Federal agencies will use a shared service solution for future modernization of financial systems, according to a memo to agency heads from Danny Werfel, Controller of the Office of Management and Budget (OMB).
Werfel said wider use of shared services with standardized financial systems would enable agencies to strategically source software providers, reduce system implementation timelines and risks, improve data quality and transparency, and focus on core missions.
In the past, Werfel emphasized, agency-specific, large-scale financial systems modernization projects have led to cost overruns, lengthy delays in planned system deployments and improvements, and large and complex systems that cannot be easily updated. Too often, he said, these systems have produced “poor return on investment, underperforming systems, and required upgrades that add little value.”
Under the new policy guidance, “agencies must consider, as part of their alternative analysis, the use of a FSSP [Federal Shared Service Provider] with respect to all new Agency proposals for core accounting and mixed systems upgrades.” Agencies cannot limit their analysis to only evaluating commercial Shared Service Providers (SSPs).
The memo underscored that OMB’s “guiding principle will be to support plans that offer the best value for the Federal Government.” OMB will fund the use of commercial SSPs if agency analysis demonstrates that the SSP can provide better value to the government.
OMB acknowledges that it will take several years to ensure that FSSPs can meet the needs of all agency customers. OMB and Treasury will work with agencies and FSSPs to help them adopt standardized processes, expand processing capabilities, and have a strong governance structure.
To ensure that agencies can sustain existing functions and operations until they can replace systems or provide upgrades, OMB “will continue to support limited investments in existing financial management systems.“ However, such investments will require “adequate business justification” and analysis that shows the proposal is less costly than a shared services alternative.
OMB will issue new guidance on technology and business requirements in the next few months for financial systems covered under OMB Circular A-127.
The DOD has been trying for almost 25 years — since its Corporate Information Management (i.e., “CIM”) days in the 1990s to the Standard Financial Information System (“SFIS”) effort it has been pursuing since 2005 — to create “common standards” and “shared solutions” for the financial systems used by the Army, Navy, Air Force, and Defense Agencies, and the result has been one massive disaster after the next. (For examples, google “DOD ERP” …)
The time is long overdue for OMB leaders to step back and consider the possibility that it is WHAT federal financial systems are being required to do (namely, produce private-sector-style balance sheets and income statements as if the government were a business, which it isn’t) that explains why those systems are in such disarray – NOT how the systems are being designed, structured, purchased, implemented, managed, or overseen.
When you demand that a government organization’s financial system produce things like “balance sheets” and “income statements” that have nothing to do with how the organization actually operates in the real world, you should not be surprised that system “modernization” seems to be impossible. You can’t fit a round peg into a square hole.