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. 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. 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. 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.