OMB Director Peter Orzag and White House Chief of Staff Rahm Emanuel issued a memorandum ordering the Federal Chief Information Officer (CIO) to immediately review the highest-risk federal IT projects. It also directed federal agencies to refrain from awarding new contracts or task orders for financial management modernization until approved by OMB. OMB has taken this action because, according to the memo, too many government IT projects cost too much, take too long, and too often deliver obsolete products. Agencies are also required to provide improvement plans to the CIO for those projects behind schedule. If agencies are not able to correct serious problems, OMB left open the possibility that agencies’ FY2012 budgets might be adjusted. The memo calls for OMB’s Deputy Director for Management to prepare recommendations for improving IT management and procurement practices within 120 days. These recommendations are expected to set higher standards for both practices and personnel, add new accountability measures for results, and provide for a more rigorous review process. In a companion memo to agency heads, OMB issued guidance on the order to stop new procurements for financial systems. The memo 1) establishes guidance for the acquisition and management of new financial systems; 2) identifies the procedures for reviewing and evaluating current financial systems modernization; and 3) updates policies on financial management shared services and software testing and certification. The guiding principles for financial management modernization call for projects that have smaller segments and clearly identifiable deliverables. Each project segment is expected to achieve specific milestones within 90-120 days and to take no more than 24 months to develop. The OMB review process requires agencies to stop all financial system modernization projects costing $20 million or more until reevaluated. If an agency has completed a modernization project, it cannot go ahead with additional planning or development until OMB approves a revised management plan. OMB will also be able to review completed projects if a failure occurs. Agencies have 60 days to provide OMB revised project plans for all projects covered by this guidance, after which OMB will have 60 days to review the plan. OMB plans to enforce this guidance through the budget execution process. Starting with the first quarter of FY2011, OMB will apportion funds for projects consistent with its segment and milestone approach. However, projects that have not been designated high-risk or have achieved specific milestones will have more funds control flexibility. In a break with previous policy, OMB will no longer require financial management shared services. However, OMB still supports such shared services when cost effective and directs agencies to focus efforts on transaction processing identified by OMB, Treasury, and the CFO Council, principally in the areas of vendor invoicing and intragovernmental transactions.