This is the accessible text file for GAO report number GAO-03-903R entitled 'Financial Management Systems: Core Financial Systems at the 24 Chief Financial Officers Act Agencies' which was released on June 27, 2003. This text file was formatted by the U.S. General Accounting Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. June 27, 2003: The Honorable Todd R. Platts Chairman, Subcommittee on Government Efficiency and Financial Management Committee on Government Reform House of Representatives: Subject: Financial Management Systems: Core Financial Systems at the 24 Chief Financial Officers Act Agencies: Dear Mr. Chairman: On April 8, 2003, we testified before your Subcommittee on the fiscal year 2002 consolidated financial statements of the U.S. government.[Footnote 1] In that testimony, we provided our perspectives on major issues relating to the U.S. government's consolidated financial statements for fiscal years 2001 and 2002, including impediments to rendering an audit opinion on consolidated financial statements. As a result of issues raised in our testimony about the preparation of the consolidated financial statements and the adequacy of financial management systems and controls at the 24 Chief Financial Officers (CFO) Act[Footnote 2] agencies, you and other subcommittee members asked a number of questions about issues surrounding the consolidated financial statements. On June 16, 2003,[Footnote 3] we responded to all but your question related to the status of financial management systems modernization agency by agency. As agreed with your office, the objectives of this letter, which address the remaining question, are to identify the core financial systems used at each of the CFO Act agencies as of September 30, 2002, and the status of any agency plans to update core financial systems. To do so, we used publicly available information and confirmed this information with the CFO Act agencies, but we did not validate or verify the information obtained or provided. Further details on our scope and methodology are provided on page 7. Core Financial Systems: Core financial systems,[Footnote 4] as defined by the Joint Financial Management Improvement Program (JFMIP),[Footnote 5] include managing general ledger, funding, payments, receivables, and certain basic cost functions. The core financial systems receive data from other financial and feeder systems, such as acquisition, grant, and personnel systems, as well as from direct user input, and provide data for financial performance measurement and analysis and for financial statement preparation. Enclosures I and II present detailed information on agencies' core financial systems including the software being used as of September 30, 2002, when the core financial systems were implemented, which agencies are planning to acquire new systems, and the target date for implementation of any new systems. Enclosure I includes 20 CFO Act agencies that reported they generally have in place a single core financial system for the agency and its subcomponent agencies and bureaus. In certain cases, more than one core financial system was used by the agencies. Enclosure II provides information on 4 agencies, the Departments of Defense (DOD), Justice (DOJ), the Treasury, and Health and Human Services (HHS), that reported having multiple core financial systems. Each of these 4 CFO Act agencies has 5 or more subcomponent agencies, which maintain separate core financial systems. However, the systems included in enclosures I and II may not include all of the JFMIP-defined functions of a core financial system. The following summary characteristics highlight key data included in enclosures I and II about the 24 CFO Act agencies' current and planned core financial systems as of September 30, 2002. Core Financial Systems Software: The 24 CFO Act agencies used a variety of core financial systems software. Ten agencies used only commercial-off-the-shelf (COTS) software packages as their core financial systems. * Two agencies, the Department of Education, and the Small Business Administration (SBA), exclusively used Oracle U.S. Federal Financials software. * One agency, the Office of Personnel Management (OPM), exclusively used American Management Systems (AMS) Momentum software package. * Four agencies, the Departments of Housing and Urban Development (HUD) and Veterans Affairs (VA), the Nuclear Regulatory Commission (NRC), and the Environmental Protection Agency (EPA), exclusively used AMS's Federal Financial System software package. * Three agencies, the Department of Labor (DOL), the Federal Emergency Management Agency (FEMA), and the Social Security Administration (SSA), exclusively used other COTS packages. * Three agencies, the Department of Energy (DOE), National Science Foundation (NSF), and the National Aeronautics and Space Administration (NASA), exclusively used custom software. * Six agencies used a mix of 2 systems: * Five agencies had partially implemented a new system in a number of their respective bureaus as of September 30, 2002. These agencies were the Agency for International Development (AID); Departments of Transportation (DOT), State, and Agriculture (USDA); and the General Services Administration (GSA). * One agency, the Department of the Interior (DOI), used both a custom and a COTS software product. * Five agencies used a variety of core financial systems. * DOD reported 100 core financial systems[Footnote 6] in use in its subcomponent agencies and bureaus of its total systems inventory of 2,114 systems. * DOJ's subcomponent agencies used multiple core financial systems, ranging from custom-built software, to some of the more common software packages, such as those from AMS and SAP. * HHS's main subcomponent agencies used either the Arthur Young Federal Success software package or custom software. * Treasury's subcomponent agencies and bureaus used a variety of COTS packages, including AMS's Federal Financial System and Momentum products, SAP, and Peoplesoft Financials. One agency, the Bureau of the Public Debt (BPD), cross-serviced several other agencies within Treasury as well. * The Department of Commerce's (DOC) major subcomponent agencies used RELTEK's Federal Financial Management System--a modified COTS product. DOC's other agencies used either custom software or COTS products. Age of the Core Financial Systems: The age of the core financial systems ranged from systems implemented in fiscal year 2002 to those implemented more than 30 years ago. * Five agencies--Education, NRC, SBA, OPM, and NSF--have fully implemented new core financial systems since the beginning of fiscal year 2001. * Four agencies--FEMA, HUD, SSA, and VA--have systems implemented from 2 to 10 years ago. * Six agencies--DOC, AID, State, USDA, GSA, and DOT--were using both legacy systems and new core financial systems implemented in parts of the agencies as of September 30, 2002. For example, GSA used both a custom system originally implemented in 1974 and AMS Momentum that it was in the process of implementing as of September 30, 2002. * Five agencies--NASA, DOE, DOI, DOL, and EPA--have systems that were implemented more than 10 years ago. * Four agencies--DOD, DOJ, HHS, and Treasury--used multiple core financial systems that were implemented from the 1960s through 2001. For example, DOD has some core financial systems that were originally implemented in the 1960s and 1970s. Software Selection Plans: Seventeen agencies[Footnote 7] were planning to or were in the process of implementing new core financial systems as of September 30, 2002. * Of this total, 11 have selected the software product they plan to use: * 3 have selected AMS Momentum (AID, GSA, and State), * 5 have selected Oracle U.S. Federal Financials (DOE, DOT, VA, HHS, and SSA), * 1 has selected RELTEK Federal Financial Management System (DOC), * 1 has selected SAP (NASA), and: * 1 has selected AMS Federal Financial System (USDA). * The remaining 6 agencies have not reached the software selection phase of their acquisition process (DOD, DOI, DOJ, DOL, EPA, and HUD). * In DOD's case, a complete business systems[Footnote 8] modernization project[Footnote 9] is under way that proposes to revamp and integrate the systems used in DOD entities as part of a DOD-wide transformation. * DOJ plans to award a contract for the acquisition of a core software package in July 2003. Target Implementation Dates: Target implementation dates for the 17 agencies planning to implement new core financial systems generally ranged from fiscal year 2003 to fiscal year 2008, though one agency had not yet selected a target implementation date. * Three agencies plan to complete or have completed implementation in fiscal year 2003 (USDA, GSA, and NASA). * Three agencies plan to complete their implementations in fiscal year 2004 (SSA, DOC, and DOT). * Ten agencies have established target implementation dates ranging from 2 to 6 years in the future (AID, DOJ, DOL, HHS, EPA, HUD, VA, DOI, State, and DOE). * One agency has not yet determined its target date for full implementation (DOD). Life Cycle Phase: These 17 agencies were in different phases[Footnote 10] of the process to implement a new core financial system as of September 30, 2002. * Five agencies--HUD[Footnote 11], DOI, DOL, DOD, and EPA--were in the business modeling and requirements phase. * One agency--DOJ--was in the analysis and design phase. * Three agencies were in the development phase: State which plans to implement an agencywide COTS product, DOE, which plans to implement a COTS-based product in October 2004, and VA, whose strategy includes a phased-in approach beginning in October 2003. * Two agencies were in the testing phase: AID, which plans to implement the COTS software currently used domestically in its overseas regional offices, and HHS, which is using a phased rollout strategy with its subcomponent agencies. * Six agencies--USDA, DOC, SSA, DOT, GSA, and NASA--were in the deployment phase as of September 30, 2002. To identify and compile the status of CFO Act agencies' core financial systems, we reviewed publicly available information, including fiscal year 2002 performance and accountability reports for the CFO Act agencies, related reports by those agencies' Inspectors General (IG), as well as any reports that we issued on this matter. We reviewed other publicly available information, including agency, Office of Management and Budget (OMB), and JFMIP Web sites to identify information on current core financial systems and planned implementations. We also reviewed related OMB circulars, including A-127,[Footnote 12] and JFMIP systems requirements for core financial systems and its Framework for Federal Financial Management Systems.[Footnote 13] We shared the information we gathered on agencies' current and planned systems with the agencies and obtained confirmations, corrections, or additional facts, but we did not independently validate or verify the information obtained or provided. We conducted our work from April to June 2003 in Washington, D.C. We are sending copies of this letter to the Ranking Minority Member, Subcommittee on Government Efficiency and Financial Management, House Committee on Government Reform and the Chairman and Ranking Minority Member, Subcommittee on Financial Management, the Budget and International Security, Senate Committee on Governmental Affairs. Copies will be made available to others upon request. This letter will also be available at no charge on the GAO Web site at http:// www.gao.gov. If you have any questions about this letter, please contact me at (202) 512-9450 or thompsons@gao.gov or Kay Daly at (202) 512-9312 or dalykl@gao.gov. Key contributors to this letter were Adrien Atwood and Debra David. We look forward to working with you and your staff on related financial management systems issues. Sincerely yours, Sally E. Thompson Director, Financial Management and Assurance: Signed by Sally E. Thompson: Enclosures I and II: Enclosure I: Current and Planned Core Financial Systems at 20 CFO Act Agencies: [See PDF for image] Legend COTS - Commercial-off-the-shelf NA - Not applicable NR - No response Source: GAO compiled. [A] To help categorize the current status of agencies' systems implementation, we used the following system development life cycle phases: (1) Business modeling and requirements includes developing complete systems requirements, establishing the "as is" model of the business processes, and meeting with stakeholders. (2) Analysis and design addresses transforming the systems requirements into a design of the "to be" system. This phase would also include evaluation of vendor proposals and vendor selection. (3) Development involves the development and modification of the system software. (4) Testing covers verifying that all requirements have been correctly developed and tested and ensuring all identified defects have been documented and corrected. (5) Deployment includes training end users, converting data, putting the software into service, verifying that all requirements have been correctly implemented, and planning for the operations and support phase of software components. (6) Operations and support involves the monitoring of product integrity and ensuring the ongoing completeness and correctness of the system. [B] AID and the State Department have agreed to integrate their separate Momentum applications into one application with two databases with full implementation expected in October 2005 following deployment of Phoenix to AID's overseas offices. [C] The agencies and bureaus of the Department of Commerce, which had not implemented CAMS as of September 30, 2002, used other core financial systems, including custom systems (implemented in the 1980s), AMS Momentum (implemented in 2002) and cross-servicing with the Department of the Interior. [D] Three Commerce bureaus will not implement CAMS, including the U.S. Patent and Trademark Office, the International Trade Administration, and the National Technical Information Service. [E] According to GSA, all enhancements to the product were added to the baseline product by the vendor. [F] Peoplesoft general ledger module implemented at FHA in October 2002. [G] NASA has 9 centers, its headquarters offices and the Jet Propulsion Laboratory, each of which had its own custom-built financial systems until each center's conversion to the new core financial system in FY 2003. [H] See U.S. General Accounting Office, Business Modernization: Improvements Needed in Management of NASA's Integrated Financial Management Program, GAO-03-507 (Washington, D.C.: Apr. 30, 2003). [I] NRC's service provider for FFS is the Department of the Interior's National Business Center. [J] This agency will adopt the Department of the Interior's personnel/ payroll services in FY 2004. [K] The solicitation for the software purchase was released in June 2001. lCFMS accounts for State's domestic financial activity, while RFMS is for overseas activity. mState uses a custom disbursement module in its regional financial management system. [End of table] [End of section] Enclosure II: Current and Planned Core Financial Systems at 4 CFO Act Agencies: [See PDF for image] Legend COTS - Commercial-off-the-shelf NA - Not applicable NR - No response: Source: GAO compiled. [A] To help categorize the current status of agencies' systems implementation, we used the following system development lifecycle phases: (1) Business modeling and requirements includes developing complete systems requirements, establishing the "as-is" model of the business processes and meeting with stakeholders. (2) Analysis and design addresses transforming the systems requirements into a design of the "to-be" system. This phase would also include evaluation of vendor proposals and vendor selection. (3) Development involves the development and modification of the system software. (4) Testing covers verifying that all requirements have been correctly developed and tested and ensuring all identified defects have been documented and corrected. (5) Deployment includes training end users, converting data, putting the software into service, verifying that all requirements have been correctly implemented and planning for the operations and support phase of software components. (6) Operations and support involves the monitoring of product integrity and ensuring the ongoing completeness and correctness of system. [B] DOD is still reviewing and analyzing its systems inventory as part of its business systems modernization and therefore, this list may or may not be complete. This list was compiled from DOD's "As Is Systems Inventory" as of October 31, 2002. [C] Department of Justice: BOP: Bureau of Prisons, OJP: Office of Justice Programs, INS: Immigration and Naturalization Service, FPI: Federal Prisons Industries, Inc, DEA: Drug Enforcement Agency, FBI: Federal Bureau of Investigation, OBDs: Offices, Boards and Divisions, USMS: United States Marshals Service. [D] Department of Health and Human Services: PSC: Program Support Center, FDA: Food and Drug Administration, CDC: Centers for Disease Control and Prevention, NIH: National Institutes of Health, CMS: Centers for Medicare and Medicaid Services. [E] Department of Treasury: BPD: Bureau of the Public Debt, ATF: Alcohol, Tobacco and Firearms, BEP: Bureau of Engraving and Printing, USCS: United States Customs Service, DO: Departmental Offices, FinCEN: Financial Crimes Enforcement Network, IRS: Internal Revenue Service, FMS: Financial Management Service, OTS: Office of Thrift Supervision, USSS: United States Secret Service. Treasury's other bureaus, not included above, used a variety of COTS packages. [F] Although Treasury does not have an agencywide core financial system, it does utilize automated tools and a central data warehouse for analysis and reporting. [End of table] [End of section] (198191): FOOTNOTES [1] U.S. General Accounting Office, Fiscal Year 2002 U.S. Government Financial Statements: Sustained Leadership and Oversight Needed for Effective Implementation of Financial Management Reform, GAO-03-572T (Washington, D.C.: Apr. 8, 2003). [2] Pub. L. No. 101-576, 104 Stat. 2838 (1990). The Federal Emergency Management Agency (FEMA), one of the 24 CFO Act agencies, was transferred to the new Department of Homeland Security (DHS) effective March 1, 2003. With this transfer, FEMA will no longer be required to prepare and have audited stand-alone financial statements under the CFO Act. DHS, along with most other executive branch agencies, will be required to prepare and have audited financial statements under the Accountability of Tax Dollars Act of 2002, Pub. L. No. 107-289, 116 Stat. 2049 (Nov. 7, 2002). We did not include DHS in our review because of its unique status as a new agency as of March 1, 2003. We included FEMA in our review since FEMA was a CFO Act agency as of September 30, 2002, and because information on FEMA's core financial system will be useful as it is incorporated into DHS. [3] U.S. General Accounting Office, Responses to Posthearing Questions Related to GAO's Testimony on the U.S. Government's Consolidated Financial Statements for Fiscal Year 2002, GAO-03-848R (Washington, D.C.: June 16, 2003). [4] Joint Financial Management Improvement Program (JFMIP), Core Financial Systems Requirements, SR-02-01 (Washington, D.C.: November 2001). [5] JFMIP is a joint and cooperative undertaking of the Office of Management and Budget, the Department of the Treasury, the Office of Personnel Management, and GAO, working with federal agencies to improve financial management practices throughout the government. [6] This list was compiled from DOD's "As Is Systems Inventory" as of October 31, 2002. [7] Treasury is among the agencies not planning to implement an agencywide core financial system. However, several of its subcomponent agencies are in the process of implementing core financial system software packages, including the Internal Revenue Service and the Office of the Comptroller of the Currency. [8] Business systems include those that are used to support civilian personnel, finance, health, logistics, military personnel, procurement, and transportation. [9] See U.S. General Accounting Office, DOD Financial Management: Important Steps Underway But Reform Will Require a Long-term Commitment, GAO-02-784T (Washington, D.C.: June 4, 2002); DOD Business Systems Modernization: Continued Investment in Key Accounting Systems Needs to be Justified, GAO-03-465 (Washington, D.C.: Mar. 28, 2003); DOD Business Systems Modernization: Longstanding Management and Oversight Weaknesses Continue to Put Investments at Risk, GAO-03-553T (Washington, D.C.: Mar. 31, 2003). [10] See definition of life cycle phases in endnote 'a' of enclosure I. [11] According to HUD, this phase will begin in July 2003. [12] OMB Circular A-127, Financial Management Systems, as revised by Transmittal Memorandum No. 2, June 10, 1999. [13] JFMIP, Framework for Federal Financial Management Systems, FFMSR- 0 (Washington, D.C.: January 1995).