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This March marks the third anniversary of an Office of Management and Budget program to consolidate financial management systems across government, but some agencies still are resisting the move, according to an industry expert.

Under OMB's financial management line of business, agencies are asked to outsource their operations to shared service centers, which are run by an agency that has set itself up as a centralized clearinghouse for those services. By outsourcing the operations, agencies can reduce the IT infrastructure needed to support billing and accounting systems such as servers, software, data warehousing and support personnel.

For fiscal 2008 and in fiscal 2009 budget requests, agencies collectively have set aside more than $1.75 billion to comply with the financial management line of business, according to a report released March 26 by INPUT, a federal consulting firm based in Reston, Va. "This is more about the consolidation of the IT infrastructure than anything else," said Vajira Ranaviraja, a federal analyst at INPUT. "Many agencies are still running legacy financial systems that are X numbers of years old. Basic accounting principles are replicated across the government; this is just trying to use economies of scale and maintain a physical infrastructure to support these services."

Some Cabinet-level agencies have resisted outsourcing to a shared service center because they already are consolidating many IT operations and because of the common fear that they will lose control of their financial operations, Ranaviraja said. "To jump from that stage to someone else managing their financial management software, it's a big step," he said. "The problem in general is ego, giving up control. They are saying we do financial management in a different way. But it's a basic process. There are only so many ways to do this."

Smaller agencies have adapted to the shared services model faster than larger agencies, according to the INPUT report. To date, 70 small and independent agencies have signed up with a shared service center.

But some Cabinet-level departments are moving forward. Federal and commercial providers are competing to take over the Labor Department's financial management operations, Ranaviraja said. If Labor awards its operations contract to a commercial provider, it could provide the incentive for other agencies to follow, he added.

The Agriculture Department has outsourced its financial management operations to Accenture rather than to a federal shared service center. However, Ranaviraja does not believe other agencies will follow Agriculture's lead. "What really has to happen is that departments have to get buy-in from their sub-agencies," he said. "Part of the process of moving toward shared service centers is getting buy-in for IT consolidation as a whole."

Four agencies offer financial management services to agencies: the General Services Administration and the departments of Transportation, Interior and Treasury. GSA should award the contract for the commercial shared service centers in fiscal 2008, but the program appears to be on hold, Ranaviraja said. Both commercial and federal shared service centers will compete for the business of agencies. GSA was not able to provide any information on the status of the commercial shared service center contract before this article was posted.

COMMENTS

• Tina, being an MBA, I understand the principle of which you speak. Still, I must ask have you ever heard the joke about the astronaut who rode to the moon on a rocket built with 3,000 least-cost contracts? Only with proper supervision does any business (and particularly the government) receive value from outsourcing. In this case, proper supervision requires sufficient numbers of trained personnel sequestered from external influence. I wouldn’t dare think a large percentage of contractor personnel are awarding contracts based on presumed later employment or financial reward; but I know there are cases of it. I feel (but readily admit to a lack of statistics to back up this feeling) that most of the damage is done due to a lack of a technical knowledge or the availability of a disinterested technical representative, sufficient numbers of legally trained CORs, and the pressures of time, need, and politics. Simply put “Haste makes waste.”, the “war” in Iraq being a classic example. Change, whether contracting or personnel systems, is possible and can be good. What metamorphs great potential into a morass of ineptitude, backstabbing, and distrust is the lack of communication, proper diagnostic troubleshooting, and time. None of which seems to have occurred in the A-76 process or NSPS. Tip off Posted April 3, 2008 3:37 PM
• Through Outsourcing one can get best possible solution at lowest cost thereby making a sizeable profit. tinasilvee Posted April 3, 2008 5:59 AM
• Nine comments; all negative. Believe it adds a little credence to the title. I am the CFO for a small agency and prior to this job I was the CFO for another small agency for six years. In both cases our accounting was done by another government agency (BPD/ARC and NBC). In both cases my experiences have been positive. Although I just started my new job and NBC is relatively new to me, we are off to a great start. Based on six plus years at small agencies and going through the process of moving an accounting system to BPD/ARC, I'm a strong advocate of public to public competitive outsourcing for financial management systems/operations. Are the costs going up for these systems - absolutely, but this should be expected. E-Government and use of the web are great tools, but they have added a new dimension to FISMA and the associated costs. The article notes: “By outsourcing the operations, agencies can reduce the IT infrastructure needed to support billing and accounting systems such as servers, software, data warehousing and support personnel.” I would also add you can reduce costs associated with system integration requirements/problems for credit cards, e-travel, contracts, T&A, asset management, investments, etc. I would also add one more thing, if you set up your financial management system correctly through public to public competitive outsourcing, the auditors will spend 95% of their time where the accounting is being done and your government accounting team will knock a home run! Steven McManus Posted March 28, 2008 1:37 PM