70 percent of agencies expected to replace core management systems in coming years
The federal government, which is hoping commercial software will help improve its muddled bookkeeping, announced new standards last week that vendors must follow when selling financial management systems to agencies.
The Core Financial System Requirements document, the first revision to the standards in three years, forms the centerpiece of an ongoing governmentwide effort to improve federal financial management systems by enabling agencies to use commercial software rather than more expensive customized packages.
For years, agencies have been taken to task by their inspectors general, the General Accounting Office and Congress for their sloppy accounting practices. In March, Rep. Stephen Horn (R-Calif.) gave agencies a C-minus grade overall for financial management.
The requirements, published by the Joint Financial Management Improvement Program (JFMIP), are particularly important now because they come as many federal agencies face transitioning to new financial systems, said Angela Carrington, a partner with PricewaterhouseCoopers' Washington, D.C., consulting division.
About 70 percent of agencies are expected to purchase new core financial management systems in the coming years, Carrington said. Many agencies will be moving from customized systems with many stand-alone applications, to the new, more integrated commercial systems, which are expected to help agencies do a better job of tracking financial data.
In addition to setting standards for federal financial systems, the requirements serve as the basis of the JFMIP tests of commercial financial management packages. JFMIP must certify financial packages before vendors can pitch them to federal agencies.
JFMIP assumed responsibility for testing financial management systems in 1999, certifying products for three years, so most of those certifications will expire Sept. 30, 2002. JFMIP officials wanted to establish the requirements in time to give vendors a chance to respond and get certified under the new set of requirements.
JFMIP is a policy group that includes GAO, the Office of Management and Budget, the Office of Personnel Management and the Treasury Department.
Karen Cleary Alderman, JFMIP's executive director, said the new document, which is about 100 pages long, makes changes by clarifying existing requirements, deleting outdated requirements and incorporating new requirements.
These changes are only minor revisions to the draft version of the document, which was published this summer, Alderman said. Many of those changes are somewhat technical — for example, requiring that systems be able to revise accounts as changes occur during transactions.
The JFMIP requirements have helped agencies by creating a marketplace for financial systems, said David Kleinberg, a former Transportation Department chief financial officer who is now a consultant.
By setting federal standards, government vendors are forced to focus on agencies' particular requirements, he said. "There is a huge amount of detailed tracking that they don't have to do in the private sector," he noted.
Each time JFMIP adds to the financial standards requirements, however, it creates new barriers for vendors that may want to enter the federal market, Kleinberg said. Additional requirements may increase standardization across the government, but they also narrow competition because vendors must spend additional money to meet the federal requirements.
But Kleinberg also said that the process has been working very well. The JFMIP requirements have forced commercial financial systems to improve — thereby helping agencies, most of which buy a new financial system once every 20 years.
Alderman said that JFMIP received nearly 800 comments on the draft document. "A lot of the comments were 'What do you mean by this and that?' " Alderman said. "Those comments are appreciated, and it is an indication that people are paying attention to the requirements."
The full document is available on JFMIP's Web site at www.jfmip.gov. JFMIP Core Financial System RequirementsThe governmentwide group also plans to hold a forum in early January to provide more information about the new core financial system requirements.
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