In our recent report, we summarize many of the agencies’ financial management system implementation failures that have been previously reported by us and inspectors general (IG). Our work and that of the IGs over the years has shown that agencies have failed to employ accepted best practices in systems development and implementation (commonly referred to as disciplined processes) that can collectively reduce the risk associated with implementing financial management systems. In our report, we identified key causes of failures within several recurring themes, including disciplined processes and human capital management. DHS would be wise to study the lessons learned through other agencies’ costly failures and consider building a strong foundation for successful financial management system implementation, as we will discuss later in our testimony. From our review of over 40 prior reports, we identified weaknesses in the following areas of disciplined processes. Requirements management. Ill-defined or incomplete requirements have been identified by many system developers and program managers as a root cause of system failure. It is critical that requirements—functions the system must be able to perform—be carefully defined and flow from the concept of operations (how the organization’s day-to-day operations are or will be carried out to meet mission needs). In our previous work, we have found agencies with a lack of a concept of operations, vague and ambiguous requirements, and requirements that are not traceable or linked to business processes. Testing. Complete and thorough testing is essential to provide reasonable assurance that new or modified systems will provide the capabilities in the requirements. 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. Industry best practices indicate that the sooner a defect is recognized and corrected, the cheaper it is to fix. In our work, we have found flawed test plans, inadequate timing of testing, and ineffective systems testing. Data conversion. In its white paper on financial system data conversion, the Joint Financial Management Improvement Program (JFMIP) identified data conversion as one of the critical tasks necessary to successfully implement a new financial system. JFMIP also noted that if data conversion is done right, the new system has a much greater opportunity for success. On the other hand, converting data incorrectly or entering unreliable data from a legacy system has lengthy and long-term repercussions. The adage “garbage in, garbage out” best describes the adverse impact. Examples of problems we have reported on include agencies that have not properly developed and implemented good data conversion plans, have planned the data conversion too late in the project, and have not reconciled account balances. Risk management. According to leading systems acquisition organizations, risk management is a process for identifying potential problems before they occur and adjusting the acquisition to decrease the chance of their occurrence. Risks should be identified as early as possible and a risk management process should be developed and put in place. Risks should be identified, analyzed, mitigated, and tracked to closure. Effectively managing risks is one way to minimize the chances of project cost, schedule, and performance problems from occurring. We have reported that agencies have not fully implemented effective risk management practices, including shortcomings in identifying and tracking risks. Project management. 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. We have reported on a number of project management problems including inadequate project management structure, schedule-driven projects, and lack of performance metrics and oversight. Quality assurance. Quality assurance provides independent assessments of whether management process requirements are being followed and whether product standards and requirements are being satisfied. This process includes, among other things, the use of independent verification and validation (IV&V). We and others have reported on problems related to agencies’ use of IV&V including specific functions not being performed by the IV&V, the IV&V contractor not being independent, and IV&V recommendations not being implemented. Inadequate implementation of disciplined processes can manifest itself in many ways when implementing a financial management system. While full deployment has been delayed at some agencies, specific functionality has been delayed or flawed at other agencies. The following examples illustrate some of the recurring problems related to the lack of disciplined processes in implementing financial management systems. In May 2004, we reported significant flaws in requirements management and testing that adversely affected the initial development and implementation of the Army’s Logistics Modernization Program (LMP), in which the Army estimated that it would invest about $1 billion. These flaws also hampered efforts to correct the operational difficulties experienced at the Tobyhanna Army Depot. In June 2005, we reported that 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 needed to be corrected before the system could be fielded to other locations. The Army lacked reasonable assurance that (1) system problems experienced during the initial deployment and causing the delay of future deployments had been corrected and (2) LMP was capable of providing the promised system functionality. Subsequent deployments of the system have been delayed. We reported in February 2005 that our experience with major systems acquisitions, such as the Office of Personnel Management’s (OPM) Retirement Systems Modernization (RSM) program, has shown that having sound disciplined processes in place increases the likelihood of the acquisitions meeting cost and schedule estimates as well as performance requirements. However, we found that many of the processes in these areas for RSM were not sufficiently developed, were still under development, or were planned for future development. For example, OPM lacked needed processes for developing and managing requirements, planning and managing project activities, managing risks, and providing sound information to investment decision makers. Without these processes in place, RSM was at increased risk of not being developed and delivered on time and within budget and falling short of promised capabilities. In August 2004, the Department of Veterans Affairs (VA) IG reported that the effect of transferring inaccurate data to VA’s 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. 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 assembled a senior leadership team to examine the results of the pilot and make recommendations to the VA Secretary regarding the future of the system. We are concerned that federal agencies’ human capital problems are eroding the ability of many agencies—and threatening the ability of others—to perform their IT missions economically, efficiently, and effectively. For example, 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 currently face skills, knowledge, and experience imbalances, especially in their IT workforces. Without corrective action, these imbalances 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 the following three key elements of human capital management. Strategic workforce planning. Having staff with the appropriate skills is key to achieving financial management improvements, and managing an organization’s employees is essential to achieving results. 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. We have reported on agencies without a sufficient human capital strategy or plan, skills gap analysis, or training plans. Human resources. 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. We have found agency projects with significant human resource challenges, including addressing personnel shortages, filling key positions, and developing and retaining staff with the required competencies. Change management. 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 transition plans not being developed, business processes not being reengineered, and customization not being limited.