Hill presents alternative LOB strategy

CRS report suggests slowing OMB’s financial management initiative to demonstrate results

Congress is exploring the possibility that conducting a demonstration project could help agencies that have been hesitant to turn over their financial management operations to a shared service provider when they are ready to upgrade or modernize their financial systems. The Office of Management and Budget made migration to shared service providers a governmentwide policy.

Agencies do not have a choice about consolidating their financial management operations using public or private shared service providers, but they can decide when they consolidate, said Garrett Hatch, a government and finance analyst at the Congressional Research Service, Congress’ policy research arm.

OMB’s Financial Management Line of Business (LOB) consolidation initiative requires agencies to make the switch to shared service providers when they are ready to upgrade or modernize their financial management systems.

CRS recently issued a report on the federal financial management LOB.
Hatch said some critics of OMB’s policy are concerned that shared service providers have not sufficiently demonstrated their capabilities and agencies need to address internal control problems before relinquishing their financial management operations to a service provider.

Many large-scale management reform initiatives begin with demonstration projects, Hatch said in the report, “OMB’s Financial Management Line of Business Initiative: Background, Issues, and Observations,” which GovExec.com obtained and first reported on.

But officials leading the shared services initiative do not see the necessity of having a demonstration project at this point.

“Shared service providers have already proven their success in supporting agency financial system operations,” said Mary Mitchell, program manager of OMB’s financial LOB initiative and executive director of the interagency Financial Systems Integration Office.

The concept of shared services is well-tested in the private and public sectors, and shared service centers are successful, said Clifton Williams, a partner at Grant Thornton’s global public sector.

“I don’t know what a pilot would do today or what additional value it would provide because they already have so many proofs of concept,” he said.

Williams cited the Defense Finance and Accounting Service. The Defense Department improved its financial accounting after it consolidated under DFAS.

Under the current LOB plan, OMB works with agencies to determine the best time for them to switch to a shared service provider. It provides migration-planning guidance, including a sample service-level agreement and a due diligence checklist for vetting prospective service providers.

Most federal agencies have not migrated to shared service providers. OMB officials report that in any single year, probably only two or three of the 24 largest agencies will make the switch. The Department of Housing and Urban Development, the Agriculture Department and the Office of Personnel Management are in various stages of procuring shared services. The Environmental Protection Agency recently awarded a financial management services contract to CGI Federal.

Hatch said OMB should not slow its work on financial management standardization issues because standards will reduce the risk for agencies as they shift their financial operations to shared service providers — whenever that happens.

Slow down on financial management consolidationThe Office of Management and Budget should consider slowing agencies’ migration to shared service providers to reduce the inherent risks, according to the Congressional Research Service. Garrett Hatch, an analyst at CRS, prepared a report for Congress in which he wrote that OMB should:
  • Initiate a demonstration project involving a few agencies so people can observe and analyze the migration process in a controlled environment.
  • Push for standardization by developing performance metrics, standardizing business processes and establishing governmentwide accounting codes. Those efforts would enable agencies to compare financial data.
— Mary Mosquera

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