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Report to the Chairman, Subcommittee on Federal Financial Management, 
Government Information, Federal Services, and International Security, 
Committee on Homeland Security and Governmental Affairs, U.S. Senate: 

United States Government Accountability Office: 
GAO: 

September 2010: 

Financial Management Systems: 

Experience with Prior Migration and Modernization Efforts Provides 
Lessons Learned for New Approach: 

GAO-10-808: 

GAO Highlights: 

Highlights of GAO-10-808, a report to the Chairman, Subcommittee on 
Federal Financial Management, Government Information, Federal 
Services, and International Security, Committee on Homeland Security 
and Governmental Affairs, U.S. Senate. 

Why GAO Did This Study: 

In 2004, the Office of Management and Budget (OMB) launched the 
financial management line of business (FMLOB) initiative, in part, to 
reduce the cost and improve the quality and performance of federal 
financial management systems by leveraging shared services available 
from external providers. In response to a request to study FMLOB-
related issues, this report (1) identifies the steps agencies have 
taken, or planned to take, to modernizing their core financial systems 
and migrate to an external provider and (2) assesses the reported 
benefits and significant challenges associated with migrations, 
including any factors related to OMB’s new financial systems 
modernization approach. GAO’s methodology included surveying federal 
agencies to obtain the status of their financial management systems as 
of September 30, 2009 (prior to OMB’s March 2010 announcement of a new 
approach), and interviewing officials with selected agencies, external 
providers, and OMB. 

In oral comments on a draft of this report, OMB stated its position 
that it was too early for GAO to draw conclusions on its new approach 
because it is still a work in progress. For this reason, GAO is not 
making any new recommendations. However, GAO observes that the 
experience and challenges related to prior migration and modernization 
efforts offer important lessons learned as OMB continues to develop 
and implement its new approach. 

What GAO Found: 

In an effort to capitalize on new technologies to help address serious 
weaknesses in financial management and help meet their future 
financial management needs, federal agencies continued to modernize 
their core financial systems, which often has led to large-scale, 
multiyear financial system implementation efforts. For the last 6 
years, OMB has promoted the use of shared services as a means to more 
efficiently and effectively meet agency core financial system needs. 
Overall, 14 of 23 civilian Chief Financial Officer (CFO) Act agencies 
are planning to complete their efforts to deploy 14 new core financial 
systems at various times through fiscal year 2018, and in connection 
with their modernization efforts, 10 of the 14 agencies are migrating, 
or planning to migrate, hosting and application management support 
services to external providers. GAO also found that the CFO Act 
agencies were not using a limited number of external providers, a 
critical element of OMB’s original approach. Five of the 10 agencies 
planned to rely on five different commercial providers, while 2 of the 
10 planned to rely on the same federal provider and 3 had not 
determined the provider. In contrast, smaller agencies were more 
frequently relying on the four federal shared service providers to 
provide core financial system support services to leverage the 
benefits of using external providers. 

The most common benefits of migrating cited by CFO Act agencies were 
external providers’ expertise, the potential for cost savings, and the 
agencies’ ability to focus more on mission-related responsibilities. 
However, CFO Act agencies and external providers cited various 
challenges affecting modernization and migration efforts, such as 
reengineering business processes and the ability of external providers 
to provide specific solutions that meet complex agency needs. In March 
2010, OMB announced a new financial systems modernization approach 
that focuses on the use of common automated solutions for transaction 
processing, such as invoicing and intergovernmental transactions. OMB 
issued a memorandum in June 2010 that included guidance for key 
elements of its new approach, such as agencies splitting financial 
system modernization projects into smaller segments. This new guidance 
also requires CFO Act agencies to halt certain modernization projects, 
pending OMB review and approval of revised project plans. Important 
aspects of the new approach have not yet been developed or articulated 
and OMB has stated that it plans to develop additional guidance. In 
GAO’s view, it is critical that OMB’s new guidance elaborate on the 
new approach and address key issues such as goals and performance 
plans clearly linked to strategies for achieving them, a governance 
structure, and specific criteria for evaluating projects. GAO believes 
these issues need to be addressed to reduce risks and help ensure 
successful outcomes as OMB moves forward with its new approach. GAO 
will continue to work with OMB to monitor the implementation of its 
new approach. 

View [hyperlink, http://www.gao.gov/products/GAO-10-808] or key 
components. For more information, contact Kay L. Daly at (202) 512-
9095 or Naba Barkakati at (202) 512-2700. 

[End of section] 

Contents: 

Letter: 

Background: 

Some Agencies Have Used Migration of Core Financial Systems as Part of 
Modernization Efforts, but Shared Services Use Is Limited: 

Benefits and Challenges of Agency Migrations Raise Important Issues 
for OMB's New Financial Systems Modernization Approach: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Modernization and Migration of Core Financial Systems and 
Services to External Providers: 

Appendix III: Case Studies of Agency Migration and Modernization 
Efforts: 

Appendix IV: Key Characteristics of Selected External Providers: 

Appendix V: Reported Benefits and Challenges Related to Agency 
Migration and Modernization Efforts: 

Appendix VI: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: Summary of Core Financial Systems Reported by 23 CFO Act 
Agencies as of September 30, 2009: 

Table 2: Summary of Current, Planned, and Expected Systems Use of 
External Providers as Reported by 23 CFO Act Agencies as of September 
30, 2009: 

Table 3: Summary of Major Advantages of Migrating to External 
Providers Reported by CFO Act Agencies: 

Table 4: Summary of Major Disadvantages of Migrating to External 
Providers Reported by CFO Act Agencies: 

Table 5: Current Core Financial Systems Fully Deployed at CFO Act 
Agencies as of September 30, 2009: 

Table 6: Core Financial Systems CFO Act Agencies Plan to Fully Deploy 
after September 30, 2009: 

Table 7: USDA's Key Migration and Modernization Activities: 

Table 8: FCC's Key Migration and Modernization Activities: 

Table 9: DOJ's Key Migration and Modernization Activities: 

Table 10: OPM's Key Migration and Modernization Activities: 

Table 11: Key Characteristics of OMB-Designated Federal Shared Service 
Providers: 

Table 12: CFO Act Agency Perspectives on Migrating and Modernizing 
Core Financial Systems: 

Table 13: Reported Key Challenges Affecting CFO Act Agency Migration 
and Modernization Efforts: 

Figures: 

Figure 1: Timeline of USDA's Key Migration and Modernization 
Activities: 

Figure 2: Timeline of FCC's Key Migration and Modernization Activities: 

Figure 3: Timeline of DOJ's Key Migration and Modernization Activities: 

Figure 4: Timeline of OPM's Key Migration and Modernization Activities: 

Abbreviations: 

BPD: Bureau of Public Debt: 

CBIS: Consolidated Business Information System: 

CFO: Chief Financial Officer: 

CGAC: Common Government-wide Accounting Classification: 

COTS: commercial off-the-shelf: 

DOD: Department of Defense: 

DOJ: Department of Justice: 

E-gov: electronic government: 

ERP: enterprise resource planning: 

FCC: Federal Communications Commission: 

FFIS: Foundation Financial Information System: 

FFMIA: Federal Financial Management Improvement Act of 1996: 

FFS: Federal Financial System: 

FIT: Office of Financial Innovation and Transformation: 

FMLOB: financial management line of business: 

FMMI: Financial Management Modernization Initiative: 

FSIO: Financial Systems Integration Office: 

GFIS: Government Financial Information System: 

GSA: General Services Administration: 

HRLOB: human resource line of business: 

IT: information technology: 

JFMIP: Joint Financial Management Improvement Program: 

LMP: Logistics Modernization Program: 

NBC: National Business Center: 

NFC: National Finance Center: 

NRC: Nuclear Regulatory Commission: 

OMB: Office of Management and Budget: 

OPM: Office of Personnel Management: 

SSP: shared service provider: 

UFMS: Unified Financial Management System: 

USDA: Department of Agriculture: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

September 8, 2010: 

The Honorable Thomas R. Carper: 
Chairman: 
Subcommittee on Federal Financial Management, Government Information, 
Federal Services, and International Security: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

Dear Mr. Chairman: 

Over the years, the federal government has spent billions of dollars 
annually on developing or acquiring, implementing, and maintaining 
financial management systems that often fail to meet cost, schedule, 
and performance goals. Recognizing the seriousness of this problem, in 
March 2004, the Office of Management and Budget (OMB) launched the 
financial management line of business (FMLOB) initiative, which, among 
other things, provided an approach to increase agencies' use of shared 
service solutions in connection with their modernization efforts. 
Specifically, this approach required agencies to migrate certain 
common services supporting their core financial systems,[Footnote 1] 
such as information technology (IT) hosting and application 
management,[Footnote 2] to a limited number of external providers. 
[Footnote 3] According to OMB, shared service solutions would enable 
economies of scale by centrally locating, or consolidating, solution 
assets and reusing federal and commercial subject matter expertise 
through common acquisitions, interface development, and application 
management. OMB also expected the reduction in the number of agencies 
implementing their own systems to reduce the risks, and associated 
costs, of systems implementations. As previously reported, we have 
supported and called for such initiatives to standardize and 
streamline common systems, which can reduce costs.[Footnote 4] The 
effectiveness of financial management systems is critical in 
facilitating agencies' ability to institute strong financial 
management and internal controls.[Footnote 5] 

In response to your request to study a range of FMLOB-related issues, 
in May 2009, we reported that although OMB had made some progress 
toward implementing the initiative, extensive work remained before its 
goals would be achieved.[Footnote 6] Specifically, OMB had not fully 
addressed our March 2006 recommendations to fully integrate four key 
building blocks into FMLOB implementation efforts, specifically, the 
need to (1) develop a concept of operations to help guide FMLOB-
related activities, (2) define standard business processes to promote 
consistency within and across agencies, (3) develop a strategy and 
establish a timetable for ensuring that agencies' financial management 
systems are migrated to a limited number of service providers, and (4) 
define and effectively implement applicable disciplined processes 
necessary to properly manage financial management system 
implementation projects.[Footnote 7] This report addresses the 
remaining aspects of your request dealing with migration efforts at 
agencies and external providers, including (1) identifying the steps 
agencies have taken, or plan to take, toward modernizing their core 
financial systems and migrating to an external provider and (2) 
assessing the reported benefits associated with migrations and 
significant challenges, including any factors related to OMB's newly 
announced financial systems modernization approach (new approach), 
that may affect modernization and migration efforts at agencies and 
external providers. Specifically, in June 2010, during the performance 
of our work, OMB announced key elements of its new approach, which 
will focus, in part, on the development of common automated solutions 
for transaction processing, the requirement for agencies to split 
financial system modernization projects into smaller segments not to 
exceed 24 months, and increasing oversight and review of financial 
system projects.[Footnote 8] Further, under the new approach, OMB is 
no longer requiring the use of external providers in all cases for 
core financial systems, but supports such arrangements when they are 
cost effective. 

To identify the steps agencies have taken or plan to take in their 
financial systems migration and modernization efforts and assess 
related benefits and challenges, we conducted a survey of the 24 Chief 
Financial Officers (CFO) Act of 1990 agencies to obtain information 
regarding their current and planned core financial systems and 
migration activities as of September 30, 2009.[Footnote 9] To obtain 
additional information on modernization and migration efforts among 
selected agencies, we performed four agency case studies.[Footnote 10] 
To identify FMLOB efforts among smaller agencies, in addition to the 
Federal Communications Commission case study, we interviewed 
knowledgeable officials with the Small Agency Council[Footnote 11] and 
the four OMB-designated federal shared service providers (SSP). 
[Footnote 12] We also reviewed and analyzed policies and guidance 
related to migration and modernization activities obtained from OMB 
and the Financial Systems Integration Office (FSIO) and interviewed 
key officials of these organizations to obtain their perspectives on 
FMLOB-related benefits and challenges. In addition, we interviewed key 
officials of two commercial vendors supporting two of the case study 
agencies and the four federal SSPs concerning their FMLOB-related 
efforts at CFO Act and non-CFO Act agencies. We also reviewed guidance 
issued by OMB regarding its new approach for federal financial 
management systems. 

We conducted this performance audit from June 2009 through September 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. Appendix I 
includes additional details on our scope and methodology. We requested 
comments on a draft of this report from the Acting Director of OMB or 
his designee. The OMB Controller provided oral comments on the draft 
report, including technical comments, which we incorporated as 
appropriate into the report. 

Background: 

Modernizing financial management systems so they can produce reliable, 
useful, and timely data needed to efficiently and effectively manage 
the day-to-day operations of the federal government has been a high 
priority for Congress for many years. In recognition of this need, and 
in an effort to improve overall financial management, Congress passed 
a series of financial and IT management reform legislation dating back 
to the early 1980s, including the CFO Act[Footnote 13] and the Federal 
Financial Management Improvement Act of 1996 (FFMIA).[Footnote 14] 
FFMIA, in particular, requires the 24 departments and agencies covered 
by the CFO Act to implement and maintain financial management systems 
that comply substantially with (1) federal financial management 
systems requirements, (2) applicable federal accounting standards, and 
(3) the U.S. Government Standard General Ledger at the transaction 
level. FFMIA also requires auditors, as part of the 24 CFO Act 
agencies' financial statement audits, to report whether those 
agencies' financial management systems substantially comply with these 
requirements. In addition, the Clinger-Cohen Act of 1996[Footnote 15] 
requires OMB to improve the acquisition, use, and disposal of IT by 
the federal government and continually assess the experiences of 
executive agencies in managing IT, among other responsibilities. 
Following enactment of this law, OMB revised Circular No. A-130, 
Management of Federal Information Resources, which established policy 
for the management of federal information resources and designated OMB 
as responsible for overall leadership and coordination, as well as the 
development and maintenance of a governmentwide strategic plan for 
federal information resources management within the executive branch. 
Despite these efforts, long-standing financial management systems 
weaknesses continue to present a formidable management challenge in 
providing accountability to the nation's taxpayers and agency 
financial statement auditors continue to report that many agencies' 
systems do not substantially comply with FFMIA requirements.[Footnote 
16] 

FMLOB Migration and Other Financial Management System Guidance: 

In March 2004, OMB launched the FMLOB initiative, in part, to reduce 
the cost and improve the quality and performance of federal financial 
management systems by leveraging shared service solutions and 
implementing other reforms. The stated goals of the FMLOB initiative 
were to (1) provide timely and accurate data for decision making; (2) 
facilitate stronger internal controls that ensure integrity in 
accounting and other stewardship activities; (3) reduce costs by 
providing a competitive alternative for agencies to acquire or 
develop, implement, and operate financial management systems through 
shared service solutions; (4) standardize systems, business processes, 
and data elements; and (5) provide for seamless data exchange between 
and among federal agencies by implementing a common language and 
structure for financial information and system interfaces. According 
to a December 2005 OMB memorandum, to achieve the FMLOB vision--and 
enable efforts to achieve its goals--federal agencies must have 
competitive options available for financial systems.[Footnote 17] OMB 
described a shared service solution framework consisting of a limited 
number of providers that deliver competitive alternatives for agencies 
investing in financial system modernizations and provide financial 
management services for multiple organizations. OMB stated that the 
economies of scale and skill of a provider will allow it to provide 
federal agencies with a lower-risk, lower-cost, and increased service 
quality alternative for financial system modernization efforts. 
According to OMB, when the FMLOB is successful, federal agencies will 
have the ability to migrate from one solution to a more competitive or 
better performing alternative that is offered by a limited number of 
stable and high-performing providers. 

In May 2006, OMB established a migration policy and issued its 
Competition Framework for FMLOB Migrations to provide guidance to 
agencies planning to migrate their financial management systems and 
services.[Footnote 18] According to this migration policy, "with 
limited exception, an agency seeking to upgrade to the next major 
release of its current core financial management system or modernize 
to a different core financial management system must either migrate to 
a [SSP] or qualified private sector provider, or be designated as an 
[SSP]. At a minimum, agencies must consider pursuing hosting and 
application management shared services. However, agencies may also 
consider other shared services, such as accounting or transaction 
processing." This policy was subsequently incorporated into OMB 
Circular No. A-127 in January 2009; this circular provides guidance on 
the use and selection of external providers to ensure that agencies 
rely on such providers to help manage their systems and no longer 
develop their own unique systems.[Footnote 19] 

As program manager for the FMLOB initiative, FSIO had a significant 
role in achieving FMLOB goals, including the development of standard 
business processes, core financial system requirements, and testing 
and product certification.[Footnote 20] In March 2010, OMB announced 
that FSIO was ceasing operations effective March 31, 2010, stating 
that FSIO had achieved its objectives of developing governmentwide 
financial management business processes and data elements.[Footnote 
21] As part of its new approach, OMB also announced in March 2010 the 
creation of the Office of Financial Innovation and Transformation 
(FIT) within the Department of the Treasury's Office of Fiscal 
Service. FIT's stated mission includes (1) helping set a new course 
for federal financial management using automated solutions to reduce 
duplicate work at individual agencies and (2) assisting in ensuring 
consistency with a long-term financial management systems strategy for 
the federal government. In June 2010, OMB announced key elements of 
its new approach, which will focus on (1) implementing smaller project 
segments that deliver critical functionality sooner, (2) increasing 
oversight and review of financial system projects, (3) promoting 
higher impact shared service efforts related to transaction 
processing, (4) assessing compliance with financial system 
requirements, and (5) revising the process for certifying financial 
management software.[Footnote 22] 

Some Agencies Have Used Migration of Core Financial Systems as Part of 
Modernization Efforts, but Shared Services Use Is Limited: 

In an effort to capitalize on new technologies to help address 
financial management weaknesses and help meet their financial 
management needs, about half of the CFO Act agencies are in the 
process of or have plans to modernize their core financial systems, 
which often involve large-scale, multiyear financial system 
implementation efforts. According to the results of our survey, 12 of 
23 civilian CFO Act agencies have migrated, or plan to migrate, 
certain services supporting 16 current systems to 12 external 
providers in connection with their modernization efforts. Because of 
the number of separate external service providers involved, the 
progress toward a shared service framework among the CFO Act agencies 
has been limited. 

Agencies' Efforts to Modernize Core Financial Systems to Meet 
Financial Management Needs: 

Over the years, federal agencies have struggled to develop and 
implement numerous core financial systems to help meet their financial 
information needs for managing and overseeing their day-to-day 
operations and programs.[Footnote 23] As shown in table 1, the 
civilian agencies, representing 23 of the 24 CFO Act agencies, 
identified 45 fully deployed core financial systems in use as of 
September 30, 2009, in response to our survey of the 24 CFO Act 
agencies.[Footnote 24] While some of these agencies have recently 
completed efforts to deploy modernized systems, 17 agencies continue 
to use 25 aging legacy systems to help meet their needs, including 8 
core financial systems placed into operation prior to 1990. Additional 
information on the 45 current civilian CFO Act agency core financial 
systems can be found in table 5 of appendix II. 

Recognizing the importance of effective core financial systems in 
meeting their financial information needs and efforts to address 
financial management weaknesses, many agencies are modernizing these 
current core financial systems. In this regard, 14 of the 23 civilian 
CFO Act agencies identified 14 systems they plan to fully deploy after 
fiscal year 2009, which will replace 27 of the current legacy systems. 
However, agencies provided this information prior to the issuance of 
OMB's June 2010 guidance concerning oversight and review of financial 
system projects, and some of these 14 planned systems may no longer be 
viable projects under that guidance. Additional information on the 14 
planned civilian CFO Act agency core financial systems can be found in 
table 6 of appendix II. 

Table 1: Summary of Core Financial Systems Reported by 23 CFO Act 
Agencies as of September 30, 2009: 

Current systems; 
Legacy: Agencies: 17; 
Legacy: Systems: 25; 
Modern[A]: Agencies: 13; 
Modern[A]: Systems: 20; 
Total: Agencies: 23; 
Total: Systems: 45. 

Planned systems; 
Legacy: Agencies: [Empty]; 
Legacy: Systems: [Empty]; 
Modern[A]: Agencies: 14; 
Modern[A]: Systems: 14; 
Total: Agencies: 14; 
Total: Systems: 14. 

Current systems expected to be replaced by planned systems; 
Legacy: Agencies: 13; 
Legacy: Systems: 17; 
Modern[A]: Agencies: 5; 
Modern[A]: Systems: 10; 
Total: Agencies: 14; 
Total: Systems: 27. 

Total systems expected (end state)[B]; 
Legacy: Agencies: [Empty]; 
Legacy: Systems: 8; 
Modern[A]: Agencies: [Empty]; 
Modern[A]: Systems: 24; 
Total: Agencies: [Empty]; 
Total: Systems: 32. 

Source: GAO analysis of CFO Act agencies' survey responses. 

Note: This includes civilian agencies only. Department of Defense 
systems have not been included. For current systems, the number of 
agencies does not total to 23 because agencies may have both legacy 
and modern systems. In addition, systems listed reflect agency survey 
responses and are subject to change based on reviews being conducted 
under OMB Memorandum M-10-26, Immediate Review of Financial Systems IT 
Projects, issued in June 2010. 

[A] For purposes of this report, we defined modern systems as those 
that are based on core financial software products qualified and 
tested by FSIO under its 2003 full test, 2005 incremental test, or the 
latest version upgrade test. 

[B] This row includes total systems expected (end state) and remaining 
after planned systems fully deployed (expected by fiscal year 2018). 

[End of table] 

In addition to the 23 civilian CFO Act agencies that responded to the 
survey, the Department of Defense (DOD) identified one current system, 
even though it responded that it has more than 100 core financial 
systems.[Footnote 25] DOD also identified 6 enterprise resource 
planning (ERP) systems it plans to deploy from 2011 through 2017. 
[Footnote 26] For example, DOD's General Fund Enterprise Business 
System is an ERP system that is expected to eliminate 87 current 
systems and to be used by approximately 79,000 users once it is fully 
deployed in January 2012. Detailed information that DOD reported on 
its current and planned systems is included in tables 5 and 6 in 
appendix II. 

Because of the scope and complexity of agency modernization efforts, 
especially those involving highly integrated ERP systems, these large- 
scale projects often involve system implementations extending over 
several years before their intended benefits can be realized. For 
example, in 1999, the Army initiated its Logistics Modernization 
Program (LMP) in order to better manage its inventory and repair 
operations at various depots.[Footnote 27] Although the Army 
anticipates completing its 12-year multiphased deployment in fiscal 
year 2011, this project reflects the substantial challenges in large- 
scale deployments, such as a lack of a comprehensive set of metrics 
with which to measure the success of implementation.[Footnote 28] 
Similarly, the Department of Justice (DOJ) is involved in a multiyear 
modernization effort to replace six core financial systems and 
multiple procurement systems operating across the agency with a new 
integrated core financial system (referred to as the Unified Financial 
Management System, or UFMS). DOJ expects to complete its efforts to 
deploy UFMS in 2013, 10 years after the initial alternatives analysis 
related to this project was completed. Additional information 
concerning core financial system modernization efforts at DOJ and 
other selected case study agencies can be found in appendix III. 

Migration of Core Financial Systems to External Providers: 

Although OMB's previous FMLOB guidance focused on migrating support 
services in connection with new or upgraded agency systems rather than 
previously deployed systems, 12 of the 23 civilian CFO Act agencies 
reported that they had already migrated, or plan to migrate, IT 
hosting or application management services supporting 16 of the 45 
current systems that had already been fully deployed as of September 
30, 2009. Further, these agencies plan to rely on eight different 
commercial providers and four federal SSPs to provide services for 
current systems.[Footnote 29] Of the 32 expected systems noted in 
table 1, there are 14 agencies relying on or expecting to rely on 11 
providers--4 federal SSPs and 7 commercial providers--to support 17 
core financial systems. Table 2 summarizes civilian agencies' use of 
external providers--either federal SSPs or commercial providers--for 
hosting or application management of the 45 current, 14 planned, and 
32 expected core financial systems. 

Table 2: Summary of Current, Planned, and Expected Systems Use of 
External Providers as Reported by 23 CFO Act Agencies as of September 
30, 2009: 

Federal SSP; 
Current: Systems: 6; 
Current: Providers[A]: 4; 
Planned: Systems: 2; 
Planned: Providers[A]: 1; 
Expected (end state): Systems: 6; 
Expected (end state): Providers[A]: 4. 

Commercial provider; 
Current: Systems: 8; 
Current: Providers[A]: 8; 
Planned: Systems: 5; 
Planned: Providers[A]: 5; 
Expected (end state): Systems: 7; 
Expected (end state): Providers[A]: 7. 

Provider to be determined; 
Current: Systems: 2; 
Current: Providers[A]: [Empty]; 
Planned: Systems: 3; 
Planned: Providers[A]: [Empty]; 
Expected (end state): Systems: 4; 
Expected (end state): Providers[A]: [Empty]. 

Subtotal; 
Current: Systems: 16; 
Current: Providers[A]: 12; 
Planned: Systems: 10; 
Planned: Providers[A]: 6; 
Expected (end state): Systems: 17; 
Expected (end state): Providers[A]: 11. 

Not relying or expected to rely on external providers; 
Current: Systems: 29; 
Current: Providers[A]: [Empty]; 
Planned: Systems: 4; 
Planned: Providers[A]: [Empty]; 
Expected (end state): Systems: 15; 
Expected (end state): Providers[A]: [Empty]. 

Total; 
Current: Systems: 45; 
Current: Providers[A]: [Empty]; 
Planned: Systems: 14; 
Planned: Providers[A]: [Empty]; 
Expected (end state): Systems: 32; 
Expected (end state): Providers[A]: [Empty]. 

Source: GAO analysis of CFO Act agencies' survey responses. 

Note: This includes civilian agencies only. DOD systems have not been 
included. In addition, systems listed reflect agency responses to 
survey and are subject to change based on reviews being conducted 
under OMB Memorandum M-10-26, Immediate Review of Financial Systems IT 
Projects, issued in June 2010. 

[A] The number of providers listed includes each provider only once 
even though it may service multiple agency systems (e.g., federal 
SSPs). 

[End of table] 

Overall, 14 of the 23 civilian CFO Act agencies are planning to 
complete their efforts to deploy 14 planned systems at various times 
through fiscal year 2018. Ten of these 14 agencies reported that they 
migrated, or plan to migrate, IT hosting and application management 
services supporting 10 of the 14 core financial systems they plan to 
fully deploy after September 30, 2009. In connection with these 
migrations, 5 of the 10 agencies plan to rely on five different 
commercial providers, while 2 of the 10 rely, or plan to rely, on the 
same federal SSP to provide these services, and 3 of the 10 have not 
determined who the provider will be. In addition, DOD is planning to 
use two commercial providers for 2 of its 6 planned systems. Table 6 
in appendix II includes additional information concerning the 
migration of selected support services for the 14 planned civilian 
agency core financial systems and 6 planned DOD systems. 

In addition to IT hosting and application management support services, 
eight CFO Act agencies reported that they have migrated, or plan to 
migrate, transaction processing services to external providers. 
Specifically, DOD, the Department of Homeland Security, the Department 
of Labor, and the Nuclear Regulatory Commission (NRC) (as shown in 
table 6 of app. II) reported that they plan to rely on external 
providers to provide transaction processing support services for their 
planned systems while the Department of Transportation, the Department 
of the Treasury, the General Services Administration, and NRC (as 
shown in table 5 of app. II), reported that they already rely on 
external providers for these services for their existing systems. 
Rather than migrating these services, some large agencies are 
consolidating their transaction processing activities in-house at the 
agency level or integrating internal accounting operations through 
their own internal agency shared solution (e.g., the Department of 
Agriculture and DOJ, as described in app. III). 

In June 2010, OMB stated that its attempts to mandate the use of 
shared services under its previous policy--for hosting and application 
management--yielded inconsistent results as medium and large agencies 
encountered the same types of costs and risks with an external 
provider as they did when modernizing in-house. In contrast, smaller 
agencies are more frequently relying on external providers to provide 
core financial system support services to leverage the benefits of 
using external providers, as discussed in more detail later in this 
report. Specifically, according to officials at the four federal SSPs, 
90 non-CFO Act agencies rely on the support services these providers 
offer. Federal SSP officials also stated that smaller agencies more 
frequently rely on the transaction processing support services they 
provide. For example, according to an official from one federal SSP, 
it provides transaction processing services to all of its 45 non-CFO 
Act client agencies. See appendix IV for information on the number of 
clients serviced by federal SSPs. 

Benefits and Challenges of Agency Migrations Raise Important Issues 
for OMB's New Financial Systems Modernization Approach: 

Agencies and external providers reported that migrating support 
services to external providers offers advantages for helping smaller 
agencies, in particular, to capitalize on the benefits associated with 
sharing the services and solutions available through external 
providers. However, while federal agencies and external providers have 
made varied progress toward implementing the FMLOB initiative, they 
continue to face significant challenges affecting their efforts to 
modernize core financial systems and migrate selected services 
supporting them. OMB officials acknowledged that efforts to capitalize 
on shared services at large agencies have achieved limited success 
and, in a March 2010 memorandum, announced a need to develop a new 
approach for financial systems in the federal government.[Footnote 30] 
The benefits and challenges experienced through agency and provider 
efforts to implement the FMLOB initiative offer important lessons 
learned that if considered could assist OMB in developing its new 
approach. 

Potential Benefits and Challenges of Agency Migrations to External 
Providers: 

Modernization and migration efforts highlighted a number of lessons 
learned regarding potential benefits and challenges of agency 
migrations to external providers. The potential benefits and 
challenges summarized in this section were identified by the 24 CFO 
Act agencies, smaller, non-CFO Act agencies, and external providers 
through survey results, interviews, and agency case studies. We also 
identified challenges with agency migrations related to OMB's guidance 
on competition. See appendix V for more details on key benefits and 
challenges reported related to agency migration and modernization 
efforts. 

As shown in table 3, external providers' experienced staff, the 
potential for cost savings through shared services, increased 
economies of scale, and the ability to focus on mission-related 
responsibilities were cited in the survey responses of CFO Act 
agencies as some of the benefits and advantages of migrating core 
financial system support services to external providers. For example, 
Treasury cited potential cost savings and benefits associated with 
using an external provider such as resource sharing, provider 
expertise in solving application problems, and using cloud computing 
concepts.[Footnote 31] In May 2010, we also reported potential 
benefits associated with cloud computing, such as economies of scale 
and the faster deployment of patches to address security 
vulnerabilities.[Footnote 32] According to external provider 
officials, smaller agencies rely more frequently on external providers 
for transaction processing than CFO Act agencies and benefit from 
providers' use of shared instances of software applications and 
standard interfaces across multiple clients, and their ability to more 
efficiently process complex transactions. 

Table 3: Summary of Major Advantages of Migrating to External 
Providers Reported by CFO Act Agencies: 

Advantages to migrating services to external providers: Potential cost 
savings through shared resources; 
IT hosting: [Check]; 
Application management: [Check]; 
Transaction processing: [Check]. 

Advantages to migrating services to external providers: Economies of 
scale; 
IT hosting: [Check]; 
Application management: [Check]; 
Transaction processing: [Check]. 

Advantages to migrating services to external providers: Allow agency 
to focus on mission; 
IT hosting: [Check]; 
Application management: [Check]; 
Transaction processing: [Check]. 

Advantages to migrating services to external providers: Greater 
efficiency and reliability through experienced staff; 
IT hosting: [Check]; 
Application management: [Check]; 
Transaction processing: [Check]. 

Advantages to migrating services to external providers: Increased data 
capacity and scalability; 
IT hosting: [Check]; 
Application management: [Empty]; 
Transaction processing: [Empty]. 

Advantages to migrating services to external providers: Enhancement in 
infrastructure; 
IT hosting: [Check]; 
Application management: [Empty]; 
Transaction processing: [Empty]. 

Advantages to migrating services to external providers: Enforceable 
service-level agreements; 
IT hosting: [Check]; 
Application management: [Check]; 
Transaction processing: [Empty]. 

Advantages to migrating services to external providers: Shift of 
responsibility to service provider; 
IT hosting: [Empty]; 
Application management: [Check]; 
Transaction processing: [Empty]. 

Advantages to migrating services to external providers: 
Standardization; 
IT hosting: [Empty]; 
Application management: [Check]; 
Transaction processing: [Empty]. 

Advantages to migrating services to external providers: Tighter 
integration with IT hosting services; 
IT hosting: [Empty]; 
Application management: [Check]; 
Transaction processing: [Empty]. 

Advantages to migrating services to external providers: Disaster 
recovery site; 
IT hosting: [Check]; 
Application management: [Empty]; 
Transaction processing: [Empty]. 

Source: GAO analysis of CFO Act agencies' survey responses. 

[End of table] 

To help realize these benefits, CFO Act agencies also identified a 
variety of key factors that contribute to successful migrations. Many 
of the factors cited involve the effective use of disciplined 
processes, such as clearly defining requirements and performing gap 
analyses to ensure that agency needs will be met, performing 
appropriate testing and data conversion procedures, minimizing 
customizations of software, and reengineering business processes to 
facilitate greater standardization.[Footnote 33] In addition, agencies 
cited the need for (1) appropriate and adequate resources to lead, 
plan, manage, execute, and oversee modernization and migration 
activities; (2) clearly defined expected outcomes and responsibilities 
of key stakeholders; and (3) effective service-level agreements and 
other mechanisms that could help ensure that the intended benefits of 
migrating are achieved.[Footnote 34] 

CFO Act agencies also cited various concerns about migrating to 
external providers, such as the ability of external providers to 
provide solutions that meet the complex and unique needs associated 
with large agency migrations. As shown in table 4, CFO Act agencies 
expressed concerns about the general loss of control, flexibility, and 
subject matter expertise and various risks they will experience if IT 
hosting, application management, and transaction processing are 
migrated and whether providers had the capacity to meet the extensive 
needs associated with large CFO Act agencies. External providers 
acknowledged these concerns, but cited additional challenges affecting 
their migration-related efforts, such as agencies' resistance to 
adopting common processes used by providers and the lack of a clear 
mechanism for ensuring that agency migrations occur as intended. 

Table 4: Summary of Major Disadvantages of Migrating to External 
Providers Reported by CFO Act Agencies: 

Disadvantages to migrating services to external providers: Governance 
issues/loss of control; 
IT hosting: [Check]; 
Application management: [Check]; 
Transaction processing: [Check]. 

Disadvantages to migrating services to external providers: Loss of 
unique requirements/loss of flexibility; 
IT hosting: [Check]; 
Application management: [Check]; 
Transaction processing: [Empty]. 

Disadvantages to migrating services to external providers: Potential 
infrastructure risks; 
IT hosting: [Check]; 
Application management: [Check]; 
Transaction processing: [Empty]. 

Disadvantages to migrating services to external providers: Potential 
implementation cost/risk; 
IT hosting: [Check]; 
Application management: [Check]; 
Transaction processing: [Empty]. 

Disadvantages to migrating services to external providers: Loss of 
agency subject matter expertise; 
IT hosting: [Empty]; 
Application management: [Check]; 
Transaction processing: [Check]. 

Disadvantages to migrating services to external providers: Capacity; 
IT hosting: [Check]; 
Application management: [Empty]; 
Transaction processing: [Empty]. 

Disadvantages to migrating services to external providers: Security 
risks; 
IT hosting: [Check]; 
Application management: [Empty]; 
Transaction processing: [Empty]. 

Disadvantages to migrating services to external providers: Competing 
priorities of multiple customers; 
IT hosting: [Empty]; 
Application management: [Check]; 
Transaction processing: [Empty]. 

Disadvantages to migrating services to external providers: Limited 
cost savings; 
IT hosting: [Empty]; 
Application management: [Empty]; 
Transaction processing: [Check]. 

Disadvantages to migrating services to external providers: Increase in 
cost; 
IT hosting: [Empty]; 
Application management: [Empty]; 
Transaction processing: [Check]. 

Source: GAO analysis of CFO Act agencies' survey responses. 

[End of table] 

We found similar migration challenges related to OMB's guidance on 
competition affecting agency and external provider migration efforts, 
its implementation, and effective oversight. For example, we found 
that agencies were not always required to migrate to an external 
provider and did not always conduct a competition for IT hosting and 
application management because they had already decided to use 
existing in-house resources to meet their needs (e.g., DOJ, which is 
discussed in more detail in app. III). On the other hand, we found 
that those agencies migrating to external providers were not using a 
limited number of external providers, raising significant questions 
regarding the extent to which the services they are to provide will be 
shared with other agencies and any related potential cost savings will 
be realized. Specifically, as previously discussed, based on survey 
responses, 14 CFO Act agencies were relying, or planning to rely, on a 
total of 11 different external providers to support 17 expected 
systems and providers for 4 of the 17 systems were still to be 
determined. 

Unlike similar efforts to implement other OMB electronic government (E-
gov) initiatives, the FMLOB guidance does not provide a mechanism for 
determining the appropriate number of providers needed or describe a 
governance structure to help ensure that agencies migrate to one of 
the specific providers identified.[Footnote 35] For example, prior 
policies for the human resource line of business (HRLOB) and E-Payroll 
initiatives[Footnote 36] both involved the migration of agency- 
performed functions common across federal agencies to specifically 
designated shared service centers.[Footnote 37] Further, in connection 
with the E-Payroll initiative, established in June 2002, four 
providers were selected to furnish payroll services for the executive 
branch. In its latest annual report to Congress on E-gov benefits, OMB 
reported that migrations of payroll functions performed by other 
agencies to these providers had been completed.[Footnote 38] 

Lessons Learned Raise Key Issues to Consider for Achieving 
Modernization Goals under OMB's New Approach: 

OMB officials acknowledged that efforts to modernize financial 
management systems under its FMLOB initiative have achieved limited 
success and that a new approach is needed. Detailed information on 
OMB's new approach is not yet available because of its early stage of 
implementation. However, we have summarized the key elements of its 
new approach and identified related issues, generally based on lessons 
learned from prior migration and modernization efforts, for OMB to 
consider as it moves forward with its implementation. 

Summary of OMB's New Approach: 

To address ongoing challenges with financial management practices, OMB 
announced a new financial systems modernization approach, which 
encompasses the following five key areas. 

* Shared services for transaction processing. In March 2010, OMB and 
Treasury announced the creation of FIT, within Treasury, effective on 
April 5, 2010.[Footnote 39] FIT is expected to coordinate with the CFO 
Council to identify and facilitate the acquisition or development of 
initial operating capabilities for automated solutions for transaction 
processing. Initially, FIT's efforts will focus on developing 
operating capabilities for vendor invoicing and intergovernmental 
transactions. According to OMB, based on the success of interested 
agencies' efforts to pilot initial capabilities of new solutions, they 
will be phased in across the federal government as other agencies 
request to adopt them. OMB stated that its previous policy captured 
under the FMLOB initiative--requiring agencies to either serve as SSPs 
or leverage their services--will no longer be mandated in all cases, 
but supports such arrangements when they are cost effective. 

* Segmented approach for deploying systems. OMB's new approach for 
agencies seeking to deploy a financial system includes limiting the 
overall length of development projects to 24 months and splitting them 
into segments of 120 days or less, in part to help simplify planning, 
development, project management, and other tasks and prioritize the 
most critical financial functions.[Footnote 40] 

* Oversight and review of financial system projects. According to the 
June 2010 memorandum, agencies should identify upfront a series of 
milestones, warning flags, and stop points over the course of the 
segment life cycle that if deemed necessary, could result in the 
project being suspended and returned to planning. In addition, 
mechanisms for review of project status by senior management should be 
incorporated into project plans. In this regard, the memorandum 
directed CFO Act agencies to immediately halt activities,[Footnote 41] 
as of the date of the memorandum, on financial system modernization 
projects over a specified dollar threshold pending OMB review and 
approval of revised agency project plans reflecting this guidance. The 
guidance also stated that OMB will review project status on a 
quarterly basis through fiscal year 2012 and that project segment 
milestones must be met in order to release funding for additional 
segments.[Footnote 42] In addition, OMB announced the establishment of 
the Financial Systems Advisory Board under the CFO Council, which will 
make recommendations to OMB on selected projects being reviewed in 
accordance with the memorandum. 

* Compliance with financial system requirements. OMB stated in its 
June 2010 memorandum that current core financial system requirements 
remain in effect and federal agencies have an ongoing responsibility 
to comply with them. OMB is also initiating a performance-based 
approach for compliance with financial system requirements that it 
believes will reduce the cost, risk, and complexity of financial 
system modernizations. OMB plans to issue a revision to OMB Circular 
No. A-127, Financial Management Systems, which will update existing 
requirements and include new guidance on how agencies and auditors 
will assess compliance with these requirements. 

* Process for certifying financial management software. In March 2010, 
OMB announced the discontinuation of FSIO's core financial system 
software testing and certification function and announced that FSIO 
operations would cease effective March 31, 2010.[Footnote 43] OMB's 
June 2010 memorandum states that OMB is reforming the software testing 
and certification program by shifting the accountability of software 
performance to vendors through self-certification. Under this 
approach, agencies will hold vendors accountable in the same manner in 
which other contractual obligations are enforced and will be able to 
hold contractors specifically accountable for false certifications. 
OMB also plans to provide additional details related to testing 
process changes in its revision to OMB Circular No. A-127 and revisit 
this policy on an annual basis. 

Key Issues Moving Forward: 

OMB's decision to embark on this new approach raises several key 
issues that have far-reaching implications for the government, 
software vendors, and external providers. Recognizing that the new 
approach is in an early stage of implementation, the steps taken so 
far do not fully describe a strategy that will address these issues 
moving forward, nor do they yet fully take into account lessons 
learned associated with previous governmentwide modernization efforts, 
including, in particular, the FMLOB migration activities discussed 
earlier in this report. Without sufficient detail on how these issues 
are to be addressed, uncertainties exist concerning the potential 
effectiveness of OMB's new approach. The following describes key 
issues related to each of the five areas of OMB's new approach. 

Shared Services for Transaction Processing: 

Key issues: 
* How will the new approach be implemented and what governance 
structure will be established to fully realize the benefits of common 
solutions and new technologies? 
* How will new governmentwide shared solutions that are intended to 
perform functions currently performed at agencies work with current 
core financial systems and solutions? 
* What guidance will be provided to agencies to encourage their 
participation in, and adoption of, the new solutions envisioned in the 
new approach? 

Previous efforts to realize the benefits associated with shared 
services have been challenging, in part because of the lack of a 
governance structure that ensures agency adoption of shared service 
solutions. Agency participation in the new solutions being developed 
by FIT is voluntary and OMB's previous policy regarding migrations to 
external providers is no longer mandated. Therefore, the potential 
benefits that will actually be realized through shared services are 
uncertain. 

According to the Institute of Electrical and Electronic Engineers, a 
concept of operations is normally one of the first documents produced 
during a disciplined development effort.[Footnote 44] OMB officials 
stated that they are developing an overall concept of operations but 
did not provide us an estimated timeframe for its completion. We 
previously reported on the need for this critical tool to provide an 
overall road map for describing the interrelationships among financial 
management systems and how information is to flow from and through 
them and within and across agencies, and ensuring the validity of each 
agency's implementation approach.[Footnote 45] In addition, a concept 
of operations can be used to communicate overall quantitative and 
qualitative system characteristics to users, developers, and other 
organizational elements and would allow stakeholders to understand the 
user organizations, missions, and organizational objectives from an 
integrated systems point of view. We recognize that OMB's new approach 
is in an early implementation stage and guidance is still being 
developed. However, implementing this approach without certain policy 
guidance carries risk. For instance, without a concept of operations 
that provides an overall road map to guide implementation efforts, it 
is unclear how the new governmentwide solutions envisioned under the 
new approach will integrate with current or planned core financial 
systems, as well as how they will impact numerous smaller agencies 
that have already migrated to federal SSPs. 

In addition, the governance structure for implementing OMB's new 
approach will involve efforts expected to be performed by FIT. OMB has 
described certain activities FIT is expected to perform, but 
additional information concerning its purpose, its authority, and the 
resources to be devoted to its efforts remain unclear. For example, 
although OMB stated that FIT will assist in ensuring consistency with 
a long-term financial management systems strategy for the federal 
government, the specific role that FIT will play in developing or 
implementing a strategy or overseeing efforts to achieve its goals has 
not yet been defined. 

Segmented Approach for Deploying Systems: 

Key issues: 
* What actions will be taken to help ensure that agencies' efforts to 
reduce the scope of modernization projects so that they can be 
completed within 24 months do not inappropriately emphasize schedule-
driven priorities at the expense of achieving event-driven objectives? 
* What guidance will be provided to ensure that agencies have 
developed an overall, high-level system architecture that clearly 
defines specific development projects that provide interim 
functionality? 

Although efforts to reduce the scope of agency modernization projects 
so that they can be completed within 24 months may result in more 
manageable projects, we have previously reported on the importance of 
capturing metrics that identify events and trends to assess whether 
systems will provide needed functionality rather than schedule-driven 
approaches that may lead to rework instead of making real progress on 
a project.[Footnote 46] The process for ensuring that future 
modernization projects conducted under the new approach will align 
with governmentwide and agency goals, achieve measurable results, and 
minimize future work-arounds and rework has not yet been clearly 
described. 

The Clinger-Cohen Act highlights the need for sound, integrated agency 
IT architectures and lays out specific aspects of a process agency 
chief information officers are to implement in order to maximize the 
value of agencies' IT investments.[Footnote 47] For example, 
consistent with OMB's new approach, the act also advocates the use of 
a modular acquisition strategy for a major IT system. Under this type 
of strategy, an agency's need for a system is satisfied in successive 
acquisitions of interoperable increments. However, the act also states 
that each increment should comply with common or commercially accepted 
standards applicable to IT so that the increments are compatible with 
other increments of IT that make up the system. Some agency financial 
system modernization projects involve the implementation of large, 
integrated ERP systems--which may be designed to perform a variety of 
business-related tasks, such as accounts payable, general ledger 
accounting, and supply chain management across multiple organizational 
units--to help achieve agency strategic goals. Given the tightly 
integrated nature of these systems, the extent to which implementation 
projects can be modified and segmented to achieve OMB's objective for 
delivering interim functionality to help agencies address critical 
needs has not yet been determined. 

Oversight and Review of Financial System Projects: 

Key issues: 
* What specific criteria will be used to evaluate agency modernization 
project plans and task orders requiring OMB review and approval? 
* What steps will be taken to ensure that appropriate procedures and 
resources are in place at the agency level to avoid an improper 
impoundment of funds? 
* How will the roles and responsibilities of OMB, the Financial 
Systems Advisory Board, or others involved in conducting the reviews 
and their efforts be defined and measured? 

Our prior work has linked financial management system failures, in 
part, to agencies not effectively incorporating disciplined processes 
shown to reduce software development and acquisition risks into their 
implementation projects.[Footnote 48] We support the principle of 
increased oversight and review of projects as called for in our prior 
recommendations. However, the criteria for performing quarterly 
assessments of agency modernization projects do not clearly define how 
such assessments will evaluate the extent to which agencies are 
embracing disciplined processes. Further, OMB's template for capturing 
information on agency projects identifies numerous aspects to be 
reviewed; however, agencies are not required to provide information 
needed to assess the effectiveness of testing and data conversion 
efforts necessary to ensure that substantial defects are detected 
prior to implementation and that modifications of existing data enable 
them to operate in a different environment. These and other 
disciplined processes are critical for successfully implementing a new 
system. Effective oversight to ensure that they are incorporated into 
agency and governmentwide system implementation projects will also 
continue to be a critical factor in the success of future 
modernization efforts envisioned under OMB's new approach. 

In addition, OMB's direction and CFO Act agencies' implementation of 
the direction to immediately halt activities on financial system IT 
projects pending the outcome of OMB's review present additional risks 
concerning adherence to procedures to be followed for impoundments of 
budget authority, as prescribed in the Impoundment Control Act of 
1974.[Footnote 49] Not all delays in obligating funds are 
impoundments, but where OMB has given direction to agencies to halt 
the issuance of new task orders or new procurements, we are concerned 
that agencies may misinterpret that as a direction to withhold budget 
authority from obligation either during the review process or upon the 
decision to terminate an investment. OMB issues general guidance in 
OMB Circular No. A-11 on the applicable procedures for compliance with 
the Impoundment Control Act. However, in 2006, we reported to Congress 
and OMB that executive agencies had improperly impounded budget 
authority following the President's submission of proposals to 
Congress to rescind certain budget authority because, in part, 
agencies were not fully aware of the nature of the proposals and their 
intended effect on currently available budget authority.[Footnote 50] 
OMB officials stated that none of the 24 CFO Act agencies identified 
an impoundment resulting from OMB's direction, but OMB had not 
evaluated the potential impact of the direction on the agencies' 
budget authority nor had it issued any clarifying guidance to the 
agencies to alert them to the potential for impoundments that might 
arise if agencies withheld budget authority by not awarding contracts 
as directed. 

Moreover, OMB's reliance on the Financial Systems Advisory Board to 
assist in the review of agency modernization projects will depend, in 
part, on the availability of sufficient resources to perform effective 
reviews and having clear criteria for selecting projects and 
performing the reviews. Having clear, measurable criteria for 
determining which projects are to be assessed and that provides for 
objective assessments would help ensure that they are performed 
completely and consistently for all projects and that oversight 
efforts help achieve intended results. The extent to which CFOs and 
chief information officers from major agencies or other experts will 
be available and used to perform such reviews, including whether such 
officials may be involved in reviewing projects related to their own 
agencies, has not been specified. While OMB officials told us that 
they plan to take steps to exclude officials from reviewing systems at 
their own agencies, the process for doing so has not been disclosed. 

Compliance with Financial System Requirements and Process for 
Certifying Financial Management Software: 

Key issues: 
* How will system requirements and standard business processes be 
updated and maintained? 
* What criteria will be used to determine whether a performance-based 
approach for compliance with financial system requirements reduces the 
cost, risk, and complexity of financial system modernizations? 
* What actions will be taken to help ensure that discontinuing FSIO's 
software testing and certification program does not result in lack of 
interoperability across agency systems? 
* What steps will be taken to ensure that vendor self-certifications 
comply with applicable provisions of the Federal Acquisition 
Regulation? 
* What guidance will be provided to agencies to clarify any changes in 
agency responsibilities for testing and validating software 
functionality? 

FSIO played a significant role in helping to identify and document 
federal financial management system requirements and the standard 
business processes on which they should be based. Such efforts were 
aimed at preventing duplicative research and compilation across 
government. Prior to ceasing operations effective March 31, 2010, FSIO 
was working to finalize an exposure draft and issue an updated version 
of core financial system requirements intended, in part, to reflect 
changes necessary to align them with current standard business 
processes. OMB's June 2010 memorandum states that it plans to issue a 
revision to OMB Circular No. A-127 to update existing requirements and 
to provide guidance for agencies and auditors on how to assess 
compliance. The extent to which these changes will affect 
modernization efforts as well as improve the ability of financial 
systems to help address long-standing weaknesses is undetermined. 

While OMB's plan to require vendors to self-certify software 
functionality is intended to shift accountability for software 
performance to vendors, it does not change vendor accountability for 
delivering products that meet specified standards. It also does not 
eliminate the need to develop and update those standards as new 
requirements are established to facilitate future improvements. Our 
work on financial management systems modernizations and industry 
standards has identified the importance of clearly defining systems 
requirements and managing those requirements throughout system 
implementations, and failure to do so can have a significant negative 
impact on their success.[Footnote 51] OMB plans to provide additional 
guidance related to the change in the testing process in an upcoming 
revision to OMB Circular No. A-127 and revisit the policy on an annual 
basis. However, it is not clear if OMB will be defining system 
standards and keeping those definitions up to date going forward or if 
these tasks will be delegated to another entity. 

The Government Performance and Results Act of 1993 (Results Act) 
highlights the importance of strategic plans and performance plans as 
a means for assisting agencies to achieve desired results.[Footnote 
52] We previously reported that strategies should be specific enough 
to enable an assessment of whether they would help achieve the goals 
of the strategic plan.[Footnote 53] We also reported on how 
collaborative efforts involving multiple agencies to address 
crosscutting issues--such as federal financial management 
modernization efforts--could benefit from a governmentwide strategic 
plan that identifies long-term goals and the strategies needed to 
address them, aligned performance goals, and improved performance 
information that assists decision making to improve results.[Footnote 
54] Recognizing OMB's critical role in governmentwide efforts, such as 
those envisioned under this new approach, the Clinger-Cohen Act, and 
OMB's implementing guidance, OMB Circular No. A-130, specifically 
require OMB to develop a strategic plan for managing information 
resources. Further, incorporating performance plans, goals, and other 
key elements that facilitate performance measurement and monitoring is 
essential for ensuring that efforts are appropriately aligned to 
achieve desired results. It will be essential that performance plans 
are expressed in an objective, quantifiable, and measurable form that 
clearly links strategic goals with the strategies to be used to 
achieve them. 

Concluding Observations: 

OMB's FMLOB initiative represented an important effort intended to 
reduce costs and improve the quality and performance of federal 
financial management systems that agencies depend on to generate 
reliable, useful, and timely information needed for decision-making 
purposes. In connection with their efforts to implement this 
initiative and modernize their systems, many agencies took steps to 
migrate selected core financial system support services to external 
providers. The use of external providers by smaller agencies in 
particular highlights potential benefits to be realized through these 
efforts, such as adopting common processes and sharing software. Other 
agencies continue to rely on aging legacy systems--even though they 
may have migrated to an external provider. Agencies continue to be 
challenged with reengineering business processes and effectively 
incorporating disciplined processes into their implementation efforts 
to help ensure their success. 

OMB announced a new strategy and plans for future financial management 
system modernization efforts, and began issuing a series of guidance 
on its new approach from March 2010 to June 2010. However, it is too 
early to determine the extent to which this new approach will address 
the cost, risk, and complexity of financial system modernizations. The 
experience and challenges related to efforts to implement the FMLOB 
initiative provide important lessons learned as OMB continues to 
develop and implement its new approach. OMB has stated that it plans 
to develop additional guidance, such as a governmentwide concept of 
operations, a long-term financial management systems strategy, and a 
revised OMB Circular No. A-127. Critical next steps will include OMB 
elaborating on its new approach to address key issues. The following 
includes our observations on these issues. 

* As we have previously reported in connection with the FMLOB 
initiative, a concept of operations is one of the first and foremost 
critical building blocks and is needed to provide an overall road map 
to guide implementation of OMB's new approach in accordance with best 
practices. Until a well-defined concept of operations is developed, 
questions remain on how the proposed governmentwide solutions can be 
integrated with current and planned agency financial management 
systems. 

* Articulating key aspects of a strategic plan, such as goals and 
performance plans clearly linked to strategies for achieving them and 
expressed in an objective, quantifiable, and measurable form, is also 
critical for the success of OMB's new approach. In addition, a 
governance structure that provides clear roles and responsibilities of 
key stakeholders, such as the Financial Systems Advisory Board and 
FIT, is necessary to help ensure that the stated goals are achieved. 
Further, detailed guidance and criteria will be important for 
understanding how ongoing and future modernization projects will be 
evaluated. 

* In developing its strategy, it is also important for OMB to clarify 
the need to mitigate the risks involved with the new requirements for 
agencies to revise project plans to shorter increments. These risks 
include agencies adopting a schedule-driven approach rather than 
focusing on achieving event-driven results consistent with agency 
needs. In addition, providing guidance to agencies on incorporating 
relevant OMB Circular No. A-11 procedures would help to ensure that 
OMB efforts to review financial system IT projects under its new 
approach do not result in improper impoundments. 

* As part of OMB's revisions to Circular No. A-127, several 
clarifications would help provide agencies with direction to implement 
OMB's new approach, including (1) the requirements for using an SSP, 
(2) the new process for developing and updating federal financial 
management system requirements and standard business processes, and 
(3) the performance-based approach for determining FFMIA compliance. 

We recognize that OMB is still in the process of fully implementing 
this new approach and completing related guidance. However, addressing 
these and other identified key issues and overcoming the historical 
tendency for agencies to view their needs as unique and resist 
standardization will depend on prompt and decisive action to develop 
an effective governmentwide modernization strategy and related 
guidance. We are not making any new recommendations in this report 
because of the early implementation stage of OMB's new approach; 
however, we will continue to work with OMB to help ensure that it 
provides agency management and other stakeholders with the guidance 
needed to bring about meaningful improvements in financial management 
systems. Finally, to ensure that taxpayers' dollars are used 
effectively and efficiently, continued congressional oversight will be 
crucial for transforming federal financial management systems to 
better meet federal government needs. 

Agency Comments and Our Evaluation: 

We requested comments on a draft of this report from the Acting 
Director of OMB or his designee. On August 31, 2010, the OMB 
Controller provided oral comments on the draft report, including 
technical comments, which we incorporated as appropriate. Overall, the 
Controller was concerned that it was too early for GAO to draw 
conclusions on the change in policy that was published in OMB 
Memorandum M-10-26 issued on June 28, 2010, and that the report needed 
to better reflect the new approach as being a work in progress in the 
beginning stages of implementation. To help address OMB's concern, we 
included additional references to the early implementation stage of 
OMB's new approach. The Controller also stated that the questions 
raised in the report were good for framing the issues, and that some 
of them were in the process of being addressed. For example, he stated 
that the planned revisions to OMB Circular No. A-127 will address 
issues raised on systems requirements and the process for certifying 
software. We have updated the report accordingly. The Controller also 
stated that the members of the new Financial Systems Advisory Board 
adopted a charter dated August 1, 2010, which provides additional 
detail and specificity on the role and responsibilities of the Board 
members. We were provided the charter on September 2, 2010, and will 
evaluate it as part of our future work. We continue to believe that 
the questions and issues raised in the report need to be addressed by 
OMB in order to reduce risks and help ensure successful outcomes as it 
moves forward with its new approach and develops additional guidance. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to the Ranking 
Member, Subcommittee on Federal Financial Management, Government 
Information, Federal Services, and International Security, Senate 
Committee on Homeland Security and Governmental Affairs; the Chairman 
and Ranking Member, Subcommittee on Government Management, 
Organization, and Procurement, House Committee on Oversight and 
Government Reform; and the Acting Director of OMB. The report also 
will be available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact Kay Daly, Director, Financial Management and Assurance, who 
may be reached at (202) 512-9095 or dalykl@gao.gov, or Naba Barkakati, 
Chief Technologist, Applied Research and Methods, who may be reached 
at (202) 512-2700 or barkakatin@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix VI. 

Sincerely yours, 

Signed by: 

Kay L. Daly: 
Director, Financial Management and Assurance: 

Signed by: 

Naba Barkakati: 
Chief Technologist: 
Applied Research and Methods: 
Center for Engineering and Technology: 

[End of section] 

Appendix I: Scope and Methodology: 

To address our objectives, we surveyed chief financial officers (CFO), 
or their designees, at the 24 CFO Act agencies. We asked each agency 
to identify the core financial systems that were fully deployed in the 
agency as of September 30, 2009, and any that the agency planned to 
fully deploy after that date.[Footnote 55] Through the use of e-
mailed, self-administered questionnaires, we collected descriptive 
information on modernization and migration-related activities about 
each core financial system, as well as overall agency activities and 
perspectives regarding financial management line of business (FMLOB) 
migration efforts. We designed and tested these questionnaires in 
consultation with subject matter experts at GAO and the Financial 
Systems Integration Office (FSIO), GAO survey research methodologists, 
and selected agency officials. Data collection took place from 
November 2009 to April 2010. All 24 agencies responded to the survey 
request and returned questionnaires on 46 currently deployed systems 
and 20 planned systems that they had identified, as shown in appendix 
II, tables 5 and 6, respectively.[Footnote 56] 

While all agencies returned questionnaires, and therefore our data are 
not subject to sampling or overall questionnaire nonresponse error, 
the practical difficulties of conducting any survey may introduce 
other errors into our findings. In addition to questionnaire design 
activities discussed above, to minimize errors of measurement, 
question-specific nonresponses, and data processing errors, GAO 
analysts (1) pretested draft questionnaires with two agency officials 
prior to conducting the survey, (2) contacted respondents to follow up 
on answers that were missing or required clarification, and (3) 
answered respondent questions to resolve difficulties they had 
answering our questions during the survey. In addition, we tested the 
accuracy of selected responses provided by three agencies by comparing 
them to data we obtained from case studies. 

To obtain more detailed information on steps taken to modernize core 
financial systems and migrate related support services to external 
providers, we performed case studies at the Department of Justice 
(DOJ), Department of Agriculture (USDA), Federal Communications 
Commission (FCC), and Office of Personnel Management (OPM).[Footnote 
57] These agencies were selected to provide a variety of perspectives 
from agencies actively involved in core financial system modernization 
efforts. Specifically, the criteria used to select agencies for the 
case studies included (1) different software solutions, (2) a mix of 
large and small agencies, and (3) differing experiences concerning the 
use of external providers to support their core financial systems. To 
identify the use of different software solutions and differing 
experiences concerning the use of external providers, we reviewed an 
inventory of CFO Act agency and non-CFO Act agency core financial 
systems published by FSIO as of December 2008 that identified 
agencies' software, versions, and providers, where applicable, that 
hosts the systems, as well as selected 2008 agency performance and 
accountability reports.[Footnote 58] To provide a mix of large and 
small agencies, we selected at least one agency from each of three 
strata defined by gross costs as reported in the 2008 Financial Report 
of the United States Government.[Footnote 59] To help ensure an 
efficient use of audit resources, we did not select agencies for which 
GAO had done work involving their financial management systems for our 
case study work performed in this review. We obtained and summarized 
information regarding these case study agencies from documentation 
provided by the agencies, such as capital asset plans and alternatives 
analyses. We also interviewed key agency officials involved with the 
implementations, including CFOs and project managers. We did not 
evaluate the effectiveness of the acquisition and implementation 
processes used by the case study agencies. In addition, we did not 
verify the accuracy of the data provided. 

To identify the benefits of, and key challenges that agency officials 
report as having an impact on, their efforts to modernize and migrate 
core financial systems to external providers, we reviewed and analyzed 
survey results from the 24 CFO Act agencies. In addition, we reviewed 
policies, guidance, reports, and memorandums obtained from the Office 
of Management and Budget (OMB), FSIO, the four selected case study 
agencies, the four OMB-designated federal shared service providers 
(SSP), two commercial vendors supporting migration activities at 
selected case study agencies, and prior GAO reports. The four OMB- 
designated federal SSPs were the Department of Transportation's 
Enterprise Services Center, the Department of the Interior's National 
Business Center, the Department of the Treasury's Bureau of Public 
Debt's Administrative Resource Center, and the General Services 
Administration's Federal Integrated Solutions Center. We interviewed 
knowledgeable officials of these organizations, as well as a co-chair 
of the Small Agency Council Finance Committee[Footnote 60] and 
chairman of its Financial Systems Subcommittee (the CFO of the Equal 
Employment Opportunity Commission and Deputy CFO of the Federal Energy 
Regulatory Commission, respectively) and the team leader of the CFO 
Council's[Footnote 61] FSIO Oversight Transformation Team concerning 
key factors that contribute to successful migrations and significant 
challenges that may affect migration efforts at agencies and external 
providers. 

We also interviewed key OMB officials, including the Controller and 
Deputy Controller of the Office of Federal Financial Management, to 
discuss these factors as well as governmentwide efforts toward 
migrating core financial systems to external providers and OMB's newly 
announced policy and financial systems modernization approach (new 
approach). We obtained and reviewed recent policies and guidance 
[Footnote 62] issued by OMB, such as OMB Memorandum M-10-26[Footnote 
63] calling for an immediate review of financial systems projects. We 
analyzed OMB's new approach, in relation to relevant laws, 
regulations, and guidance, including the Clinger-Cohen Act,[Footnote 
64] the CFO Act,[Footnote 65] the Federal Financial Management 
Improvement Act of 1996 (FFMIA),[Footnote 66] OMB Circular No. A-127, 
[Footnote 67] OMB Circular No. A-130,[Footnote 68] and standards set 
by the Institute of Electrical and Electronic Engineers. 

We conducted this performance audit from June 2009 through September 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

We requested comments on a draft of this report from the Acting 
Director of OMB or his designee. We received oral and technical 
comments from the OMB Controller, which are discussed in the Agency 
Comments and Our Evaluation section and incorporated as appropriate. 

[End of section] 

Appendix II: Modernization and Migration of Core Financial Systems and 
Services to External Providers: 

Tables 5 and 6 summarize responses received from CFO Act agencies 
concerning their core financial systems[Footnote 69] and efforts to 
migrate selected core financial system support services to external 
providers.[Footnote 70] The agencies completed separate questionnaires 
on each identified core financial system and the status of activities 
related to migrating information technology (IT) hosting, application 
management, and transaction processing services supporting these 
systems to external providers as of September 30, 2009.[Footnote 71] 
The status of agency migration activities and use of external 
providers are categorized as follows: 

* Migrated - (provider). Agency has already migrated this service to a 
federal SSP or commercial provider as indicated. 

* Planned - (provider). Agency has decided and planned to migrate this 
service to a selected federal SSP or commercial provider as indicated. 

* Planned - (provider undetermined). Agency has decided to migrate 
this service but has not yet selected a provider. 

* Undecided. Agency has not decided to migrate this service. 

* Not planned. Agency does not plan to migrate this service to an 
external provider. 

Table 5 summarizes the results of the 24 CFO Act agency responses 
related to 46 current core financial systems, including 45 civilian 
systems and 1 defense system, that agency officials identified as 
being fully deployed as of September 30, 2009. Of these, 12 agencies 
reported that they have already migrated, or plan to migrate, IT 
hosting or application management core financial system support 
services to external providers for 16 systems. Further, 4 agencies 
reported that they rely on external providers for transaction 
processing services supporting 4 systems. 

Table 5: Current Core Financial Systems Fully Deployed at CFO Act 
Agencies as of September 30, 2009: 

Agency: Agency for International Development[C]; 
System name: Phoenix - Financial Systems Integration; 
Year deployed[A]: 1998; 
Vendor and software name[B]: AMS Momentum v.6.0; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Agriculture[D]; 
System name: Foundation Financial System; 
Year deployed[A]: 1998; 
Vendor and software name[B]: AMS Federal Financial System v5.5; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Commerce; 
System name: National Technical Information Service; 
Year deployed[A]: 1990; 
Vendor and software name[B]: Custom; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Commerce; 
System name: Commerce Business System; 
Year deployed[A]: 1999; 
Vendor and software name[B]: Oracle v.10g; 
Use of external provider for: IT hosting: Migrated - federal SSP; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Commerce; 
System name: Momentum; 
Year deployed[A]: 2003; 
Vendor and software name[B]: CGI Momentum v.6.2; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Undecided. 

Agency: Department of Defense[E]; 
System name: DLA-Enterprise Business System; 
Year deployed[A]: 2005; 
Vendor and software name[B]: SAP v.6.0; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Education[D]; 
System name: Financial Management Support System; 
Year deployed[A]: 2002; 
Vendor and software name[B]: Oracle Federal Financials v.11.5.10; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Energy; 
System name: Standard Accounting and Reporting System; 
Year deployed[A]: 2005; 
Vendor and software name[B]: Oracle Federal Financials v.11.5.9; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Health and Human Services[F]; 
System name: Financial Accounting Control System; 
Year deployed[A]: 1992; 
Vendor and software name[B]: Federal Success; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Health and Human Services[F]; 
System name: National Institutes of Health Business System; 
Year deployed[A]: 2001; 
Vendor and software name[B]: Oracle E-Business Suite 11.5.10; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Health and Human Services[F]; 
System name: Unified Financial Management System; 
Year deployed[A]: 2005; 
Vendor and software name[B]: Oracle E-Business Suite, v.11.5.10; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Migrated - 
commercial provider; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Homeland Security[G]; 
System name: Integrated Financial Management Information System; 
Year deployed[A]: 1996; 
Vendor and software name[B]: Digital Systems Group IPL v.5.1.6; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Homeland Security[G]; 
System name: Federal Financial Management System; 
Year deployed[A]: 1998; 
Vendor and software name[B]: Savantage Federal Financial Management 
v.3.0 R.2.12; 
Use of external provider for: IT hosting: Planned - commercial 
provider; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Undecided. 

Agency: Department of Homeland Security[G]; 
System name: Momentum Financials; 
Year deployed[A]: 2000; 
Vendor and software name[B]: CGI Momentum Financials v.6.1.6; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Undecided. 

Agency: Department of Homeland Security[G]; 
System name: Core Accounting System; 
Year deployed[A]: 2003; 
Vendor and software name[B]: Oracle Federal Financials v.11.5.10; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Homeland Security[G]; 
System name: Enterprise Financial Management System; 
Year deployed[A]: 2005; 
Vendor and software name[B]: Oracle Federal Financials v.11.5.9; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Undecided. 

Agency: Department of Homeland Security[G]; 
System name: SAP; 
Year deployed[A]: 2005; 
Vendor and software name[B]: SAP R/3, v.6.0; 
Use of external provider for: IT hosting: Planned - provider 
undetermined; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Undecided. 

Agency: Department of Housing and Urban Development[H]; 
System name: HUDCAPS/FFS; 
Year deployed[A]: 1995; 
Vendor and software name[B]: AMS Federal Financial System v.5.6.1; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Housing and Urban Development[H]; 
System name: FHA Subsidiary Ledger; 
Year deployed[A]: 2003; 
Vendor and software name[B]: : PeopleSoft Federal Financials v.8.8; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Housing and Urban Development[H]; 
System name: Ginnie Mae Financial and Accounting System; 
Year deployed[A]: 2006; 
Vendor and software name[B]: PeopleSoft Financials v.8.9; 
Use of external provider for: IT hosting: Migrated - commercial 
provider; 
Use of external provider for: Application management: Migrated - 
commercial provider; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of the Interior[D]; 
System name: Federal Financial System; 
Year deployed[A]: 1988; 
Vendor and software name[B]: AMS Federal Financial System v. 5.1.7; 
Use of external provider for: IT hosting: Migrated - federal SSP; 
Use of external provider for: Application management: Migrated - 
federal SSP; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Justice[I]; 
System name: Financial Management System; 
Year deployed[A]: 1985; 
Vendor and software name[B]: INFOR E Series 98.01; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Justice[I]; 
System name: Financial Management Information System; 
Year deployed[A]: 1974; 
Vendor and software name[B]: Information Builders FOCUS; 
Use of external provider for: IT hosting: : Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Justice[I]; 
System name: STARS; 
Year deployed[A]: 1998; 
Vendor and software name[B]: : Computer Data Systems FARS; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Justice[I]; 
System name: Unified Financial Management System -ATF; 
Year deployed[A]: 2009; 
Vendor and software name[B]: CGI Momentum 6.1.5b; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Justice[I]; 
System name: SAP; 
Year deployed[A]: 2000; 
Vendor and software name[B]: SAP/Enterprise Core Component, v. 6.0; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Justice[I]; 
System name: Unified Financial Management System-DEA; 
Year deployed[A]: 2009; 
Vendor and software name[B]: CGI Momentum 6.1.5; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Labor[D]; 
System name: Department of Labor Accounting and Related Systems; 
Year deployed[A]: 1989; 
Vendor and software name[B]: Custom; 
Use of external provider for: IT hosting: Migrated - commercial 
provider; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of State; 
System name: Joint Financial Management System; 
Year deployed[A]: 2003; 
Vendor and software name[B]: CGI Momentum 6.0; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of the Treasury; 
System name: BEP Management Information System; 
Year deployed[A]: 1985; 
Vendor and software name[B]: INFOR/SSA Global Technologies 
Consolidated Application System v.3.0; 
Use of external provider for: IT hosting: Planned - commercial 
provider; 
Use of external provider for: Application management: Planned 
- commercial provider; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of the Treasury; 
System name: People Soft Financials; 
Year deployed[A]: 2001; 
Vendor and software name[B]: : PeopleSoft Financials v.8.4; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Undecided. 

Agency: Department of the Treasury; 
System name: Oracle E-Business Suite; 
Year deployed[A]: 2002; 
Vendor and software name[B]: Oracle Federal Financials v.11.5.10; 
Use of external provider for: IT hosting: Migrated - federal SSP; 
Use of external provider for: Application management: Migrated - 
federal SSP; 
Use of external provider for: Transaction processing: Migrated - 
federal SSP. 

Agency: Department of the Treasury; 
System name: Integrated Financial System; 
Year deployed[A]: 2005; 
Vendor and software name[B]: SAP v. 4.6c; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of the Treasury; 
System name: Financial Accounting and Services Division; 
Year deployed[A]: 2006; 
Vendor and software name[B]: CGI Momentum Financials v.5.0.1; 
Use of external provider for: IT hosting: Planned - provider 
undetermined; 
Use of external provider for: Application management: Planned - 
provider undetermined; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Department of Transportation; 
System name: DELPHI; 
Year deployed[A]: 2000; 
Vendor and software name[B]: Oracle E-Business Suite v.11.5.10; 
Use of external provider for: IT hosting: Migrated - federal SSP; 
Use of external provider for: Application management: Migrated - 
federal SSP; 
Use of external provider for: Transaction processing: Migrated - 
federal SSP. 

Agency: Department of Veterans Affairs[J]; 
System name: Financial Management System; 
Year deployed[A]: 1995; 
Vendor and software name[B]: CGI-AMS Federal Financial System v. 
4.0.7G; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Environmental Protection Agency[D]; 
System name: Integrated Financial Management System; 
Year deployed[A]: 1989; 
Vendor and software name[B]: CGI Federal Financial System v.5.1; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: General Services Administration; 
System name: Pegasys; 
Year deployed[A]: 2000; 
Vendor and software name[B]: CGI Momentum v.6.2.3; 
Use of external provider for: IT hosting: Migrated - federal SSP; 
Use of external provider for: Application management: Migrated - 
federal SSP; 
Use of external provider for: Transaction processing: Migrated - 
federal SSP. 

Agency: National Aeronautics and Space Administration; 
System name: SAP; 
Year deployed[A]: 2003; 
Vendor and software name[B]: SAP v.6.0; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Not planned. 

Agency: National Science Foundation[D]; 
System name: Financial Accounting System; 
Year deployed[A]: 1980's; 
Vendor and software name[B]: Custom; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Nuclear Regulatory Commission[D]; 
System name: Federal Financial System; 
Year deployed[A]: 1992; 
Vendor and software name[B]: AMS Federal Financial System; 
Use of external provider for: IT hosting: Migrated - federal SSP; 
Use of external provider for: Application management: Migrated - 
federal SSP; 
Use of external provider for: Transaction processing: Migrated - 
federal SSP. 

Agency: Office of Personnel Management[D]; 
System name: Government Financial Information System; 
Year deployed[A]: 2001; 
Vendor and software name[B]: CGI Momentum and Procurement v.3.7.2/4.6; 
Use of external provider for: IT hosting: Migrated - commercial 
provider; 
Use of external provider for: Application management: Migrated - 
commercial provider; 
Use of external provider for: Transaction processing: Undecided. 

Agency: Small Business Administration[K]; 
System name: Loan Accounting System; 
Year deployed[A]: 1982; 
Vendor and software name[B]: Custom; 
Use of external provider for: IT hosting: Migrated - commercial 
provider; 
Use of external provider for: Application management: Migrated - 
commercial provider; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Small Business Administration[K]; 
System name: Financial Reporting Information System/Consolidated 
General Ledger; 
Year deployed[A]: 2000; 
Vendor and software name[B]: Custom; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency: Small Business Administration[K]; 
System name: OCFO Oracle Administrative Accounting System; 
Year deployed[A]: 2001; 
Vendor and software name[B]: Oracle Federal Financials v.11.5.10.2; 
Use of external provider for: IT hosting: Migrated - commercial 
provider; 
Use of external provider for: Application management: Migrated - 
commercial provider; 
Use of external provider for: Transaction processing: Undecided. 

Agency: Social Security Administration; 
System name: Social Security Online Accounting and Reporting Systems; 
Year deployed[A]: 2004; 
Vendor and software name[B]: Oracle Federal Financials v.12.0.6; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Source: GAO survey of 24 CFO Act agencies. 

[A] Year deployed reflects agency responses on the fiscal year the 
system was first placed into operation. 

[B] Vendor and software name include the current software name and 
version reported by the agency. In addition, CGI now owns Momentum and 
Federal Financial System (FFS), which were purchased from American 
Management Systems (AMS), and Oracle now owns PeopleSoft. 

[C] According to its survey response, the Agency for International 
Development has partnered with the Department of State for the 
department to provide certain hosting, application management, and 
transaction processing services supporting Agency for International 
Development's core financial system. However, the Department of State 
is not a designated federal SSP as defined by OMB. Therefore, Agency 
for International Development is not shown as using an external 
provider. 

[D] This agency plans to replace its current core financial system. 
See table 6 for additional details regarding the core financial system 
the agency plans to fully deploy after September 30, 2009. 

[E] The Department of Defense (DOD) has over 100 core financial 
systems; however, officials only provided a response for one core 
financial system that was fully deployed as of September 30, 2009. 
Upon inquiry, DOD officials could not provide sufficient information 
concerning DOD's current core financial systems. 

[F] The Department of Health and Human Services plans to replace one 
of its three current core financial systems. See table 6 for 
additional details regarding the core financial system the agency 
plans to fully deploy after September 30, 2009. 

[G] The Department of Homeland Security plans to replace its current 
core financial systems with one planned system. See table 6 for 
additional details regarding the core financial system the agency 
plans to fully deploy after September 30, 2009. 

[H] The Department of Housing and Urban Development plans to replace 
all three of its current core financial systems with one planned 
system. See table 6 for additional details regarding the core 
financial system the agency plans to fully deploy after September 30, 
2009. 

[I] The Department of Justice plans to replace five of its six current 
core financial systems with one planned system. See table 6 for 
additional details regarding the core financial system the agency 
plans to fully deploy after September 30, 2009. 

[J] At the time of our survey, the Department of Veterans Affairs 
planned to replace this system. Subsequent to conducting our survey, 
the project planned to replace this system was canceled, and according 
to department officials, they have not decided whether to replace this 
system. 

[K] The Small Business Administration plans to replace all three of 
its current core financial systems with one planned system. See table 
6 for additional details regarding the core financial system the 
agency plans to fully deploy after September 30, 2009. 

[End of table] 

In addition to completing separate questionnaires concerning current 
core financial systems that were fully deployed as of September 30, 
2009, agencies completed separate questionnaires for 20 core financial 
systems, including 14 civilian and 6 defense systems, that they 
planned to fully deploy after that date, as shown in table 6. The 
surveys were conducted prior to the issuance of OMB's new guidance. 
Accordingly, the impact, if any, of the new policy on agencies' plans 
to deploy new core financial systems is not reflected in table 6. Some 
of these systems have already been partially deployed at bureaus or 
other subagency components within the agencies, and therefore some 
services may have already been migrated to an external provider even 
though full deployment had not yet occurred as of September 30, 2009. 
Of these systems, 10 agencies reported that they have already 
migrated, or plan to migrate, IT hosting and application management 
services supporting 10 systems; 4 agencies reported that they either 
do not plan, or had not yet made a decision, to migrate both these 
services supporting 4 systems; and 1 agency, the Department of 
Defense, reported that it did not plan to migrate these services for 4 
planned systems and had migrated both services for 1 system and 
application management services for 1 system. In addition, 4 agencies 
reported that they plan to rely on external providers to provide 
transaction processing services supporting 4 planned systems. 

Table 6: Core Financial Systems CFO Act Agencies Plan to Fully Deploy 
after September 30, 2009: 

Agency[A]: Department of Agriculture; 
System name: Financial Management Modernization Initiative; 
Year to be deployed[B]: 2012; 
Vendor and software name: SAP v. 6.0; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Department of Defense; 
System name: Logistics Modernization Program; 
Year to be deployed[B]: 2011; 
Vendor and software name: SAP ECC6.0; 
Use of external provider for: IT hosting: Migrated - commercial 
provider; 
Use of external provider for: Application management: Migrated - 
commercial provider; 
Use of external provider for: Transaction processing: Migrated - 
commercial provider. 

Agency[A]: Department of Defense; 
System name: General Fund Enterprise Business System; 
Year to be deployed[B]: 2012; 
Vendor and software name: SAP ERP v.6.0 and SAP v.7.0; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Migrated - 
commercial provider; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Department of Defense; 
System name: Defense Agencies Initiative; 
Year to be deployed[B]: 2013; 
Vendor and software name: Oracle-E Business Suite 11.5.10.2; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Undecided. 

Agency[A]: Department of Defense; 
System name: Defense Enterprise Accounting and Management System; 
Year to be deployed[B]: 2015; 
Vendor and software name: Oracle E-Business Suite v.11i; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Department of Defense; 
System name: Expeditionary Combat Support System; 
Year to be deployed[B]: 2017; 
Vendor and software name: Oracle E-Business Suite v.R12; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Department of Defense; 
System name: Navy-ERP; 
Year to be deployed[B]: 2013; 
Vendor and software name: SAP ERP v.5.0; 
Use of external provider for: IT hosting: Department of Education: Not 
planned; 
Use of external provider for: Application management: Department of 
Education: Not planned; 
Use of external provider for: Transaction processing: Department of 
Education: Not planned. 

Agency[A]: Department of Education; 
System name: Financial Management Support System Release 12; 
Year to be deployed[B]: 2014; 
Vendor and software name: Oracle Federal Financials v.12; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Department of Health and Human Services; 
System name: Healthcare Integrated General Ledger Accounting System; 
Year to be deployed[B]: 2012; 
Vendor and software name: Oracle E-Business Suite, v.11.5.10; 
Use of external provider for: IT hosting: Migrated - commercial 
provider; 
Use of external provider for: Application management: Migrated - 
commercial provider; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Department of Homeland Security; 
System name: Transformation and Systems Consolidation; 
Year to be deployed[B]: 2018; 
Vendor and software name: To be determined; 
Use of external provider for: IT hosting: Planned - provider 
undetermined; 
Use of external provider for: Application management: Planned - 
provider undetermined; 
Use of external provider for: Transaction processing: Planned - 
provider undetermined. 

Agency[A]: Department of Housing and Urban Development; 
System name: HUD Integrated Core Financial System; 
Year to be deployed[B]: Unknown; 
Vendor and software name: Oracle-PeopleSoft Federal Financials v9.x; 
Use of external provider for: IT hosting: Planned - provider 
undetermined; 
Use of external provider for: Application management: Planned - 
provider undetermined; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Department of the Interior; 
System name: Financial and Business Management System; 
Year to be deployed[B]: 2013; 
Vendor and software name: SAP v.6.0; 
Use of external provider for: IT hosting: Migrated - federal SSP; 
Use of external provider for: Application management: Migrated - 
federal SSP; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Department of Justice; 
System name: Unified Financial Management System; 
Year to be deployed[B]: 2013; 
Vendor and software name: CGI Momentum; 
Use of external provider for: IT hosting: Not planned; 
Use of external provider for: Application management: Not planned; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Department of Labor; 
System name: New Core Financial Management System; 
Year to be deployed[B]: 2010; 
Vendor and software name: Oracle Federal Financials R12; 
Use of external provider for: IT hosting: Planned - commercial 
provider; 
Use of external provider for: Application management: Planned - 
commercial provider; 
Use of external provider for: Transaction processing: Planned - 
commercial provider. 

Agency[A]: Department of Veterans Affairs; 
System name: Integrated Financial Accounting System[C]; 
Year to be deployed[B]: 2014; 
Vendor and software name: To be determined; 
Use of external provider for: IT hosting: Planned - provider 
undetermined; 
Use of external provider for: Application management: Planned - 
provider undetermined; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Environmental Protection Agency; 
System name: Financial System Modernization Project; 
Year to be deployed[B]: 2012; 
Vendor and software name: CGI Momentum v.6.4x; 
Use of external provider for: IT hosting: Planned - commercial 
provider; 
Use of external provider for: Application management: Planned - 
commercial provider; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: National Science Foundation; 
System name: iTRAK; 
Year to be deployed[B]: 2016; 
Vendor and software name: To be determined; 
Use of external provider for: IT hosting: Undecided; 
Use of external provider for: Application management: Undecided; 
Use of external provider for: Transaction processing: Not planned. 

Agency[A]: Nuclear Regulatory Commission; 
System name: Financial Accounting and Integrated Management 
Information System; 
Year to be deployed[B]: 2011; 
Vendor and software name: CGI Momentum Financials; 
Use of external provider for: IT hosting: Planned - federal SSP; 
Use of external provider for: Application management: Planned - 
federal SSP; 
Use of external provider for: Transaction processing: Migrated - 
federal SSP. 

Agency[A]: Office of Personnel Management; 
System name: Consolidated Business Information System; 
Year to be deployed[B]: 2011; 
Vendor and software name: Oracle E-Business Suite/Hyperion R.12 and 
PRISM 6.1; 
Use of external provider for: IT hosting: Migrated - commercial 
provider; 
Use of external provider for: Application management: Migrated - 
commercial provider; 
Use of external provider for: Transaction processing: Undecided. 

Agency[A]: Small Business Administration; 
System name: Loan Management and Accounting System; 
Year to be deployed[B]: 2015; 
Vendor and software name: Oracle E-Business Suite R.12; 
Use of external provider for: IT hosting: Planned - commercial 
provider; 
Use of external provider for: Application management: Planned - 
commercial provider; 
Use of external provider for: Transaction processing: Undecided. 

Source: GAO survey of 24 CFO Act agencies. 

[A] Planned projects listed reflect agency responses to survey for 
planned systems as of September 30, 2009 and are subject to change 
based on reviews being conducted under OMB Memorandum M-10-26 issued 
in June 2010. Based on original survey responses, the following nine 
agencies do not have plans to deploy additional core financial systems 
after September 30, 2009: Agency for International Development, 
Department of Commerce, Department of Energy, Department of State, 
Department of the Treasury, Department of Transportation, General 
Services Administration, National Aeronautics and Space 
Administration, and Social Security Administration. 

[B] Year to be deployed reflects agency responses on the fiscal year 
the system is planned to be fully deployed. 

[C] Subsequent to conducting our survey, according to the Department 
of Veterans Affairs, this project was canceled. 

[End of table] 

[End of section] 

Appendix III: Case Studies of Agency Migration and Modernization 
Efforts: 

Additional information concerning selected federal agencies' migration 
and modernization efforts is presented in this appendix. The four case 
study agencies are USDA, FCC, DOJ, and OPM. All four of these agencies 
reported similar reasons for undertaking efforts to modernize their 
core financial systems, including reliance on out-dated software that 
adversely affected their ability to meet financial management 
challenges, and had a goal of implementing a solution that will 
provide agencywide, streamlined, real-time accounting and reporting 
capability. We did not evaluate the effectiveness of the acquisition 
and implementation processes used by the case study agencies or verify 
the data provided. 

Department of Agriculture: 

Project details: 
Financial Management Modernization Initiative; 
Planned software solution: SAP; 
IT Hosting: USDA National Finance Center (NFC); 
USDA’s total estimated life cycle cost from 2007 to 2014: $300.3 
million; 
Users: Agencywide 14,000 users at full deployment; 

Source: USDA. 

USDA is taking steps to modernize its core financial systems using a 
solution based on SAP commercial off-the-shelf (COTS) software that is 
intended to provide agencywide online, real-time transaction 
capability and access. USDA's Financial Management Modernization 
Initiative (FMMI) is intended to replace the Foundation Financial 
Information System (FFIS) and consolidate and eliminate multiple 
systems currently used in various USDA component agencies and staff 
offices. USDA launched FMMI after identifying the need to upgrade 
department and agency financial and administrative payment and program 
general ledger systems. 

In 2005, USDA began efforts to identify its new core financial system 
needs and took steps to determine what software and services could be 
provided by federal SSPs, private software vendors, and other 
commercial providers. Figure 1 and table 7 summarize the key migration 
and modernization activities used by USDA to identify and deploy a 
core financial system solution. 

Figure 1: Timeline of USDA's Key Migration and Modernization 
Activities: 

[Refer to PDF for image: timeline] 

March 2004: 
FMLOB initiative launched. 

August 2005: 
Initial alternatives analysis. 

December 2005: 
Request for information. 

August 2006: Solicitation for integrator and software. 

December 2008: 
Software selected/integrator selected. 

February 2009: 
IT host (NFC) selected. 

October 2009: 
Phase 1 deployed. 

December 2011: 
Final agency deployment. 

Sources: USDA officials and documentation. 

[End of figure] 

Table 7: USDA's Key Migration and Modernization Activities: 

Key activities: Identify need for new system; 
Description: In 2003, the vendor announced plans to stop supporting 
its Federal Financial System (FFS), which was currently in place at 
USDA, requiring USDA to determine whether to maintain the system 
itself or replace it. USDA external auditors had also identified 
control deficiencies related to the current system. Two additional 
requirements USDA identified were to get real-time transaction updates 
as opposed to batch updates, and consolidate multiple legacy software 
systems with one core financial system. Based on these factors, USDA 
began efforts to determine the most effective way to move forward. 

Key activities: Perform alternatives analysis; 
Description: In the 2005 alternatives analysis, USDA considered four 
alternatives (with associated estimated costs for the 2006 to 2020 
time frame): 
* OMB-designated federal SSP ($766 million); 
* Commercial vendor ($604 million); 
* In-house ($588 million); 
* In-house/SSP hybrid ($781 million); 
USDA also documented consideration of outsourcing integration, IT 
hosting, application management, and business processing functions. 
According to agency officials, the large volume of USDA transactions 
was a concern for the federal SSPs, particularly with respect to 
business processing functions. USDA chose the in-house solution based 
on a combination of lower cost, value, and risk factors. USDA 
determined that the in-house alternative would have less adverse 
impact on financial management operations at USDA. Currently, USDA 
hosts its existing system at the National Finance Center (NFC), and 
USDA officials stated most of the infrastructure is already in place 
to host the new system. 

Key activities: Solicitations and contract awards for software and 
determined services; 
Description: USDA performed a combined public-private competition for 
implementation and integration and software services. It received 
offers from three commercial vendors and no federal SSPs. USDA chose a 
FSIO/Joint Financial Management Improvement Program-certified COTS 
core financial software product with implementation and integration 
support from a private contractor. In addition, USDA conducted a 
public-private competition for IT hosting, and found that an in-house 
solution would be best. USDA received three offers from federal 
processing centers, and chose NFC for IT hosting. 

Key activities: Deployment status and reported challenges; 
Description: In October 2009, USDA deployed FMMI to headquarters and 
one agency and planned to continue deployment at its remaining 
agencies through the end of 2011. According to USDA officials, USDA 
made changes to the original schedule and delayed deployment to 
agencies because of funding constraints and management decisions. USDA 
performed a gap analysis and other reviews that identified a need for 
some system modifications, including interface with the Department of 
the Treasury Intra-Governmental Payment and Collection System and 
incorporation of the Common Government-wide Accounting Classification 
(CGAC) structure. USDA officials stated that a standard configuration 
had been developed and would be deployed at remaining bureaus within 
USDA. In addition to funding constraints and system modifications, 
USDA officials reported that reengineering its business processes and 
resistance to changes within the organization resulting from its FMMI 
efforts presented additional challenges. USDA officials also reported 
that because of USDA's unique needs and large transaction volume, 
migrating services supporting FMMI to an external provider would not 
be in its best interest at this time. 

Sources: USDA officials and documentation. 

[End of table] 

Federal Communications Commission: 

Project details: 
Core Financial Replacement System; 
Planned software solution: Momentum 6.3.4; 
IT hosting and application management: CGI; 
FCC’s total estimated life cycle cost from 2006 to 2018: $32.8 million; 
Users: Agencywide 250 users at full deployment. 

Source: FCC. 

FCC identified a need to modernize its core financial systems and 
selected a Web-based version of Momentum COTS software to provide 
agencywide online, real-time transaction capability and access. FCC's 
planned new core financial system is also intended to interface 
electronically with common governmentwide software applications and to 
replace a number of peripheral supporting software applications 
currently in use at FCC. FCC's Core Financial System Replacement 
Project is intended to replace the Federal Financial System (FFS), 
which is an older, nonintegrated system that relies on batch 
processing of transactions and is currently hosted by the Department 
of the Interior's National Business Center (NBC). The new core 
financial system is planned to be used as the system of record for all 
external reporting requirements, including financial statement 
preparation access and processing. 

In 2005, FCC began efforts to identify its core financial system needs 
and took steps to determine what software and services could be 
provided by federal SSPs, private software vendors, and other external 
providers. Figure 2 and table 8 summarize the key modernization and 
migration activities taken by FCC to identify and plan a core 
financial system solution. 

Figure 2: Timeline of FCC's Key Migration and Modernization Activities: 

[Refer to PDF for image: timeline] 

March 2004: 
FMLOB initiative launched. 

September 2005: 
Alternatives analysis. 

September 2006: 
Project Management Office contractor selected. 

May 2007: 
Request for information. 

September 2007: 
Solicitation for integrator and IT host. 

September 2008: 
Integrator and IT host selected. 

October 2010: 
Agency deployment. 

Sources: FCC officials and documentation. 

[End of figure] 

Table 8: FCC's Key Migration and Modernization Activities: 

Key activities: Identify need for new system; 
Description: FCC's previous host, NBC, notified the agency that it 
could no longer support FFS, which required FCC officials to assess 
whether they would maintain the system themselves or replace the 
system. FCC external auditors had also identified control deficiencies 
related to the current system. Two additional requirements FCC 
identified were to get real-time transaction updates as opposed to 
batch updates and comply with OMB initiatives related to standard 
business processes and external provider migration. Based on these 
factors, FCC began efforts to determine the most effective way to move 
forward with its financial management system. 

Key activities: Perform alternatives analysis; 
Description: In 2005, FCC officials performed a review to identify and 
assess possible alternatives for maintaining or replacing the core 
financial system. FCC determined qualitative considerations and 
estimated risk-adjusted life cycle costs for four alternatives: 
* Status quo ($16.2 million); 
* Modify existing core financial system ($19.8 million); 
* Develop a custom core financial system ($19.8 million); 
* Acquire a COTS product ($12.9 million); 
FCC determined that the fourth alternative, to acquire a certified 
COTS product, combined with IT hosting support, would meet FCC's goal 
of streamlining financial operations and incorporating FSIO 
requirements and standard business processes. The first two 
alternatives were not viable because the current FFS would not be 
supported after October 1, 2006. 
FCC noted that both the qualitative and quantitative information 
received for the alternatives analysis was highly preliminary and was 
not detailed. FCC planned to obtain more specific responses from the 
federal SSPs, major COTS product vendors, and system integrators in 
the federal marketplace during the contract competition process. FCC 
performed a separate review to determine what services should be 
outsourced and what functions should be performed in-house. Per agency 
officials, unique FCC accounting needs and the possible loss of 
flexibility and control contributed to officials' decision not to 
outsource business processing functions. 

Key activities: Solicitations and contract awards for software and 
determined services; 
Description: FCC performed a combined public-private competition for 
implementation, IT hosting, application management, and software 
services. Prior to the formal solicitation, FCC issued a market 
request questionnaire and received information about provider 
capabilities from nine commercial vendors and three federal SSPs. Of 
these, only four commercial vendors and one federal SSP submitted 
formal offers. FCC noted that the information provided by these 
external providers was useful, but evaluating available options was 
time consuming and challenging. 

Key activities: Deployment status and reported challenges; 
Description: Because FCC experienced some challenges with implementing 
the standard version of Momentum, it developed a modified version and 
plans to begin deployment on October 14, 2010. A project management 
office contractor assisted in developing and comparing specific FCC 
accounting requirements to Momentum standard processes. FCC asked CGI 
to incorporate some enhancements based on differences identified. Some 
of these enhancements related to newly developed FSIO standard 
business processes that though not yet required, FCC identified as 
needed. For example, FCC enhancements included specific details of 
interfaces with the FedDebt system, budgetary reporting functions, and 
incorporation of CGAC. FCC officials commented that their 
comprehensive review and inclusion of requirements in their 
solicitation package will be a critical factor in determining the 
success of their migration efforts. They also commented that they have 
developed an effective plan for monitoring contractor performance, and 
handling changing requirements and customer needs that will also be 
critical factors to the success of their migration efforts. 

Sources: FCC officials and documentation. 

[End of table] 

Department of Justice: 

Project details: 
Unified Financial Management System; 
Planned software solution: CGI Federal Momentum Financials; 
DOJ’s total estimated life cycle cost from 2003 to 2021: $1.1 billion; 
Users: Agencywide 35,000 users at full deployment. 

Source: DOJ. 

DOJ is configuring its Unified Financial Management System (UFMS) to 
improve financial management and procurement operations across DOJ. 
UFMS is planned to replace six core financial management systems and 
multiple procurement systems currently operating across DOJ with an 
integrated COTS solution. According to officials, UFMS should allow 
DOJ to streamline and standardize business processes and procedures 
across all of its components, providing secure, accurate, timely, and 
useful financial data to financial and program managers across the 
department, and produce component-and department-level financial 
statements. In addition, the system is intended to assist DOJ by 
improving financial management performance and to aid departmental 
components in addressing the material weaknesses and nonconformances 
in internal controls, accounting standards, and systems security 
identified by DOJ's Office of Inspector General. Finally, the system 
is intended to provide procurement functionality to streamline 
business processes, provide consolidated management information, and 
provide the capability to meet all mandatory requirements of the 
Federal Acquisition Regulation and the Justice Acquisition Regulations. 

In 2003, DOJ began efforts to identify its new core financial system 
needs and took steps to determine what software and services could be 
provided by private software vendors and other external providers. 
Figure 3 and table 9 summarize the key migration and modernization 
activities taken by DOJ to identify and deploy a core financial system 
solution. 

Figure 3: Timeline of DOJ's Key Migration and Modernization Activities: 

[Refer to PDF for image: timeline] 

February 2003: 
Solicitation for software. 

May 2003: 
Initial alternatives analysis. 

March 2004: 
Software contract award. 

March 2004: 
FMLOB initiative launched. 

May 2005: 
Solicitation for integrator. 

December 2005: 
Integrator selected. 

June 2006: 
Independent verification and validation contractor selected. 

January 2009: 
Drug Enforcement Administration deployment. 

September 2013: 
Final agency deployment. 

Sources: DOJ officials and documentation. 

[End of figure] 

Table 9: DOJ's Key Migration and Modernization Activities: 

Key activities: Identify need for new system; 
Description: In 2003, the vendor announced plans to stop supporting 
FFS, which required DOJ to determine if it would maintain the system 
itself or replace the system. In addition, DOJ determined that it 
wanted a single, unified financial management system across the 
department to streamline interagency business processes and reporting. 
By consolidating multiple legacy software systems into one core 
financial system, it hoped to reduce auditor-reported internal control 
weaknesses. 

Key activities: Perform alternatives analysis; 
Description: In the 2003 alternatives analysis, three alternatives 
were considered as follows (with estimated costs): 
* Status quo ($532.4 million); 
* Cross-servicing with another agency ($606.8 million); 
* COTS implementation ($609.7 million); 
The COTS implementation solution was chosen based on best overall 
value. The COTS option scored significantly higher on the qualitative 
analysis than the other two options. According to DOJ officials, this 
option was chosen to significantly improve financial management 
processes and procedures and reduce the cost of operations and 
maintenance for financial management across the department. 

Key activities: Solicitations and contract awards for software and 
determined services; 
Description: DOJ first held a competition for software in 2003; 
it received offers from four commercial vendors and selected Momentum. 
In 2005, DOJ held another public-private competition for integration 
and implementation services. It received offers from two commercial 
vendors. In a separate selection process, another contractor was 
chosen to perform independent verification and validation services. 
While moving through the modernization decision process, DOJ 
considered outsourcing services. However, DOJ decided it would be most 
advantageous to pursue standardizing and unifying its financial 
management system in-house prior to pursuing outsourcing options. DOJ 
cited concerns as to whether external providers could handle its 
transaction capacity and classified data needs, and decided to 
consider becoming an SSP after its implementation is completed. As a 
result, no competitions were conducted for IT hosting, application 
management, and transaction processing. 

Key activities: Deployment status and reported challenges; 
Description: DOJ's implementation approach is intended to ensure 
standardization and complement the Momentum base product, which allows 
for standard processes, data, and reporting capabilities. DOJ will 
utilize a shared configuration of Momentum throughout the department. 
This agency configuration has only been fully deployed at one 
component, the Drug Enforcement Administration, and was partially 
deployed at four additional components. The deployment timeline was 
adjusted because of funding challenges and refinement of the 
implementation strategy to include updated technology. Staged 
deployment is planned to continue at remaining bureaus through the end 
of 2013. DOJ officials cited challenges associated with storage of 
secure data, large capacity, and resistance to change in connection 
with their UFMS modernization efforts. 

Sources: DOJ officials and documentation. 

[End of table] 

Office of Personnel Management: 

Project details: 
Consolidated Business Information System; 
Planned software solution: Oracle v12; 
IT hosting and application management: Accenture; 
OPM’s total estimated life cycle cost from 2008 to 2018: $135.4 
million; 
Users: Agencywide 1,500 users at full deployment. 

Source: OPM. 

OPM is taking steps to modernize its core financial systems using a 
solution based on Oracle COTS software that is intended to provide 
agencywide online, real-time transaction capability and access. The 
Consolidated Business Information System (CBIS) is intended to 
consolidate and eliminate multiple systems currently used by OPM with 
the initial deployment October 1, 2009, replacing the Government 
Financial Information System (GFIS). GFIS included CGI Momentum, which 
is used for salaries and expenses, and a revolving fund. OPM deployed 
phase I, release 1 of CBIS to replace Momentum and, according to 
officials, plans to launch phase II to incorporate trust fund 
accounting are currently under review by OPM leadership. Under CBIS, 
OPM also replaced its contract administration software, Procurement 
Desktop, with the Compusearch PRISM solution during phase I, release 1. 

In 2005, OPM began efforts to identify its core financial system needs 
and took steps to determine what software and services could be 
provided by federal SSPs, private software vendors, and other external 
providers. Figure 4 and table 10 summarizes the key actions taken and 
challenges encountered by OPM in identifying a core financial system 
solution. 

Figure 4: Timeline of OPM's Key Migration and Modernization Activities: 

[Refer to PDF for image: timeline] 

March 2004: 
FMLOB initiative launched. 

June 2005: 
First alternatives analysis. 

September 2005: 
IT host (BPD) selected. 

January 2007: 
Revised alternatives analysis. 

July 2007: 
Request for information. 

November 2007: 
Solicitation of integrator and host. 

August 2008: 
Integrator/host selected. 

October 2009: 
Phase I deployed. 

January 2011: Phase II deployment. 

Sources: OPM officials and documentation. 

[End of figure] 

Table 10: OPM's Key Migration and Modernization Activities: 

Key activities: Identified need for new system; 
Description: In 2003, the vendor announced plans to stop supporting 
FFS, OPM's system for its trust funds at the time, requiring OPM to 
determine if it would maintain the system itself or replace the 
system. OPM decided to use this as an opportunity to improve and 
update agency business processes to current standards. In addition, it 
decided to reduce cuff or feeder systems and move to real-time 
transaction updates as opposed to batch updates. 

Key activities: Performed first alternatives analysis; 
Description: In the 2005 alternatives analysis, OPM considered the 
following three alternatives (estimated costs for the 2005 to 2014 
time frame): 
* In-house upgrade to CGI-AMS's Momentum 6.x ($73.93 million); 
* Cross-service upgrade to CGI-AMS's Momentum 6.x ($55.95 million); 
* Cross-service migration to Oracle Federal Financials ($52.90 
million); 
OPM noted that costs did not include amounts for data cleanup or 
business process reengineering. OPM chose the cross-service migration 
to Oracle Federal Financials because of its strong financial benefits, 
integrated core accounting with internal and external feeder systems, 
and real-time ad hoc reporting features. 
OPM entered into an interagency agreement with the Department of the 
Treasury's Bureau of Public Debt (BPD) in 2005 for IT hosting and 
other services but, according to OPM officials, mutually agreed to 
discontinue the interagency agreement based on BPD's inability to meet 
OPM's reimbursable business needs. 

Key activities: Performed second alternatives analysis; 
Description: In 2007, OPM performed a second alternatives analysis 
with three other options considered (estimated risk-adjusted life 
cycle costs): 
* Cross-service integration/migration to IT hosting vendor ($69.4 
million); 
* Cross-service for IT hosting service ($53.2 million); 
* Cross-service migration with federal SSP ($50.5 million); 
OPM chose cross-service integration/migration to IT hosting vendor 
because it enabled the agency to extricate itself from the business of 
implementing and managing financial systems, provided significantly 
improved processes, and reduced operations and maintenance costs. OPM 
decided to keep transaction processing in-house for control and 
staffing purposes. 

Key activities: Solicitations and contract awards for software and 
determined services; 
Description: In 2005, an interagency agreement provided that BPD would 
perform IT hosting and other services. Then in 2007, OPM conducted a 
combined public-private competition for software, integration, and 
hosting services. One federal and five commercial providers submitted 
offers. From these, three commercial providers were determined to be 
in the competitive range and provided demonstrations to OPM. During 
the modernization process, OPM considered outsourcing services and 
determined that it was only advantageous to outsource IT hosting and 
application management. Unique needs, loss of control, and staffing 
concerns were the main disadvantages cited to migrating transaction 
processing. 

Key activities: Deployment status and reported challenges; 
Description: Phase I deployment occurred in October 2009 for key 
accounting transactions including salary, expense, and revolving fund 
transactions. In addition, the results of mock conversions identified 
some enhancements needed to specific interfaces and customizations. 
The systems integrator/host demonstrated that CGAC elements are 
included in the Oracle instance used by OPM. OPM has unique trust fund 
requirements that may require review and approval from OMB to 
supplement the standard Oracle configuration upon initiation of phase 
II of CBIS. Phase II deployment planned for fiscal year 2011 was 
delayed 1 year because of problems with the RetireEZ system 
development. OPM originally considered a phase III of CBIS. However, 
an official assessment or approval for a phase III of CBIS has not yet 
occurred. According to OPM officials, leadership changes at pivotal 
points in the modernization process have been problematic for OPM. 

Sources: OPM officials and documentation. 

[End of table] 

[End of section] 

Appendix IV: Key Characteristics of Selected External Providers: 

OMB designated four federal entities--(1) the National Business Center 
of the Department of the Interior; (2) the Administrative Resource 
Center, Bureau of Public Debt, of the Department of the Treasury; (3) 
the Federal Integrated Solutions Center of the General Services 
Administration; and (4) the Enterprise Services Center of the 
Department of Transportation--as SSPs for federal financial 
management. All four SSPs offer IT hosting, application management, 
transaction processing, and system implementation services or have a 
structure for providing all four of these services. Although the SSPs 
offer the four basic services mentioned above, the specific services 
provided may vary based on the requirements, size, and complexity of 
the client agency. SSPs typically offer a range of the following four 
basic services: 

* IT hosting services may include systems management and monitoring, 
disaster recovery, help desk, network security compliance and 
controls, and continuity of operations plans and testing. 

* Application management services may include system/software 
administration, application configuration, application setup and 
security, user access and maintenance, configuration management, and 
coordination of application upgrades and fixes. 

* Transaction processing services may include account maintenance and 
reconciliation, financial reporting, regulatory and managerial 
reporting, standard general ledger reconciliation, payment processing, 
billings and collections, accounts payable, accounts receivable, 
travel payments, relocation payments, budgetary transactions, and 
fixed asset accounting. 

* System implementation services may include implementation and 
integration support services, requirements analysis, system 
conversions, project management, systems testing, change management, 
and training. 

To help monitor and measure the performance of selected external 
providers in connection with the financial management line of business 
(FMLOB) services they provide, SSPs and agencies rely on service-level 
agreements, which are binding agreements that define the specific 
level and quality of the operational and maintenance services that an 
external provider will provide to a customer agency and outline 
penalties and incentives that may arise from not performing or 
exceeding the expected service levels. The inclusion of appropriate 
and clearly defined performance measures and metrics in service-level 
agreements is important for ensuring the usefulness of this tool. 
OMB's FMLOB Migration Planning Guidance defines the four service 
categories and related performance metrics. Although specific metrics 
included in service-level agreements are negotiated and may vary, 
examples of performance metrics related to the services described 
above include the following: 

(1) For IT hosting, system availability; average total response time 
for system components; resolution time for critical, high, medium, and 
low incidents; number of security incidents in the past year; and file 
recovery time. 

(2) For application management, average time to restore mission- 
critical application functionality; unplanned downtime; percentage of 
on-time upgrades; and average retrieval time for archived data. 

(3) For transaction processing, invoice process cycle time; percentage 
of financial transactions with errors; average business days to close 
the books; and number of business days to report after closing books. 

(4) For system implementation services, percentage of standard 
financial management system requirements fulfilled; percentage of 
satisfactory postimplementation survey responses; and reduction in 
help desk volume. 

SSPs are also required to operate and maintain a COTS software package 
in compliance with FSIO core financial system requirements. As shown 
in table 11, three of the four SSPs use the Oracle software package, 
while two of the four use a Momentum software package. One SSP offers 
SAP software. In addition to the software offered by each SSP, table 
11 also provides an overview of key characteristics of the four OMB- 
designated federal SSPs including detailed information regarding the 
number of full-time equivalent staff dedicated to providing financial 
management services and the clients they serve. The selected 
characteristics provide context for the financial management systems- 
related operations of the four federal SSPs. 

Table 11: Key Characteristics of OMB-Designated Federal Shared Service 
Providers: 

Parent organization; 
Enterprise Services Center: Department of Transportation; 
National Business Center: Department of the Interior; 
Administrative Resource Center: Bureau of the Public Debt, Department 
of the Treasury; 
Federal Integrated Solutions Center: General Services Administration. 

Total number of client agencies[A]; 
Enterprise Services Center: 7; 
National Business Center: 26; 
Administrative Resource Center: 18; 
Federal Integrated Solutions Center: 46. 

Number of CFO Act agency clients; 
Enterprise Services Center: 1; 
National Business Center: 3; 
Administrative Resource Center: 2; 
Federal Integrated Solutions Center: 1. 

Number of non-CFO Act agency clients; 
Enterprise Services Center: 6; 
National Business Center: 23; 
Administrative Resource Center: 16; 
Federal Integrated Solutions Center: 45. 

Funding structure[B]; 
Enterprise Services Center: Franchise fund; 
National Business Center: Working capital fund; 
Administrative Resource Center: Franchise fund; 
Federal Integrated Solutions Center: Working capital fund. 

Full-time equivalents dedicated to financial management system 
activities; 
Enterprise Services Center: 440; 
National Business Center: 267; 
Administrative Resource Center: 170; 
Federal Integrated Solutions Center: 22. 

Software offered[C]; 
Enterprise Services Center: Oracle; 
National Business Center: Momentum, SAP, Oracle; 
Administrative Resource Center: Oracle; 
Federal Integrated Solutions Center: Momentum. 

Instances[D]; 
Enterprise Services Center: One instance; 
National Business Center: For Momentum, four separate instances; 
for SAP, one instance; 
and for Oracle, two instances (13 of 14 clients are on one instance); 
Administrative Resource Center: Three instances (16 of 18 clients are 
on one instance); 
Federal Integrated Solutions Center: One instance. 

Source: GAO analysis of SSP data. 

[A] The total numbers of clients listed for each SSP were derived by 
counting each overall agency as one client (i.e., multiple agency 
components were counted as one agency). 

[B] Franchise funds and working capital funds are types of 
intragovernmental revolving funds that operate as government-run, self-
supporting, businesslike enterprises to provide a variety of common 
administrative services (e.g., information technology support and 
transaction processing) to other federal agencies on a fee-for-service 
basis. These funds are required to recover the full costs of services 
provided from the agencies they serve and often operate on a break-
even basis over time. 

[C] According to National Business Center (NBC) officials, NBC is 
retiring its legacy system--the Federal Financial System (FFS). NBC no 
longer offers FFS to new clients as a software solution, and existing 
clients using FFS will migrate to other solutions. 

[D] According to federal SSP officials, an instance is a uniquely 
configured and separate installation of a software application. 

[End of table] 

[End of section] 

Appendix V: Reported Benefits and Challenges Related to Agency 
Migration and Modernization Efforts: 

This appendix includes additional details on the key benefits and 
challenges of agencies migrating their core financial systems to 
external providers for IT hosting, application management, and 
transaction processing. The potential benefits and challenges include 
those reported by the CFO Act agencies in response to our survey. The 
surveys were conducted prior to the issuance of OMB's new guidance. 
Accordingly, the effect, if any, of the new policy is not reflected in 
agencies' responses. Non-CFO Act agencies' use of external providers 
also highlights potential benefits and challenges. While external 
providers cited efforts to address agency concerns, they also 
highlighted their own concerns and challenges with agency migrations. 
We also noted other migration challenges related to OMB's guidance on 
competitions. 

Potential Benefits of Agency Migrations Reported by CFO Act Agencies: 

Based on survey responses concerning the potential advantages and 
disadvantages of migrating core financial system support services, 16 
of the 24 (67 percent) CFO Act agencies believe that the benefits of 
migrating IT hosting greatly or somewhat outweighed their concerns, 
while 14 of 24 (58 percent) reported similar perceptions concerning 
the benefits of migrating application management services to external 
providers. In comparison, as shown in table 12, the responses 
indicated the perception that potential disadvantages outweigh any 
potential advantages of migrating transaction processing services to 
an external provider for 10 of the 24 (42 percent) CFO Act agencies. 

Table 12: CFO Act Agency Perspectives on Migrating and Modernizing 
Core Financial Systems: 

Type of service: IT hosting; 
Advantages greatly outweigh disadvantages: 9; 
Advantages somewhat outweigh disadvantages: 7; 
Advantages equal to disadvantages: 2; 
Disadvantages somewhat outweigh advantages: 1; 
Disadvantages greatly outweigh advantages: 3; 
Don't know: 2. 

Type of service: Application management; 
Advantages greatly outweigh disadvantages: 8; 
Advantages somewhat outweigh disadvantages: 6; 
Advantages equal to disadvantages: 1; 
Disadvantages somewhat outweigh advantages: 3; 
Disadvantages greatly outweigh advantages: 5; 
Don't know: 1. 

Type of service: Transaction processing; 
Advantages greatly outweigh disadvantages: 1; 
Advantages somewhat outweigh disadvantages: 1; 
Advantages equal to disadvantages: 3; 
Disadvantages somewhat outweigh advantages: 5; 
Disadvantages greatly outweigh advantages: 10; 
Don't know: 4. 

Source: GAO analysis of CFO Act agencies' survey responses. 

[End of table] 

According to CFO Act agency responses to our survey, some of the 
potential benefits of migrating the IT hosting, application 
management, and transaction processing services for agencies' core 
financial systems to external providers include the following: 

* Potential cost savings through shared resources. For example, the 
Nuclear Regulatory Commission cited cost reductions in equipment 
purchase and maintenance costs, as well as the number of staff needed 
to maintain the application and process transactions. 

* Allowing agency to focus on mission. For example, OPM stated that 
migrating its financial management system to an IT hosting provider 
enables OPM to extricate itself from the business of managing 
financial systems, transfers some of the risk associated with 
implementing and maintaining the system, and allows the CFO 
organization to concentrate on its goal of providing strategic 
direction based on financial data. 

* Greater efficiency and reliability through experienced staff. For 
example, the Department of Transportation stated in its survey 
response that benefits include having a provider that has experience 
with the specific equipment, operations, and maintenance required by 
the hosted application. 

Reported Potential Benefits on the Use of Federal SSPs by Non-CFO Act 
Agencies: 

According to Small Agency Council officials, small agencies are more 
likely to migrate to external providers because they do not have 
sufficient resources to support infrastructures required to operate 
and maintain core financial systems. For example, according to one 
federal SSP, many of its clients consist of small commissions, such as 
the Election Assistance Commission, that rely on the "end-to-end" 
services the SSP provides. Further, according to officials at the four 
federal SSPs, their efforts toward acquiring additional clients are 
primarily focused on small to midsized agencies that may lack 
sufficient resources or expertise to meet their core financial system 
needs. The following summarizes the key reported benefits for non-CFO 
Act agencies. 

* Potential cost savings through shared resources. Based on 
information provided by SSP officials, their clients share the same 
instance of core financial software hosted and maintained by SSPs with 
eight or more other clients, on average.[Footnote 72] Federal SSP 
officials stated that the use of shared instances and other tools, 
such as standard interfaces that facilitate the exchange of data 
between core financial systems and other systems, enables agencies to 
realize significant cost savings by spreading IT hosting, maintenance, 
and other related costs among multiple clients. 

* Greater efficiency and reliability. According to FCC officials, FCC 
is currently modernizing its core financial system and is migrating to 
a commercial provider to take advantage of the provider's expertise in 
acquiring and maintaining the latest technology to meet FCC's needs. 
Further, since federal SSPs process transactions for multiple 
agencies, they are able to devote more resources toward processing 
complex transactions than smaller agencies that may not individually 
be required to handle such transactions on a regular basis. For 
example, according to one SSP, although many agencies do not process a 
large number of transactions involving employees' permanent changes in 
duty stations, the SSP maintains the expertise and capability to 
efficiently process these complex transactions on a regular basis 
because of the volume it is required to handle on behalf of all its 
clients. 

* Enhanced compliance with federal standards. External providers are 
working to incorporate changes in software to facilitate agencies' 
efforts to comply with new standards and requirements, such as the 
Common Governmentwide Accounting Classification (CGAC) and other 
recently issued standard business processes.[Footnote 73] According to 
a federal SSP official, having a limited number of providers 
incorporate these changes into a common solution shared by multiple 
agencies, rather than each agency spending valuable resources to 
accomplish the same objective on its own, represents a significant 
advantage for the agencies relying on the shared solutions the SSP 
provides. 

Reported Challenges Related to Agency Modernization and Migration 
Efforts: 

CFO Act agencies highlighted system implementation disciplined 
processes, along with reengineering their business processes, among 
the greatest modernization challenges they face. Additional 
information on these and other reported key challenges affecting CFO 
Act agency modernization and migration efforts can be found in table 
13. 

Table 13: Reported Key Challenges Affecting CFO Act Agency Migration 
and Modernization Efforts: 

Type of challenge: Reengineering business processes to take most 
advantage of available resources and technologies; 
Number of responses[A]: 18. 

Type of challenge: Reengineering business processes to conform to 
newly issued Financial Management Systems Standard Business Processes 
for U.S. Government Agencies, issued by FSIO and the CGAC structure; 
Number of responses[A]: 17. 

Type of challenge: System implementation activities related to 
configuration and interfaces; 
Number of responses[A]: 16. 

Type of challenge: System implementation activities related to testing; 
Number of responses[A]: 16. 

Type of challenge: Obtaining/maintaining adequate project team 
resources with appropriate expertise and leadership; 
Number of responses[A]: 16. 

Type of challenge: Addressing existing financial management system and 
other related deficiencies; 
Number of responses[A]: 15. 

Type of challenge: System implementation activities related to data 
conversion; 
Number of responses[A]: 15. 

Type of challenge: System implementation activities related to 
requirements management; 
Number of responses[A]: 13. 

Type of challenge: System implementation activities related to risk 
management; 
Number of responses[A]: 12. 

Type of challenge: Obtaining adequate funding; 
Number of responses[A]: 12. 

Type of challenge: Identifying external providers with the ability to 
meet agency requirements; 
Number of responses[A]: 12. 

Type of challenge: Adhering to federal acquisition requirements and 
processes; 
Number of responses[A]: 11. 

Type of challenge: Managing, evaluating, and monitoring external 
provider performance throughout period of performance; 
Number of responses[A]: 10. 

Type of challenge: System implementation activities related to project 
management; 
Number of responses[A]: 10. 

Type of challenge: Justifying migration of core financial system to 
external providers as better value than existing in-house services or 
other alternatives; 
Number of responses[A]: 9. 

Type of challenge: Obtaining information on the performance of 
external providers (federal SSPs or other commercial vendors that 
provide FMLOB migration services) to select best provider; 
Number of responses[A]: 9. 

Type of challenge: Usefulness of FMLOB guidance and tools; 
Number of responses[A]: 8. 

Type of challenge: Obtaining commitment from top leadership; 
Number of responses[A]: 7. 

Source: GAO analysis of CFO Act agencies' survey responses. 

[A] Number of 24 CFO Act agency survey respondents indicating that the 
specified challenges were a great or moderate challenge to their 
agency's migration efforts excluding "Don't Know" and "N/A" responses. 

[End of table] 

The following summarizes key examples of CFO Act agency survey and 
case study results related to challenges associated with migrating IT 
hosting, application management, and transaction processing to 
external providers. 

* Department of Health and Human Services officials expressed concerns 
about the loss of control and risks associated with allowing another 
entity to manage or host the infrastructure on which an agency's 
critical data reside, which could become impaired or compromised. 

* Agencies cited concerns with the loss of flexibility associated with 
using the same setup and configurations across agencies in order to 
achieve efficiencies and cost savings governmentwide. In addition, 
agencies stated that they were reluctant to forgo their established 
business processes, noting that they would lose the benefits 
associated with their unique business processes and the technical 
expertise of internal staff who support and use them. For example, the 
Department of Energy cited concerns with losing agency capabilities 
and subject matter expertise and becoming totally reliant on the 
service provider. 

* Case study agency officials expressed concerns that although COTS 
products help enable agencies to use common platforms to modernize 
their core financial systems, the products need additional 
enhancements to help meet common agency needs. For example, these 
officials identified a need for (1) enhancements that effectively 
address new governmentwide CGAC and FSIO standard business 
processes[Footnote 74] and agency budgetary reporting needs and (2) 
common interfaces that facilitate the exchange of financial data 
between agency core financial systems and governmentwide systems, such 
as the FedDebt system. Further, recognizing that unreconciled 
intragovernmental information continues to impede the preparation of 
the federal government financial statements each year,[Footnote 75] 
they stated that intragovernmental transaction processing should be 
further clarified.[Footnote 76] 

* Case study agency officials stated that their agencies each worked 
individually with selected COTS vendors to produce enhanced solutions 
to meet their needs. For example, the case study agencies noted that 
they have had to develop interfaces to existing solutions such as 
payroll, travel, reporting, and FedDebt that should already be part of 
a standard configuration. Agency officials were unable to specify the 
portions of their modernization costs that are specifically 
attributable to meeting software and configuration needs they have in 
common with other agencies. 

Reported Challenges Related to OMB's Competition Framework: 

Although external providers acknowledged agency migration concerns and 
stated that they were taking steps to address them, they cited 
additional challenges affecting their migration-related efforts. For 
example, external provider officials stated that overcoming agencies' 
resistance to adapting their business processes to those used by 
external providers is a significant challenge. Further, according to 
one SSP official, although OMB had a goal of migrating agencies to a 
limited number of stable and high-performing providers, it lacked a 
clear mechanism for enforcing agencies, especially large agencies, 
migrate to an external provider in a manner consistent with the goals 
of the FMLOB initiative. Specifically, based on survey responses, CFO 
Act agencies reported that they were relying, or planning to rely, on 
a total of 6 different external providers for IT hosting and 
application management services supporting their planned systems and a 
total of 12 different providers to provide these services for their 
current systems. 

We also noted other challenges related to OMB's Competition Framework 
that affect agency and external provider migration efforts. OMB's 
Competition Framework, as well as revisions made to OMB Circular No. A-
127, require agencies to conduct competitions among external providers 
to help evaluate different options available for meeting their needs. 
The following is a summary of these reported challenges. 

* According to one federal SSP, some agency solicitations for shared 
services consist of lengthy, detailed requirements and other 
information that can sometimes result in unnecessarily expensive and 
time-consuming efforts to review and provide required responses. 
Federal SSP officials noted that the federal government may spend a 
significant amount of federal funds on demonstrations, especially in a 
situation where all four SSPs respond to a request for a demonstration 
from a single agency. Moreover, officials at SSPs also expressed 
concerns about the significant challenges they face in competing with 
commercial vendors and acquiring additional clients because of the 
limited resources they can devote to such activities. 

* Federal SSP officials stated that full cost recovery requirements 
associated with being a franchise fund or working capital fund place 
federal SSPs at an inherent disadvantage when competing against 
commercial vendors under OMB's Competition Framework.[Footnote 77] 
According to federal SSP officials, they may not bid on agency 
solicitations that would involve significant start-up costs to meet an 
agency's unique needs if doing so would not also benefit other clients 
they serve that would also bear a portion of these costs. These 
officials also stated that commercial vendors have more flexibility to 
price their bids aggressively in early years to acquire additional 
business and rely on efforts to recoup their costs in subsequent 
years. External providers also reported seeing an increase in 
agencies' desire to use firm-fixed price contracts and include 
performance incentives and disincentives in service-level agreements 
which, according to SSP officials, are difficult for them to 
accommodate because of full cost recovery requirements. 

* According to DOJ officials, DOJ did not conduct a competition 
because the department determined that federal SSPs could not 
accommodate its capacity, security requirements, and unique accounting 
needs based on limited information received about SSP capabilities and 
costs during preliminary planning discussions related to its financial 
management system modernization effort. However, DOJ officials 
acknowledged that they did not receive sufficient information to fully 
evaluate the capabilities of the federal SSPs and stated that they 
were not sure whether all aspects of their preliminary determination 
would hold true if more research were conducted and SSP capabilities 
had improved. 

[End of section] 

Appendix VI: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Kay L. Daly, (202) 512-9095 or dalykl@gao.gov: 

Naba Barkakati, (202) 512-2700 or barkakatin@gao.gov: 

Staff Acknowledgments: 

In addition to the contacts named above, individuals who made major 
contributions to this report were Chris Martin, Senior-Level 
Technologist; Michael LaForge, Assistant Director; Jehan Abdel-Gawad; 
Lauren Catchpole; Francine DelVecchio; F. Abe Dymond; Latasha Freeman; 
Wilfred Holloway; Jim Kernen; Theresa Patrizio; Carl Ramirez; Jerome 
Sandau; Pamela Valentine; and Carolyn Voltz. 

[End of section] 

Footnotes: 

[1] Under the Federal Financial Management Improvement Act of 1996, 
section 806(5), "financial system" includes an information system 
comprising one or more applications that is used to (1) collect, 
process, maintain, transmit, or report data about financial events; 
(2) support financial planning or budgeting activities; (3) accumulate 
and report cost information; or (4) support the preparation of 
financial statements. OMB Circular No. A-127, Financial Management 
Systems (Washington, D.C., Jan. 9, 2009) generally refers to financial 
systems as "core financial systems" and provides an additional 
description of their use and the functions they may perform, such as 
general ledger management, funds management, payment management, 
receivable management, and cost management. 

[2] According to OMB's FMLOB Migration Planning Guidance, hosting is 
defined as services that house, serve, and maintain files, software 
applications, and databases. Application management is defined as 
services to maintain, enhance, and manage all types of software 
applications, including maintenance, upgrades, and performance 
analysis. 

[3] OMB Circular No. A-127 states that if agencies cannot immediately 
migrate to an external provider (i.e., OMB-designated federal shared 
service providers and commercial vendors), they should take 
incremental steps by moving their hosting or application management 
support to a provider. Prior guidance contained in OMB's Competition 
Framework for FMLOB Migrations issued in May 2006 required agencies to 
consider, at a minimum, pursuing hosting and application management 
shared services. 

[4] GAO, Financial Management Systems: Additional Efforts Needed to 
Address Key Causes of Modernization Failures, [hyperlink, 
http://www.gao.gov/products/GAO-06-184] (Washington, D.C.: Mar. 15, 
2006). 

[5] The term financial management systems includes the financial 
systems and the financial portions of mixed systems necessary to 
support financial management, including automated and manual 
processes, procedures, controls, data, hardware, software, and support 
personnel dedicated to the operation and maintenance of system 
functions. 

[6] GAO, Financial Management Systems: OMB's Financial Management Line 
of Business Initiative Continues but Future Success Remains Uncertain, 
[hyperlink, http://www.gao.gov/products/GAO-09-328] (Washington, D.C.: 
May 7, 2009). 

[7] [hyperlink, http://www.gao.gov/products/GAO-06-184]. 

[8] OMB Memorandum M-10-26, Immediate Review of Financial Systems IT 
Projects (Washington, D.C., June 28, 2010). 

[9] CFOs were established under 31 U.S.C. § 901(b) for 24 specific 
agencies that are subject to the CFO Act, as amended: the Departments 
of Agriculture (USDA), Commerce, Defense (DOD), Education, Energy, 
Health and Human Services, Homeland Security, Housing and Urban 
Development, the Interior, Justice (DOJ), Labor, State, 
Transportation, the Treasury, and Veterans Affairs; Environmental 
Protection Agency; National Aeronautics and Space Administration; 
Agency for International Development; General Services Administration 
(GSA); National Science Foundation; Nuclear Regulatory Commission; 
Office of Personnel Management (OPM); Small Business Administration; 
and Social Security Administration. 

[10] Case study agencies were selected to provide a mix of large and 
small agencies using different software solutions and having different 
past experiences concerning the use of external providers to support 
their core financial systems. Case studies were performed at three CFO 
Act agencies (DOJ, USDA, and OPM) and one non-CFO Act agency (the 
Federal Communications Commission). 

[11] The Small Agency Council is a voluntary management association 
representing about 80 small agencies with generally fewer than 500 
employees. According to the council, its efforts are intended to help 
federal policy oversight agencies develop management policies 
affecting small agencies and exchange approaches for improving 
management and productivity in small agencies to strengthen their 
internal management practices. 

[12] The four OMB-designated federal SSPs are the Department of the 
Treasury's Bureau of Public Debt's Administrative Resource Center, the 
Department of the Interior's National Business Center, the Department 
of Transportation's Enterprise Services Center, and GSA's Federal 
Integrated Solutions Center. 

[13] Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990). 

[14] Pub. L. No. 104-208, div. A., § 101(f), title VIII, 110 Stat. 
3009, 3009-389 (Sept. 30, 1996). 

[15] 40 U.S.C. §§ 11101-11704. 

[16] See our audit report on the federal government's 2009 and 2008 
consolidated financial statements that was incorporated into the 2009 
Financial Report of the United States Government published by the 
Department of the Treasury (Feb. 26, 2010). For fiscal years 2009 and 
2008, auditors for 10 and 14 of the 24 CFO Act agencies, respectively, 
reported that the agencies' financial management systems did not 
substantially comply with one or more of the three FFMIA requirements. 

[17] OMB Memorandum, Update on the Financial Management Line of 
Business and the Financial Systems Integration Office (Washington, 
D.C., Dec. 16, 2005). 

[18] OMB Memorandum, Competition Framework for Financial Management 
Lines of Business Migrations (Washington, D.C., May 22, 2006). 

[19] OMB Circular No. A-127 prescribes policies and standards for 
executive departments and agencies to follow concerning their 
financial management systems. It also states that if agencies cannot 
migrate to a federal SSP or commercial provider immediately, then they 
should take incremental steps by moving their hosting or application 
management support to a provider. An agency is required to conduct 
public-private competitions (i.e., between federal SSPs and commercial 
vendors) in connection with its modernization efforts and may rely on 
its in-house operations if the agency demonstrates to OMB that its 
internal operations represent a best value and lower-risk alternative. 

[20] In December 2004, the Joint Financial Management Improvement 
Program (JFMIP) Principals voted to modify the roles and 
responsibilities of the JFMIP, resulting in the creation of FSIO. FSIO 
assumed responsibility for coordinating the work related to federal 
financial management systems requirements. 

[21] OMB Memorandum, Update on the Financial Systems Integration 
Office (Washington, D.C., Mar. 16, 2010). 

[22] OMB Memorandum M-10-26, Immediate Review of Financial Systems IT 
Projects. 

[23] [hyperlink, http://www.gao.gov/products/GAO-06-184]. 

[24] Table 1 includes the 23 civilian CFO Act agencies only. Because 
DOD officials did not provide comprehensive information concerning 
DOD's current core financial systems, we were unable to include DOD 
systems. 

[25] See appendix II for more information concerning DOD's survey 
responses. 

[26] An ERP system is an automated system using commercial off-the- 
shelf software and consisting of multiple, integrated functional 
modules that perform a variety of business-related tasks, such as 
accounts payable, general ledger accounting, and supply chain 
management. 

[27] LMP is an ERP system intended to transform the Army's logistics 
operations in six core processes: order fulfillment, demand and supply 
planning, procurement, asset management, materiel maintenance, and 
financial management. If effectively implemented, LMP is expected to 
provide the Army benefits associated with commercial best practices, 
such as inventory reduction, improved repair cycle time, and increased 
response time. Additionally, LMP is intended to improve supply and 
demand forecast planning and maintenance workload planning, and 
provide a single source of data for decision making. Through 2009, the 
Army has reportedly expended about $1.1 billion to implement LMP, and 
estimates a total life cycle cost in excess of $2.6 billion to procure 
and operate the system. When LMP is fully implemented, it is expected 
to include approximately 21,000 users at 104 locations worldwide, and 
it will be used to manage more than $40 billion worth of goods and 
services, such as inventory managed at the national level and repairs 
at depot facilities. 

[28] GAO, Defense Logistics: Actions Needed to Improve Implementation 
of the Army Logistics Modernization Program, [hyperlink, 
http://www.gao.gov/products/GAO-10-461] (Washington, D.C.: Apr. 30, 
2010). 

[29] Two agencies reported plans to migrate their IT hosting or 
application management support services supporting two current core 
financial systems but had not yet identified a specific external 
provider, in part, because they were still evaluating their needs and 
the services that providers offer. 

[30] OMB Memorandum, The Office of Financial Innovation and 
Transformation (Washington, D.C., Mar. 30, 2010). 

[31] Although exact definitions vary, cloud computing can, at a high 
level, be described as a form of computing where users have access to 
scalable, on-demand IT capabilities that are provided through Internet-
based technologies. 

[32] GAO, Information Security: Federal Guidance Needed to Address 
Control Issues with Implementing Cloud Computing, [hyperlink, 
http://www.gao.gov/products/GAO-10-513] (Washington, D.C.: May 27, 
2010). 

[33] Disciplined processes represent best practices in systems 
development, acquisition, and implementation efforts that have been 
shown to reduce the risks associated with software development and 
acquisition efforts to acceptable levels and are fundamental to 
successful system implementations. 

[34] According to OMB's FMLOB Migration Planning Guidance, a service- 
level agreement is a mutually binding agreement negotiated between a 
service provider and a customer that defines the specific level and 
quality of the operational and maintenance services that an external 
provider will provide to a customer agency and outlines penalties and 
incentives that may arise from not performing or exceeding the 
expected service levels. The inclusion of appropriate and clearly 
defined performance measures and metrics in service-level agreements 
is important for ensuring the usefulness of this tool. See app. IV for 
additional information on selected metrics used to monitor and measure 
the performance of selected external providers in connection with the 
FMLOB services they provide. 

[35] In 2002, OMB identified 25 initiatives related, in part, to 
eliminating redundant, nonintegrated business operations and systems 
covering a wide spectrum of government, including the E-Payroll 
initiative, which involved the migration of payroll functions 
performed across 26 federal agencies to four payroll providers 
selected to furnish payroll services for the executive branch. 

[36] According to HRLOB migration guidance, the vision of the HRLOB 
initiative is to provide governmentwide, modern, cost-effective, 
standardized and interoperable human resource solutions providing 
common core functionality to support the strategic management of human 
capital and addressing duplicative and redundant human resources 
systems and processes across the federal government. The HRLOB 
governance structure establishes the oversight and development of 
common solution(s) for the transformation of the federal government to 
a standardized solution or set of solutions whereby customer agencies 
will have the option to choose from a public or private shared service 
center for their human resources functions and to facilitate a 
seamless integration of human resources solutions. According to OMB, 
the E-Payroll initiative benefits agencies by permitting them to focus 
on mission-related activities rather than on administrative payroll 
functions and helps to reduce payroll processing costs through 
economies of scale, avoiding the cost of duplicative capital system 
modernization activities, standardizing and consolidating 
governmentwide federal civilian payroll services and processes by 
simplifying and standardizing related policies and procedures and 
improving integration of payroll, human resources, and finance 
functions. 

[37] According to OMB Memorandum, Competition Framework for Human 
Resources Management Line of Business Migrations (Washington, D.C., 
May 18, 2007), agency HRLOB migrations shall result in the selection 
of an approved public or private sector shared service center with a 
demonstrated ability to leverage technology, expertise and other 
resources to achieve best value for the taxpayer. According to HRLOB 
Migration Planning Guidance, a panel composed of representatives from 
the HRLOB Multi-Agency Executive Strategy Committee reviewed and 
qualified the current shared service centers consisting of five public 
and four private sector shared service centers. In addition, OMB 
Memorandum, Consolidating and Standardizing Federal Civilian Payroll 
Processing (Washington, D.C., Jan. 10, 2003) provided E-Payroll 
migration guidance requiring executive branch agencies to migrate to 
two payroll processing partnerships (one partnership consisting of the 
Defense Finance and Accounting Service and GSA and the other 
consisting of USDA's National Finance Center and the Department of the 
Interior's National Business Center). 

[38] OMB, Fiscal Year 2010 Report to Congress on the Benefits of the E-
Government Initiatives (Washington, D.C., January 2010). According to 
OPM, the final agency migration scheduled under the E-Payroll 
initiative was completed in September 2009. 

[39] OMB Memorandum, The Office of Financial Innovation and 
Transformation. 

[40] OMB Memorandum M-10-26, Immediate Review of Financial Systems IT 
Projects. 

[41] According to OMB, CFO Act agencies are required to halt (1) all 
financial system modernization projects with $20 million or more in 
planned spending on development or modernization expenses and (2) the 
issuance of new task orders for projects identified as high risk by 
OMB. According to OMB, such projects include those involving the 
deployment of core financial systems and noncore financial systems 
deployed in conjunction with other business systems. 

[42] OMB may employ flexibility regarding funds control for projects 
that have a proven track record of achieving specific milestones 
within well-defined segments. 

[43] OMB Memorandum, Update on the Financial Systems Integration 
Office. 

[44] See Institute of Electrical and Electronic Engineers Std. 1362- 
1998. The institute is a nonprofit, technical professional association 
that develops standards for a broad range of global industries, 
including the IT and information assurance industries and is a leading 
source for defining best practices. 

[45] [hyperlink, http://www.gao.gov/products/GAO-06-184] and 
[hyperlink, http://www.gao.gov/products/GAO-09-328]. 

[46] GAO, Financial Management Systems: Lack of Disciplined Processes 
Puts Implementation of HHS' Financial System at Risk, [hyperlink, 
http://www.gao.gov/products/GAO-04-1008] (Washington, D.C.: Sept. 23, 
2004). 

[47] According to 40 U.S.C. § 11315(a), an IT architecture is an 
integrated framework for evolving or maintaining existing, and 
acquiring new, IT to achieve the agency's strategic and information 
resources management goals. 

[48] [hyperlink, http://www.gao.gov/products/GAO-06-184]. 

[49] The Impoundment Control Act of 1974, 2 U.S.C. ch. 17B, prescribes 
the authorized purposes and procedures to be followed for impoundments 
of budget authority. An impoundment is any action or inaction by an 
officer or employee of the federal government that precludes 
obligation or expenditure of budget authority. 

[50] GAO, Impoundments Resulting from the President's Proposed 
Rescissions of October 28, 2005, B-307122 (Washington, D.C.: Mar. 2, 
2006). 

[51] [hyperlink, http://www.gao.gov/products/GAO-06-184]. 

[52] According to the Results Act, performance goals associated with 
strategic plans should be expressed in an objective, quantifiable, and 
measurable form or, if not feasible, described with sufficient 
precision and in such terms that would allow for an accurate, 
independent determination of performance that meets the described 
criteria. 

[53] GAO, Managing for Results: Critical Issues for Improving Federal 
Agencies' Strategic Plans, [hyperlink, 
http://www.gao.gov/products/GAO/GGD-97-180] (Washington, D.C.: Sept. 
16, 1997). 

[54] GAO, Government Performance: Strategies for Building a Results- 
Oriented and Collaborative Culture in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO-09-1011T] (Washington, 
D.C.: Sept. 24, 2009). 

[55] Specifically, agencies were asked to complete separate 
questionnaires for each core financial system. However, agencies with 
more than 10 systems were asked to only complete questionnaires on the 
10 systems they considered to be their most significant, along with 
the rationale they used to determine their relative significance. 

[56] This includes one agency, the Department of Defense (DOD), that 
returned questionnaires on one currently deployed system and 6 planned 
systems. Upon inquiry, DOD officials could not provide sufficient 
information concerning the number of DOD's current or planned core 
financial systems, but stated that DOD has over 100 current core 
financial systems. However, based on other recent work performed 
related to DOD enterprise resource planning systems, we determined 
that the inclusion of the 7 systems identified provides useful, 
relevant data concerning significant core financial system 
modernization projects. 

[57] Additional information concerning the results of work performed 
at case study agencies can be found in appendix III. 

[58] For the selected case study agencies, OPM was the only CFO Act 
agency that had attempted to migrate to an external provider. USDA and 
DOJ do not plan to migrate because they have decided to continue using 
existing in-house resources. FCC previously utilized a federal shared 
service provider and was in the process of migrating to a commercial 
provider. 

[59] Department of the Treasury, 2008 Financial Report of the United 
States Government (Washington, D.C., Dec. 15, 2008). Agencies selected 
for case studies were selected from among those with gross costs, as 
reported, in three strata: gross costs of $100 billion or more (USDA), 
less than $100 billion but more than $10 billion (DOJ and OPM), and 
$10 billion or less (FCC). 

[60] The Small Agency Council Finance Committee consists of financial 
management officials from small, independent federal agencies that 
meet to discuss and address specific items of interest to the 
community and coordinate the activities of the agencies of its 
members, including those related to consolidation and modernization of 
financial systems; improving quality of financial information, 
financial data and information standards; internal controls; 
legislation affecting financial operations and organizations; and 
other financial management matters. 

[61] The CFO Council was established by section 302 of the CFO Act to 
advise and coordinate the activities of the agencies of its members on 
such matters as consolidation and modernization of financial systems, 
improved quality of financial information, financial data and 
information standards, internal controls, legislation affecting 
financial operations and organizations, and any other financial 
management matters. See 31 U.S.C. § 901 note. 

[62] OMB Memorandum, Update on the Financial Systems Integration 
Office and OMB Memorandum, The Office of Financial Innovation and 
Transformation. 

[63] OMB Memorandum M-10-26, Immediate Review of Financial Systems IT 
Projects. 

[64] 40 U.S.C. §§ 11101-11704. 

[65] Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990). 

[66] Pub. L. No. 104-208, div. A., § 101(f), title VIII, 110 Stat. 
3009, 3009-389 (Sept. 30, 1996). 

[67] OMB Circular No. A-127, Financial Management Systems (Washington, 
D.C., Jan. 9, 2009). 

[68] OMB Circular No. A-130, Management of Federal Information 
Resources (Washington, D.C., Nov. 28, 2000). 

[69] According to OMB Circular No. A-127, a core financial system is 
an information system that may perform all financial functions 
including general ledger management, funds management, payment 
management, receivable management, and cost management. The core 
financial system is the system of record that maintains all 
transactions resulting from financial events and is specifically used 
for collecting, processing, maintaining, transmitting, and reporting 
data regarding financial events. Other uses include supporting 
financial planning and budgeting activities, and preparing financial 
statements. 

[70] According to OMB Circular No. A-127, an external provider is an 
OMB-designated federal SSP or a commercial vendor. Currently, there 
are four federal SSPs: the Department of the Interior's National 
Business Center, the General Services Administration's Federal 
Integrated Solutions Center, the Department of the Treasury's Bureau 
of the Public Debt's Administrative Resource Center, and the 
Department of Transportation's Enterprise Services Center. 

[71] Although OMB Circular No. A-127 does not require agencies to 
migrate core financial system transaction processing activities, 
external providers offer this service to agencies, along with IT 
hosting and application management services. 

[72] According to federal SSP officials, an instance is a uniquely 
configured and separate installation of a software application. 

[73] Financial Systems Integration Office, Financial Management 
Systems Standard Business Processes for U.S. Government Agencies 
(Washington, D.C., July 18, 2008). This document presents 
governmentwide common processes and activities, standard business 
rules, and data exchanges for core financial business processes. 

[74] Financial Systems Integration Office, Financial Management 
Systems Standard Business Processes for U.S. Government Agencies. This 
document presents governmentwide common processes and activities, 
standard business rules, and data exchanges for core financial 
business processes. It contains detailed descriptions of the funds, 
payment, receivables, reimbursables, and reports management processes. 

[75] Specifically, auditors continue to report that the government is 
unable to reconcile differences between intragovernmental transactions 
reported by purchasing and selling agencies and cited different 
formatting of transaction data reported by the purchasing and selling 
agencies as a significant contributor to intragovernmental transaction 
differences. 

[76] In March 2010, the Department of the Treasury announced an 
initiative to create a central utility for intragovernmental 
transactions and implement business processes that would require 
authorization from both parties (receipt and acceptance) to the 
transaction prior to the settlement/payment transaction. 

[77] Franchise funds and working capital funds are types of 
intragovernmental revolving funds that operate as government-run, self-
supporting businesslike enterprises to provide a variety of common 
administrative services (e.g., information technology support and 
transaction processing) to other federal agencies on a fee-for-service 
basis. These funds are required to recover the full costs of providing 
services from the agencies they serve and often operate on a break-
even basis over time. 

[End of section] 

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