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The government spends $8 billion a year on financial management systems, which are run by more than 55,000 employees. The success rate of modernizing these systems is poor. There's a long list of failures ranging from EPA to Labor, to the SBA and VA. OMB is trying again to solve these problems by mandating agencies move to federal shared service providers over the next decade. Federal News Radio's special report, Shared Services Revisited, explores the challenges faced by OMB, agency providers and agency customers in this latest attempt to move to federal financial management shared service providers.
Familiar questions, few answers so far for OMB's latest financial systems effort
Tuesday - 4/8/2014, 4:43am EDT
The departments of Commerce and Housing and Urban Development and the Coast Guard are planning to outsource their financial management systems in the coming year.
These three agencies have only one choice in how they modernize their financial management systems — through a federal shared services provider.
The Office of Management and Budget's March 2013 policy created a federal first priority for agencies to modernize their financial management systems through a shared services provider.
But this second attempt by OMB to move agencies to financial management shared services is fraught with the same obstacles of a decade ago.
In the mid-2000s, OMB tried to encourage agencies to use one of four federal civilian shared service providers. But several ongoing challenges stymied the effort, including but not limited to a lack of real competition, the uncertainty of whether the federal providers are able handle such a dramatic increase in business, and how best to ensure agencies are satisfied with their services and what happens if they are not.
But OMB believes this attempt at shared services is different. The administration says budget concerns and technology advancements will help overcome these long- standing barriers.
"I want to underscore this point: this is not fire the start gun, mad rush to shared services, everybody has got to get there within two years, OK go," said Norman Dong, who recently left his position as acting controller at OMB and is now the commissioner of the Public Buildings Service at the General Services Administration. "But it is a much more of a thoughtful migration over time and we think that will help increase the uptake in shared services across the federal government over time."
Dong spoke last June about the administration's vision around financial management shared services.
Federal News Radio's special series, Shared Services Revisited, looks at whether there still are too many unanswered questions that would doom shared services once again.
$8 billion, 53,000 people
OMB named five shared service providers under the Financial Management Line of Business initiative. With the exception of the Defense Finance and Accounting Service, the four civilian providers — the departments of Treasury, Transportation and Interior, and GSA — mostly found success with small and micro agencies.
But with agencies spending more than $8 billion a year on financial management systems and with more than 53,000 employees supporting those efforts, the opportunity to consolidate and simplify is great.
So administration officials say the time is right for a renewed push for shared services.
But private sector and other experts say OMB's plans need more time to bake.
Carlos Otal, a managing partner with Grant Thornton, said there are several questions that OMB still needs to answer, including whether it's cheaper for customer agencies to stay with what they already are using than move to a new provider in these times of tight budgets.
"How's that going to work out? Who's going to pay? Where are those investments going to come from?" he said. "Today there [are] various models for that. For the most part, the customer agencies are the ones who get the budget and pay. The question has to be asked, are there other models that would work better? And how would that model work through the legislative and other processes given the various constraints presented by that?"
Otal said OMB and Treasury's Office of Financial Innovation and Transformation (OFIT) are trying to address these and many other questions.
But as agencies begin to move to these shared service providers, some experts are questioning whether OMB and OFIT are getting ahead of themselves.
A recent Association of Government Accountants survey of federal employees shows feds are concerned over this lack of clarity.
"[OMB and OFIT] are still building the framework by which the government will go about executing this. They even termed it as putting the wheels on the bus," said Otal, who helped oversee the AGA survey. "They did lay out in the coming months there will be a series of more guidance that will be coming out around this, as well as other announcements, such as additional shared service providers they are now evaluating to help alleviate some of these concerns."
Respondents to the AGA survey strongly believe shared services can work in the government. A majority of the respondents, say, however, they are concerned about losing control and not getting their needs met.
Additionally, OMB's policy has yet to address how federal providers can ramp up to accept new customers in a timely fashion.