New initiatives at Labor Department lead to high scores

The Labor Department is like a star pupil that keeps asking the teacher for more assignments -- and some of those extra-credit activities are translating into major changes inside the department.

New financial management systems, job competitions and e-government initiatives are among the changes Labor is in the midst of implementing. "We don't call it a replacement system; we want to create something totally different," said Samuel Mok, Labor's chief financial officer.

By multiple measures, Labor stands out as a success story in public management. The Labor and Energy departments are the only two that earned four out of five "green" ratings on the latest president's management score card with one remaining yellow. It also has earned a clean financial audit for the past eight years, and a Certificate of Excellence in Accountability Reporting from the Association of Government Accountants for the past four years.

Perhaps more interesting than the agency's grades, however, is how they earned them. By acting early-in some cases, anticipating regulations before they were enacted-and sticking to a clearly outlined strategy, Labor has surpassed many of its fellow agencies in meeting goals set by President Bush.

The agency is in the midst of a $40 million transition, which includes a new software system and reporting process. It should be completed in two and a half years, Mok says.

"He's really good," said Tabetha Mueller, spokeswoman for the House Government Reform Subcommittee on Government Efficiency and Financial Management. She noted that Mok instituted a quarterly reporting system on internal controls, an area that may face more regulation in the next round of auditing rules issued by the Government Accountability Office.

"They're looking down the road, at what will probably be strengthened, and he's on top of that," she said.

Mok, who emigrated from China after high school, applies many of the tools he learned as a consultant and chief executive in the private sector. He decided, for example, that his job was to make financial information understandable not only to the Office of Management and Budget and GAO, but also to people who are not familiar with accounting.

Less paper, more action

He started his reform efforts with a concept: Instead of spending vast amounts of resources on processing transactions-such as transferring data from one team to another-he wanted that energy redirected toward support for decision-making. In other words, he wanted less paper shuffling and more action.

"The new Web-based accounting system-that is the bridge" between the old way of doing things and the new way, Mok said in an interview with Government Executive. That accounting system, which is based on commercial software developed by Oracle and customized for Labor, should let senior managers analyze trends and notice potential problems from their desks, he says.

One new tool is an early warning system that would show a sudden spike in accounts receivable, for example. Managers could explore the reasons for the spike, such as whether an agency was not collecting bills, says Mok.

Anticipation of future regulations is part of his management style. "We correctly predicted Sarbanes-Oxley would affect us," he says, referring to the anticipation of the new GAO auditing rules.

Better communication also has became a centerpiece of his new approach. He decided to meet with his senior managers twice a week. "I'm not sure how many CFOs do that," he says. And he provides Labor Secretary Elaine Chao with a status report on his progress every three months.

Mok's former stomping grounds, the Treasury Department, where he served as CFO from 1986 to 1992, has not been as successful in its financial management. The agency has a "red" rating, the lowest, in financial performance. Mok attributes the difference to organization and agency leadership.

Other agencies are also feeling Mok's influence. As co-chair of the OMB-created Financial Management Line of Business task force, Mok will help agencies to develop a standardized approach to financial management, which he says will include automating certain reporting functions.

Meanwhile, Labor's inspector general has warned of potential problems with the new financial management system. In his November 2004 report to Congress, IG Gordon S. Heddell wrote, "While Labor has received high marks on the president's management score card for financial performance and budget and performance integration, it faces challenges in fully implementing improvements undertaken in these areas." Specifically, the IG report noted that the new system will need to be fully tested and checked for accurate data transmission from the old system.

New job competitions

Competitive sourcing is the only management initiative that still earns Labor a "yellow," the middle rating. Patrick Pizzella, the department's chief information officer and assistant secretary for administration and management, said it took the agency about a year to prepare to hold job competitions. Labor earned a "red," the lowest score, in the category prior to the June 30 score card.

This year, the agency has held six competitions, involving about 150 full-time employees for jobs including invoice clerks and printing specialists. Competitive sourcing, Pizzella said, is the most challenging of the five initiatives because it tends to be misunderstood.

Job contests have been a controversial topic among federal agencies and federal employee unions, which tend to argue that they eliminate jobs for federal employees without providing savings or better quality service for taxpayers.

"We had the usual type of questions and concerns," said Pizzella. "We made an extra effort to listen to employees and educate them about the process…so it wasn't so sudden or unexpected." The agency also works with unions to "eliminate a lot of the mystery" surrounding the competitions, he said.

Pizzella said he would like to see a "green" rating for competitive sourcing by the end of fiscal 2005. To do that, Labor will have to hold more contests and complete its FAIR Act inventory, he added.

E-government efforts

The Labor Department gradually has moved toward a green light in e-government, Pizzella said. Soon after the Bush administration introduced the management score card, Labor officials took note of the e-government standards and deliberately worked to meet each, he said.

"Some periods of time we worked more on one than the other, but we knew we had to meet them all," he said. "We couldn't have an A-plus in four out of the five and get a C in the other and expect to be green. [We] had to really get the A on all of them."

On the latest quarterly score card, reflecting achievements at the close of fiscal 2004, the pieces "just sort of all came together," Pizzella noted. To earn top marks in e-government, agencies must demonstrate that their IT systems are aligned to the government's broader IT architecture, managers must present strong business cases to support all major technology investments, at least 90 percent of computer systems must be secure and managers must steer clear of duplicative projects.

In August 2004, administration officials added one more standard for success in e-government-the requirement that agencies use "earned value management" to justify and track IT investments. The technique involves measuring the level at which IT systems perform and analyzing the extent to which a given investment will enhance that baseline performance.

Because this is the newest of the green-light standards in e-government, it presented the last hurdle for the Labor Department, Pizzella said. Security has presented a major challenge for other departments, but early on, Labor invested in protecting its IT systems, he said.

In fiscal 2002, the department spent 15 percent of its $395.9 million technology budget on security, compared with 4 percent the previous year. Spending on security leveled off in fiscal 2003 and fiscal 2004, hovering near 7 percent of the technology budget for each of those years.

Aside from early investments in security, Labor's success in e-government can be attributed to coordination among agencies within the department and managers' adherence to a strategic plan, Pizzella said.

A board with representatives from each of the Labor agencies reviewed IT projects to improve coordination, he said. Intradepartmental working groups helped "involve folks outside the CIO's office" in e-government and prompted a "collegial and cooperative" approach, he added.

Labor's e-government initiative also benefited from high-level leadership, Pizzella said. "When we rolled out our . . . strategic plan, the secretary talked about becoming a digital department," he said.

The Labor Department already has benefited from improved IT management, Pizzella said. By requiring solid business cases for investments, the department has "allocated resources in as efficient a way as possible rather than just throwing money at people's IT wishes," he noted, adding that the department has remained content with a technology budget that has remained relatively flat, at close to $400 million, for the past three years.