Agencies expect to invest in new financial systems

Input report highlights the importance of the Financial Management Line of Business initiative to OMB

The Financial Management Line of Business (FMLOB), which passed its third anniversary in March, could generate $1.75 billion in contractor activity during the next two years, according to a report from market research firm Input. That figure, derived from fiscal 2008 and 2009 budget documents, indicates the importance that the Office of Management and Budget attaches to the initiative.

Mostly small agencies have begun to act under the initiative, said Input federal analyst Vajira Ranaviraja. They have given up their internal financial management systems and shifted those functions to an approved shared-services center. The goal is to consolidate common financial management information technology needs of multiple agencies in the shared centers.

OMB is urging agencies to move to the shared-services model as their systems come due for upgrade, Ranaviraja said. However, some agencies are reluctant to move. No Cabinet-level agencies have committed to transfer their operations to any of the four agency-run centers, and some have expressed doubt that the model can support their needs, according to Input’s report. Those agencies might be open to moving to a vendor-run center, however, the report added.

OMB updated its FMLOB policy in January by adding a software certification requirement. OMB’s Financial Systems Integration Office is working with agencies to develop business standards that will become part of the software qualification and certification process, according to the policy update issued by OMB’s acting controller, Danny Werfel.

When that certification process is completed, OMB will require agencies and shared-services centers to use only certified financial management software products.

By December, OMB wants to create governmentwide business standards for funds control, payment management, receivables management, reimbursables and reporting processes. It expects to have those standards incorporated into software and ready for testing by December 2009.

“Right now, a lot of money being allocated for this line of business is going toward the many legacy systems” that agencies have been using, Ranaviraja said. “The whole point of migrating toward this model is to save money. The idea is to shunt the money from the legacy systems into the shared services, and you’ll have a savings there.”

Some agencies have misunderstandings that make them hesitant to adopt the new business model, said Tim Hurlebaus, vice president at CGI Federal, which hosts a shared-services center for the Environmental Protection Agency. For example, some executives erroneously believe that sharing a services center means that their agency’s data will be commingled with other agencies’ data, he said.

“I think there’s more understanding to be had,” Hurlebaus said.

According to Input, the Health and Human Services Department is the largest civilian agency spender on financial systems. HHS spent $271 million in fiscal 2006 and $310 million in 2007. The next-highest spender, the Treasury Department, spent $182 million in fiscal 2006 and $183 million in 2007. 

About the Author

Technology journalist Michael Hardy is a former FCW editor.

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