OMB begins pruning of financial systems

Thursday - 9/16/2010, 6:58am EDT

WFED's Jason Miller

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By Jason Miller
Executive Editor
Federal News Radio

The Office of Management and Budget wants to save about $1 billion a year by improving how agencies manage financial system modernization projects.

And if the early trend across just four agencies is any indication, reducing governmentwide spending on these often-troubled programs shouldn't be that difficult.

OMB Wednesday announced that the Small Business Administration would follow the lead of the Veterans Affairs Department by cancelling a major financial systems modernization project. Additionally, OMB controller Danny Werfel said during a press call with reporters that the Environmental Protection Agency and the Department of Housing and Urban Development would reduce the scope of their financial systems projects.

Werfel said the changes or cancellations in these four agencies will save the government more than $760 million over the life of the projects. OMB did not have actual or estimated cost savings for 2010 or 2011, according to a spokeswoman.

"SBA and the VA are no longer pursuing more transformative changes," Werfel said. "Their current technology is serving them effectively and can be maintained for time being. They still will need to make more modest enhancements, but that is different than the replacement of a system and a major overhaul."

VA announced in July that it had cancelled its $423 million FLITE system. VA Assistant Secretary for Information and Technology and chief information officer Roger Baker and chief financial officer Todd Grams met earlier this summer and decided that FLITE's cost and risks outweighed its benefits.

"The huge amount of money needed for a financial management system did not compare favorably with other, more pressing needs for IT dollars," said a VA spokesperson. "We will continue to work on shorter-term, lower-cost fixes designed to bolster the capabilities of our existing system."

EPA and HUD will continue with their current projects, but on a much smaller scale.

"EPA came into this process with a large footprint of technology that was budgeted for and planned and when they relooked at their project along with the advisory board and OMB, we determined that there could be risk reductions if the projects were segmented and sequenced differently, Werfel said. "We could focus on the more mission critical items up front and defer the less mission-critical items into the future."

Werfel said EPA and HUD will continue to modernize specific parts of its financial systems, and should the program be successful, future funds would be available to move out on the next set of functions.

EPA, HUD, VA and SBA were the first four agencies to under reviews by OMB and a six-person advisory panel made up of CFO and CIOs. OMB laid out how the reviews will work in a June 28 memo and detailed the 30 systems which will undergo these reviews.

"This effort is about ultimately improving the success rate of these financial systems modernization projects and improving taxpayer return on IT investments," said Jeff Zients, acting OMB director and chief performance officer.

Zients added that part of the way to improve agency IT and financial projects is by adopting private sector best practices. These include constantly reviewing initiatives and deciding to pull the plug if they are going off track and can't be fixed.

"Historically most government agencies have not done this," he said. "We are changing that. We are changing how the government does business, rigorously examining what works and what doesn't, and cutting and reforming projects that are late and/or over budget."

Interestingly, only one of the four projects met any of those the criteria of being over budget and/or off schedule, at least according to OMB's IT dashboard.

VA's FLITE program received a 5 out of 5 rating by Baker, is more than $127million under budget, but is almost 30 percent off schedule.

HUD's project is $28 million under budget, meeting its schedule with a variance of less than 10 percent and received a rating of 3 out of 5 from its CIO. SBA's project received a rating of 3 out of 5 by its CIO and was under budget and on schedule. And EPA's program is $37 million under budget, has a schedule variance of less than 4 percent and received a rating of 3 out of 5 by its CIO.

"Our strategic shift is a sign of the tough economic times," said Doug Criscitello, HUD's CFO. "We have been working on the HUD Integrated Financial Management Improvement Project (HIFMIP) for several years and have determined that more focused approach to our financial systems modernization will still get us where we need to be while ensuring that we are not overspending."