CIOs want the power of the purse

Most federal CIOs do not decide how to spend their IT budgets

When Robert McFarland became the Department of Veterans Affairs' chief information officer, he asked, "Where's the budget?" The response was one of the biggest surprises of his professional life.

Contrary to what the former Dell executive had experienced in the private sector, the VA's CIO had no control over the VA's $1.2 billion information technology budget. Spending was decentralized, and no one was watching the entire picture to monitor how efficiently the IT department made investments.

"When it's been distributed in the past, it has been harder to track," McFarland said. "It was difficult to account for what you spend and what you've been authorized to spend."

All that changed last fall when VA Secretary James Nicholson decided to centralize budget authority at the CIO's office. At the same time, Congress approved a measure to put the power of the purse in McFarland's hands, and President Bush signed it into law.

"The department has annually spent billions of dollars without accountability or measurable performance outcomes on IT modernization," said Rep. Steve Buyer (R-Ind.), chairman of the House Veterans Affairs' Committee and the measure's sponsor.

The Clinger-Cohen Act of 1996 established a CIO office at every federal agency but didn't include a specific provision for who controls the money. The reason was simple, according to sources who helped draft the legislation. Federal chief financial officers opposed giving the spending power to CIOs. This impasse has weakened the office at many federal agencies.

"Congress would have loved to add more authorities -- including budget authority -- for the CIOs," said Drew Crockett, deputy communications director for the Government Reform Committee. "However, since Clinger-Cohen was such a huge burden to pass, members at the time never thought they could get more. Budget authority for CIOs has been discussed on and off for years, and we continue to explore ways to expand the CIO function."

Although some federal agencies provide spending controls at the CIO level, many do not. This hodgepodge of policies has created a variety of difficulties for CIOs.

"Of course, it helps to have budget authority," wrote Vance Hitch, the Justice Department's CIO, in an e-mail. "It is an important factor in impacting IT initiatives. It allows you to have more direct influence and control over the success of the initiatives."

Nevertheless, Hitch does not have control over the entire Justice IT budget, although his influence has grown substantially. He makes departmentwide IT recommendations for the budget.

Justice has many components and bureaus. "While I have oversight responsibility for all IT initiatives, many of our systems apply to just one component," he said. "And thus much of the IT expenditures take place in the components or component-specific projects."

Like other federal agencies, Justice is adopting more enterprise solutions to save money, Hitch said. He directly controls a greater proportion of the department's IT budget.

But budget authority is not always the way to go, said Dan Matthews, a former Transportation Department CIO. "I know a couple of CIOs have authority," he wrote in an e-mail message before his resignation. "But I cannot say that I know how they are executing it. I am not seeking authority, though some in DOT think I should ask for it."

However, Matthews said, he had plenty of insight into departmentwide IT investments. Although the CIO could make recommendations for investments, the operating agency had final authority over the requests.

"As the budget moves through the process at DOT, the CIO works closely with the CFO in formulating the final overall budget recommendation to the secretary," Matthews added. "This process has worked over the past three years, and the CIO [office] is seeking no change during the current budget process."

Patrick Pizzella, the Labor Department's CIO, is on the other side of the spectrum. He has budget authority partly because he is also the department's assistant secretary for administration and budget. By wearing those two hats, budget policies and responsibilities rest with him.

The power of the purse also gives Pizzella a better perspective of what's happening at the department. "It allows me to see the IT spending issues very early on and allows me to preallocate resources as appropriate," he said.

In one innovation, Pizzella takes IT investments that span different Labor divisions and puts them in one pot. If some projects are making better progress than others, it allows him to reallocate the money.

That flexibility has "been a way to focus spending because the department's IT budget of $400 million has been flat for the last five years," Pizzella said. "It certainly has been very helpful for me and it has contributed to the department's overall success in e-government."

CIOs have budget authority over their offices and many have authority over enterprise infrastructure, which includes telecommunications and desktop computers. But CIOs should not get into the business of overseeing program-related IT, said Joseph Leo, the Agriculture Department's former CIO.

"Beware what you ask for because many CIOs will be left out and hung to dry the minute a program manager's office doesn't function the way they are supposed to," Leo said.

When Alan Balutis became the Commerce Department's CIO, he was also the director of management and budget. "I went through four years of having the full budget formulation and execution authorities as well as being the CIO. It was wonderful," Balutis said.

But in many departments, the CIO does not have budget authority because of an agency's culture, history and organization. "I feel very strongly that it is a key arrow in the CIO's quiver to have responsibility for that," said Balutis, now president and chief executive officer of government strategies at Input, a market research firm. "Budget authority gives you the carrot and stick. It gives you a mechanism to be involved in all key aspects of the process not just the investment."

McFarland said his new authority will allow him to track money that goes through more than 2,000 VA facilities and spend it better. "If I can understand and better manage, I can turn that money back into health care and better services for vets," he said.

Buck stops at CIOs, but not dollars

Chief information officers in the federal government are responsible for their budgets, regardless of whether they have the power to decide how much to spend and where to spend it.

But current and former CIOs say governance works better if they are in charge of the bank account than if they have to get approval from others. At the end of the day, the buck stops with them.

In government, there are two types of budget authorities, according to Jim Flyzik, former CIO at the Treasury Department. One involves the statutory authority that gives CIOs the ability to sign off on spending.

The other is an informal authority by which agency executives make it clear to their offices that the CIO must approve all information technology programs. In that case, the CIO has the power and influence to control IT spending, Flyzik said.

"If you are going to hold CIOs responsible and accountable, then you have to make them a party to decisions," Flyzik said.

Norman Lorentz, the first chief technology officer at the Office of Management and Budget and now senior vice president and CTO at Blueprint Technologies, said power over spending should be held in partnership with the mission owner, which is the department's secretary, and the chief financial and information officers.

"It is important that the CIO has control of IT in a partnership," Lorentz said.

Although many models exist for how financial controls should work, Lorentz said the government should strive for consistency in how it manages IT.

Alongside governance issues, budget concerns will most likely affect CIOs in 2006. Whether they have budget authority or not, CIOs will have to make the dollars work.

When the FBI created its CIO office in 2004, CIO Zalmai Azmi started consolidating contracts. That decision saved more than $12 million a year. Now Azmi has the power of the purse and is restructuring the FBI's IT operations to yield even more savings.

One thing is certain, however, according to Drew Ladner, another former Treasury CIO. CIOs "should have budget authority, and until they do have budget authority..., they really can't achieve their IT goals," he said.

But Karen Evans, OMB's administrator of e-government and IT, does not have direct authority over the government's $65 billion IT budget, but she said that's fine with her.

"I don't have direct authority where I can say yes [or] no to $65 billion," Evans said. "So, to me, that model seems to work very well, and I don't know that in order to be successful you have to have direct authority over all the dollars," she said in an interview last month.

-- Judi Hasson


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