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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.
Treasury figuring out how the shared services pieces fit into governmentwide puzzle
Thursday - 4/10/2014, 4:26am EDT
Over the next few months, answers to some of the most pressing questions about how financial management shared services will work must be clarified.
The Office of Management and Budget, the Treasury Department and the CFO Council are trying to plug the holes in the shared services process that thwarted the effort a decade ago.
Whether it's ensuring the four current civilian agency shared service providers or the new ones OMB expects to name in the coming weeks have the capacity to take on large agencies, or whether it's the role of the private sector in this latest effort, or whether it's the process by which Treasury will work with customer agencies to determine which shared service provider is most suitable and make sure there is lasting governance, reducing the amount of uncertainty about how version 2 of financial management shared services will work is among the administration's top priorities over the next six months.
"We are further along now in creating a repeatable process for [shared services], which I think is really important to having this be sustainable as we work through the next 10 to 12 years, which is what I think is the vision for the [OMB March 2013] memo," said Beth Angerman, the director of Treasury's Office of Financial Innovation and Transformation (OFIT), which is the program manager for the financial management shared services initiative.
"What everyone has started to slowly recognize are the great benefits of shared services," she said. "Why pay for 24 pizzas if we all could order one and just pay for the slice? There is great skepticism. I think you've even seen it with the discussion you've had with the private sector and what their role will be. So making sure everyone is on board and supportive of the overall initiative, and it's not just financial management. This whole idea of shared services is becoming a theme, if you will. So we need to make sure we are leveraging the good work and processes that already have been done, because I don't see it going away."
In part three of the special report, Shared Services Revisited, Federal News Radio explores how OFIT is putting the pieces in place to create a successful shared services program.
OMB reintroduced the concept of shared services for financial management systems in March 2013. The White House issued a memo creating a federal-first policy when agencies upgrade their financial systems.
Over the last year, OFIT and OMB have slowly been putting the processes together to smooth out some of the long-standing problems.
In the mid-2000s under the George W. Bush administration, OMB introduced this concept of shared services, offering both public and private sector options. Large agencies mostly opted out of initiative, instead deciding to upgrade their systems on their own. OMB said mostly small agencies took advantage of the shared service providers.
But after a series of failed financial management projects at large agencies, and the fact that OMB estimates agencies are spending $8 billion a year for the operation, maintenance and upgrade of these financial systems, the administration decided to push through with another attempt at shared services.
Angerman said this time, the government is in a different place than it was a decade ago.
"I think there are some CFOs who do not want to be in the business anymore of running a system. They want to be able to focus on the data. They want to be able to do analytics. They want better information available to them, more frequently and shift their focus from running a system to being able to use the data to make better decisions," she said. "What I see most often when I talk to the community is that while they all see the benefits, there is proof in the pudding, and so there needs to be some success, and that's where we are today."
A recent Association of Government Accountants survey supports OMB's belief that this time is different for shared services. The survey found 62 percent of the respondents believe shared services will work in government as a way to consolidate redundant systems and operations, while 34 percent say it will work in a limited way.
"The big take away from that summit and survey is more open communication and more interaction in town hall type settings with all the stake holders is important," said Carlos Otal, a managing partner with Grant Thornton who helped oversee the AGA summit and survey. "OMB, agencies, Treasury and the private sector can overcome a lot by getting on the same page and figuring out how we will achieve what everyone will say is a valid objective, which is reducing financial management costs and improving the effectiveness of the systems."