources and expertise on IT, administrative management, contract  management, testing, etc.  fits well with current mission and stakeholder focused model of OTS   5 6. What specific actions are expected of Federal agencies?
As described above, a central goal of the FMLOB is that financial system investments will be at  lower risk and lower cost as agencies leverage the economies offered by shared service solutions  (i.e., COEs).   To this end, OMB has instituted a policy that agencies seeking to modernize their  financial system must either be designated a public COE or must migrate to a COE (public,  private, or a combination of both).  Although exceptions to this policy will be made in limited  situations when an agency demonstrates compelling evidence of a best value and lower risk  alternative, it is OMB’s intent to avoid investments in “in-house” solutions wherever possible so  that the shared service framework can fully achieve potential and anticipated returns.
To the extent we require any specific action on your part to carry out the priority initiatives and  milestones outlined above, we will communicate such requests through subsequent memos from  OMB or the FSIC.
Performance Measures Performance Measures Performance Measures Performance Measures Performance Measures Performance Measures Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  series of measures (i.e., cost,  series of measures (i.e., cost,  series of measures (i.e., cost,  series of measures (i.e., cost,  series of measures (i.e., cost,  series of measures (i.e., cost,  quality, timeliness) to assess the  quality, timeliness) to assess the  quality, timeliness) to assess the  quality, timeliness) to assess the  quality, timeliness) to assess the  quality, timeliness) to assess the  performance of those services.   performance of those services.   performance of those services.   performance of those services.   performance of those services.   performance of those services.    Measures will address the   Measures will address the   Measures will address the   Measures will address the   Measures will address the   Measures will address the  major service areas offered by a  major service areas offered by a  major service areas offered by a  major service areas offered by a  major service areas offered by a  major service areas offered by a  financial service organization  financial service organization  financial service organization  financial service organization  financial service organization  financial service organization  (e.g., Center of Excellence). (e.g., Center of Excellence). (e.g., Center of Excellence). (e.g., Center of Excellence). (e.g., Center of Excellence). (e.g., Center of Excellence).  For each measure, identify   For each measure, identify   For each measure, identify   For each measure, identify   For each measure, identify   For each measure, identify  corresponding benchmarks for  corresponding benchmarks for  corresponding benchmarks for  corresponding benchmarks for  corresponding benchmarks for  corresponding benchmarks for  equivalent services (either  equivalent services (either  equivalent services (either  equivalent services (either  equivalent services (either  equivalent services (either  internal or outsourced) offered by  internal or outsourced) offered by  internal or outsourced) offered by  internal or outsourced) offered by  internal or outsourced) offered by  internal or outsourced) offered by  public and private organizations.   public and private organizations.   public and private organizations.   public and private organizations.   public and private organizations.   public and private organizations.    In order to compare   In order to compare   In order to compare   In order to compare   In order to compare   In order to compare  performance across the Federal  performance across the Federal  performance across the Federal  performance across the Federal  performance across the Federal  performance across the Federal  government, it must be possible  government, it must be possible  government, it must be possible  government, it must be possible  government, it must be possible  government, it must be possible  to normalize the measures (e.g.,  to normalize the measures (e.g.,  to normalize the measures (e.g.,  to normalize the measures (e.g.,  to normalize the measures (e.g.,  to normalize the measures (e.g.,  cost per transaction, cycle-time). cost per transaction, cycle-time). cost per transaction, cycle-time). cost per transaction, cycle-time). cost per transaction, cycle-time). cost per transaction, cycle-time).
Common Accounting Code Common Accounting Code Common Accounting Code Common Accounting Code Common Accounting Code Common Accounting Code Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  common accounting code  common accounting code  common accounting code  common accounting code  common accounting code  common accounting code  structure, including an applicable  structure, including an applicable  structure, including an applicable  structure, including an applicable  structure, including an applicable  structure, including an applicable  set of definitions, which all federal  set of definitions, which all federal  set of definitions, which all federal  set of definitions, which all federal  set of definitions, which all federal  set of definitions, which all federal  agencies’ new financial  agencies’ new financial  agencies’ new financial  agencies’ new financial  agencies’ new financial  agencies’ new financial  management systems must  management systems must  management systems must  management systems must  management systems must  management systems must  adhere. The common accounting  adhere. The common accounting  adhere. The common accounting  adhere. The common accounting  adhere. The common accounting  adhere. The common accounting  code structure will:  code structure will:  code structure will:  code structure will:  code structure will:  code structure will:   menu of services offered by   menu of services offered by menu of services offered by   menu of services offered by   menu of services offered by   menu of services offered by  COEs; COEs; COEs; COEs; COEs; COEs;  project plan templates;  project plan templates;  project plan templates;  project plan templates;  project plan templates;  project plan templates;  service level agreement   service level agreement   service level agreement   service level agreement   service level agreement   service level agreement  templates;  templates;  templates;  templates;  templates;  templates;   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant  contractual and competitive criteria  contractual and competitive criteria  contractual and competitive criteria  contractual and competitive criteria  contractual and competitive criteria  contractual and competitive criteria  involved in migration)  involved in migration)  involved in migration)  involved in migration)  involved in migration)  involved in migration)   due diligence checklist (clarified   due diligence checklist (clarified   due diligence checklist (clarified   due diligence checklist (clarified   due diligence checklist (clarified   due diligence checklist (clarified  and updated);  and updated);  and updated);  and updated);  and updated);  and updated);   comparison of approaches on   comparison of approaches on   comparison of approaches on   comparison of approaches on   comparison of approaches on   comparison of approaches on  public vs. private solutions;  public vs. private solutions;  public vs. private solutions;  public vs. private solutions;  public vs. private solutions;  public vs. private solutions;   migration risk areas (interfaces,   migration risk areas (interfaces,   migration risk areas (interfaces,   migration risk areas (interfaces,   migration risk areas (interfaces,   migration risk areas (interfaces,  data conversion and clean up,  data conversion and clean up,  data conversion and clean up,  data conversion and clean up,  data conversion and clean up,  data conversion and clean up,  testing, financial reporting, change  testing, financial reporting, change  testing, financial reporting, change  testing, financial reporting, change  testing, financial reporting, change  testing, financial reporting, change  to business processes); and to business processes); and to business processes); and to business processes); and to business processes); and to business processes); and  human capital planning.  human capital planning.  human capital planning.  human capital planning.  human capital planning.  human capital planning.
Project Description: Develop  Project Description: Develop  Project Description: Develop  Project Description: Develop  Project Description: Develop  Project Description: Develop  a standard set of business  a standard set of business  a standard set of business  a standard set of business  a standard set of business  a standard set of business  practices for core financial  practices for core financial  practices for core financial  practices for core financial  practices for core financial  practices for core financial  management functions (funds,  management functions (funds,  management functions (funds,  management functions (funds,  management functions (funds,  management functions (funds,  payments, receipts, fixed  payments, receipts, fixed  payments, receipts, fixed  payments, receipts, fixed  payments, receipts, fixed  payments, receipts, fixed  assets) to be adopted by all  assets) to be adopted by all  assets) to be adopted by all  assets) to be adopted by all  assets) to be adopted by all  assets) to be adopted by all  federal agencies.   The  federal agencies.   The  federal agencies.   The  federal agencies.   The  federal agencies.   The  federal agencies.   The  document/model will include:   document/model will include:   document/model will include:   document/model will include:   document/model will include:   document/model will include:    sequenced activities for core   sequenced activities for core   sequenced activities for core   sequenced activities for core   sequenced activities for core   sequenced activities for core  business processes; business processes; business processes; business processes; business processes; business processes;  data objects participating in a   data objects participating in a   data objects participating in a   data objects participating in a   data objects participating in a   data objects participating in a  business activity; business activity; business activity; business activity; business activity; business activity;  relationships among the   relationships among the   relationships among the   relationships among the   relationships among the   relationships among the  objects as they exist in the  objects as they exist in the  objects as they exist in the  objects as they exist in the  objects as they exist in the  objects as they exist in the  actual business activities; actual business activities; actual business activities; actual business activities; actual business activities; actual business activities;  data elements and definitions   data elements and definitions   data elements and definitions   data elements and definitions   data elements and definitions   data elements and definitions  stored about these objects;  stored about these objects;  stored about these objects;  stored about these objects;  stored about these objects;  stored about these objects;  and and and and and and  business rules governing   business rules governing   business rules governing   business rules governing   business rules governing   business rules governing  these objects.  these objects.  these objects.  these objects.  these objects.  these objects.
section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Kay Daly, Assistant Director;  Chris Martin, Senior-Level Technologist; Francine DelVecchio; Mike  LaForge; and Chanetta Reed made key contributions to this report.
section_title: Related GAO Products
paragraphs: DOD Business Systems Modernization: Navy ERP Adherence to Best  Business Practices Critical to Avoid Past Failures. GAO-05-858.  Washington, D.C.: September 29, 2005.
Financial Management: Achieving FFMIA Compliance Continues to  Challenge Agencies. GAO-05-881. Washington, D.C.: September 20, 2005.
Business Modernization: Some Progress Made toward Implementing  GAO Recommendations Related to NASA’s Integrated Financial  Management Program. GAO-05-799R. Washington, D.C.: September 9,  2005.
Business Systems Modernization: Internal Revenue Service’s Fiscal Year  2005 Expenditure Plan. GAO-05-774. Washington, D.C.: July 22, 2005.
DOD Business Systems Modernization: Long-standing Weaknesses in  Enterprise Architecture Development Need to Be Addressed. GAO-05-702.  Washington, D.C.: July 22, 2005.
Army Depot Maintenance: Ineffective Oversight of Depot Maintenance  Operations and System Implementation Efforts. GAO-05-441.  Washington, D.C.: June 30, 2005.
DOD Business Systems Modernization: Billions Being Invested without  Adequate Oversight. GAO-05-381. Washington, D.C.: April 29, 2005.
Internal Revenue Service: Assessment of the Fiscal Year 2006 Budget  Request. GAO-05-566. Washington, D.C.: April 27, 2005.
Information Technology: OMB Can Make More Effective Use of Its  Investment Reviews. GAO-05-276. Washington, D.C.: April 15, 2005.
Information Technology: Customs Automated Commercial Environment  Program Progressing, but Need for Management Improvements  Continues. GAO-05-267. Washington, D.C.: March 14, 2005.
Office of Personnel Management: Retirement Systems Modernization  Program Faces Numerous Challenges. GAO-05-237. Washington, D.C.:  February 28, 2005.
DOD Systems Modernization: Management of Integrated Military  Human Capital Program Needs Additional Improvements. GAO-05-189.  Washington, D.C.: February 11, 2005.
Department of Defense: Further Actions Are Needed to Effectively  Address Business Management Problems and Overcome Key Business  Transformation Challenges. GAO-05-140T. Washington, D.C.:   November 18, 2004.
Business Systems Modernization: IRS’s Fiscal Year 2004 Expenditure  Plan. GAO-05-46. Washington, D.C.: November 17, 2004.
Financial Management: Improved Financial Systems Are Key to FFMIA  Compliance. GAO-05-20. Washington, D.C.: October 1, 2004.
Financial Management Systems: HHS Faces Many Challenges in  Implementing Its Unified Financial Management System. GAO-04- 1089T. Washington, D.C.: September 30, 2004.
Financial Management Systems: Lack of Disciplined Processes Puts  Implementation of HHS’ Financial System at Risk. GAO-04-1008.  Washington, D.C.: September 23, 2004.
Information Technology: DOD’s Acquisition Policies and Guidance Need  to Incorporate Additional Best Practices and Controls. GAO-04-722.  Washington, D.C.: July 30, 2004.
Department of Defense: Financial and Business Management  Transformation Hindered by Long-standing Problems. GAO-04-941T.  Washington, D.C.: July 8, 2004.
Information Security: Agencies Need to Implement Consistent Processes  in Authorizing Systems for Operation. GAO-04-376. Washington, D.C.:  June 28, 2004.
DOD Business Systems Modernization: Billions Continue to Be Invested  with Inadequate Management Oversight and Accountability. GAO-04- 615. Washington, D.C.: May 27, 2004.
Information Technology: The Federal Enterprise Architecture and  Agencies’ Enterprise Architectures Are Still Maturing. GAO-04-798T.  Washington, D.C.: May 19, 2004.
National Aeronautics and Space Administration: Significant Actions  Needed to Address Long-standing Financial Management Problems.  GAO-04-754T. Washington, D.C.: May 19, 2004.
DOD Business Systems Modernization: Limited Progress in  Development of Business Enterprise Architecture and Oversight of  Information Technology Investments. GAO-04-731R. Washington, D.C.:  May 17, 2004.
Information Technology: Early Releases of Customs Trade System  Operating, but Pattern of Cost and Schedule Problems Needs to Be  Addressed. GAO-04-719. Washington, D.C.: May 14, 2004.
Information Technology Investment Management: A Framework for  Assessing and Improving Process Maturity (Version 1.1). GAO-04-394G.  Washington, D.C.: March 2004.
Information Technology Management: Governmentwide Strategic  Planning, Performance Measurement, and Investment Management Can  Be Further Improved. GAO-04-49. Washington, D.C.: January 12, 2004.
Human Capital: Key Principles for Effective Strategic Workforce  Planning. GAO-04-39. Washington, D.C.: December 11, 2003.
Business Modernization: NASA’s Challenges in Managing Its Integrated  Financial Management Program. GAO-04-255. Washington, D.C.:  November 21, 2003.
Business Modernization: NASA’s Integrated Financial Management  Program Does Not Fully Address Agency’s External Reporting Issues.  GAO-04-151. Washington, D.C.: November 21, 2003.
Business Modernization: Disciplined Processes Needed to Better Manage  NASA’s Integrated Financial Management Program. GAO-04-118.  Washington, D.C.: November 21, 2003.
Information Technology: Architecture Needed to Guide NASA’s  Financial Management Modernization. GAO-04-43. Washington, D.C.:  November 21, 2003.
Information Technology: Leadership Remains Key to Agencies Making  Progress on Enterprise Architecture Efforts. GAO-04-40. Washington,  D.C.: November 17, 2003.
DOD Business Systems Modernization: Important Progress Made to  Develop Business Enterprise Architecture, but Much Work Remains.  GAO-03-1018. Washington, D.C.: September 19, 2003.
Business Systems Modernization: IRS Has Made Significant Progress in  Improving Its Management Controls, but Risks Remain. GAO-03-768.  Washington, D.C.: June 27, 2003.
Business Modernization: Improvements Needed in Management of  NASA’s Integrated Financial Management Program. GAO-03-507.  Washington, D.C.: April 30, 2003.
Department of Housing and Urban Development: Status of Efforts to  Implement an Integrated Financial Management System. GAO-03-447R.  Washington, D.C.: April 9, 2003.
Information Technology: A Framework for Assessing and Improving  Enterprise Architecture Management (Version 1.1). GAO-03-584G.  Washington, D.C.: April 2003.
DOD Business Systems Modernization: Continued Investment in Key  Accounting Systems Needs to be Justified. GAO-03-465. Washington, D.C.:  March 28, 2003.
DOD Business Systems Modernization: Improvements to Enterprise  Architecture Development and Implementation Efforts Needed. GAO-03- 458. Washington, D.C.: February 28, 2003.
Customs Service Modernization: Automated Commercial Environment  Progressing, but Further Acquisition Management Improvements  Needed. GAO-03-406. Washington, D.C.: February 28, 2003.
Customs Service Modernization: Third Expenditure Plan Meets  Legislative Conditions, but Cost Estimating Improvements Needed.  GAO-02-908. Washington, D.C.: August 9, 2002.
DOD Financial Management: Important Steps Underway but Reform  Will Require a Long-term Commitment. GAO-02-784T. Washington, D.C.:  June 4, 2002.
Customs Service Modernization: Management Improvements Needed on  High-Risk Automated Commercial Environment Project. GAO-02-545.  Washington, D.C.: May 13, 2002.
Tax Administration: IRS Continues to Face Management Challenges in  its Business Practices and Modernization Efforts. GAO-02-619T.  Washington, D.C.: April 15, 2002.
Business Systems Modernization: IRS Needs to Better Balance  Management Capacity with Systems Acquisition Workload. GAO-02-356.  Washington, D.C.: February 28, 2002.
Human Capital: Building the Information Technology Workforce to  Achieve Results. GAO-01-1007T. Washington, D.C.: July 31, 2001.
Business Systems Modernization: Results of Review of IRS’ March 2001  Expenditure Plan. GAO-01-716. Washington, D.C.: June 29, 2001.
Information Technology: DLA Should Strengthen Business Systems  Modernization Architecture and Investment Activities. GAO-01-631.  Washington, D.C.: June 29, 2001.
Customs Service Modernization: Results of Review of First Automated  Commercial Environment Expenditure Plan. GAO-01-696. Washington,  D.C.: June 5, 2001.
Information Technology: Architecture Needed to Guide Modernization of  DOD’s Financial Operations. GAO-01-525. Washington, D.C.: May 17,  2001.
District of Columbia: Weaknesses in Financial Management System  Implementation. GAO-01-489. Washington, D.C.: April 30, 2001.
Tax Systems Modernization: Results of Review of IRS’ Third  Expenditure Plan. GAO-01-227. Washington, D.C.: January 22, 2001.
Tax Systems Modernization: Results of Review of IRS’ August 2000  Interim Spending Plan. GAO-01-91. Washington, D.C.: November 8, 2000.
Indian Trust Funds: Improvements Made in Acquisition of New Asset  and Accounting System But Significant Risks Remain. GAO/AIMD-00- 259. Washington, D.C.: September 15, 2000.
Tax Systems Modernization: Results of Review of IRS’ March 7, 2000,  Expenditure Plan. GAO/AIMD-00-175. Washington, D.C.: May 24, 2000.
Executive Guide: Creating Value Through World-class Financial  Management. GAO/AIMD-00-134. Washington, D.C.: April 2000.
Indian Trust Funds: Interior Lacks Assurance That Trust Improvement  Plan Will Be Effective. GAO/AIMD-99-53. Washington, D.C.: April 28, 1999.
Federal Information System Controls Audit Manual, Volume I:  Financial Statement Audits. GAO/AIMD-12.19.6. Washington, D.C.:  January 1999.
District of Columbia: Status of Efforts to Develop a New Financial  Management System. GAO/AIMD-97-101R. Washington, D.C.: July 9, 1997.
Information Security: Opportunities for Improved OMB Oversight of  Agency Practices. GAO/AIMD-96-110. Washington, D.C.: September 24,  1996.