Research service suggests test runs for financial system consolidation

The Bush administration's plan to consolidate agency financial management systems into shared service centers might enjoy a greater chance of success if first tested using pilot projects, the Congressional Research Service recommended in a recent report.

The report, written by CRS analyst Garrett L. Hatch, stated that the debate over financial management streamlining focuses on when, not if, the consolidation should take place. As part of the so-called lines of business effort, the Office of Management and Budget is requiring agencies to move to one of several centralized financial systems run by the government and the private sector, once their existing systems need upgrades. But critics argue that these transitions should not happen until risks are adequately addressed, the report stated.

Hatch, who works in the Government Organization and Management section of CRS' Government and Finance division, suggested that agencies address this by undertaking pilot projects before making transitions to shared service providers. This would allow officials to analyze and discuss the results of a potential move in a controlled environment.

But Karen Evans, OMB administrator of e-government and information technology, said the problem with pilot projects in government is that they "never go away."

"You have never seen it happen in practice," Evans said. "For me, it is either an initial implementation … or you run it like a real project with a start and a stop date. I have just never seen [a successful pilot project] happen in practice."

All agencies are scheduled to move to shared financial management service providers by 2015, and OMB officials have said consolidating financial management and human resources systems will save $5 billion over 10 years.

Hatch cited concerns that, given the scope and complexity of financial management systems, the project is moving forward too quickly. But the administration has not shown signs of slowing the drive toward consolidation.

For example, in a recent development, the Environmental Protection Agency awarded a 10-year, $84 million contract to CGI Federal Inc., an IT services company based in Fairfax, Va., to serve as its shared service provider for financial management. The award, made Feb. 13, was the first large-scale procurement under the initiative and marked the first time public and private sector shared service centers completed a competition for a large agency's business under the initiative.

The CRS report stated surveys have shown that agency officials' greatest fears are investing millions of dollars into moving to a shared service provider, only to have the provider fail to furnish the promised services. In several cases, OMB-designated shared service providers have failed to comply with financial regulations, the report stated.

A lack of regulations governing the agency-run centers has caused some to doubt that any large agency will successfully allow another shop to run its financial management systems. Several smaller agencies have moved to shared service providers. The current agency-run shared service centers are at the Bureau of Public Debt, the Interior Department's National Business Center, the Transportation Department and the General Services Administration.

In November, the Office of Personnel Management's much touted effort to move its back-end financial management operations to the Bureau of Public Debt's Administrative Resource Center collapsed. OPM officials have said they will conduct a public-private competition in the fourth quarter of fiscal 2007 to determine who will host their financial systems.

The CRS report also suggested that plans to develop performance metrics for financial management, standardize business processes across agencies and establish a governmentwide accounting code could provide the earliest opportunity to realize the benefits of improved agency financial management.

OMB has sent signals that may indicate it is backing away from the concept of consolidating agencies' IT systems around shared centers.

The agency is pursuing the adoption of uniform governmentwide standards rather than shared centers in three of the newest areas it is hoping to streamline: budget formulation and evaluation systems, geospatial information systems and IT infrastructure.

But OMB also identified in the fiscal 2008 budget proposal five agencies to serve as shared service providers for the IT security line of business, suggesting the administration hasn't completely abandoned that approach.