White House takes whack at financial management money pits

Administration projects saving $760 million by cancelling or scaling back financial systems modernization projects

White House officials today projected $760 million in savings from canceling two agency financial system modernization IT projects and reducing the scope of two other projects.

The administration is cancelling the Small Business Administration’s Loan Management and Accounting System, which will save $113 million, Daniel Werfel, controller at the Office of Management and Budget, told reporters today.

Additionally, the administration is scaling down financial system modernization projects at the Environmental Protection Agency and Housing and Urban Development Department is projected to save $180 million and $44 million, respectively, said Werfel, who is based in OMB’s Office of Financial Management. 

That's all on top of the previously-announced $423 million saved by terminating the Veterans Affairs Department’s Financial and Logistics Integrated Technology Enterprises (FLITE) accounting system modernization program.

Related stories:

OMB to review 20 financial system modernization projects
VA mailed it in on FLITE contract, IG says

These decisions reflect the outcome of the first set of performance evaluations ordered for 20 agency upgrades to financial systems announced by the Obama administration in July. The White House froze spending on the projects because they were experiencing delays, cost increases and revisions in goals.

Jeffrey Zients, acting director of OMB, said today the White House hopes to generate $1 billion a year in savings from revisions to those financial modernization projects, which historically have been overambitious, complex and difficult to manage.

“We halted all activity, pending revisions, and now we are getting results,” Zients said. “This is an example of prudent best practices.”

Evaluations of the remaining financial system projects, along with modifications, should be complete by the end of October, Zients said. OMB and agency officials along with an advisory panel of government financial officers and IT officers are doing the evaluations.

Werfel said the financial modernization programs are being re-evaluated and in many cases segmented and scaled down. In several cases, such as with the VA’s FLITE program, the modernization plan previously went far beyond the minimum needed to update the systems, he said.

“These are mission-critical functions,” Werfel said. “The issue is that the projects had taken on more than is necessary to meet the critical needs.”

In many cases, the modernizations were planned on a five-year cycle; now, the changes are being segmented into smaller revisions, with results to be produced, and performance to be evaluated, in 18-month to 24-month cycles, he said.

Werfel said a cancellation or scale-down was not necessarily a reflection of poor management of the program by either the contractor or the agency involved. In some cases, the financial systems modernizations were managed effectively, but will be cut because they are overly ambitious, he said.

“The project may be working well but there are still opportunities to reduce risks,” Werfel said.

In a related development, the VA’s Office of Inspector General on released a second critical report  on Sept. 14 on management of a pilot project in the FLITE program. It concluded that FLITE program managers did not effectively control project cost, schedule, performance, and ensure timely deliverables. VA officials agreed with the findings.

A previous report from the inspector general on Sept. 7 also scolded VA managers for poor management of a FLITE pilot project, noting that many failing to participate in key conference calls with the contractor.

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

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Reader comments

Wed, Sep 15, 2010

Tax cuts and "stimulous" spending are just political payoffs. Compared to the size of the economy all those enacted or suggested to date are relatively minor and will have little if any impact of the tens of millions of Americans who have lost their jobs, homes, and small businesses. In any event, its impact will be automatically offset by the standing orders to the Federal Reserve's Open Market Desk to maintain the status quo. For better or worse, our congress and president cannot get us out of the current severe depression. All the responsibility and tools to do so are in the hands of the Federal Reserve's governors and Presidents.

Unfortunately most are not macroeconomists with real world experience and so are quite unqualified for their positions. For example, they continue to think lowering the rate at which banks can borrow money for 24 hours will somehow cause the banks to use that 24 hour money to make long term consumer and working capital loans. Bankers just laugh at such naivete. It is the Federal Reserve's equivalent of the congressional and presidential naivete when they say that lowering taxes or a spending "stimulous" will cause the economy to rise - even though the Federal Reserve automatically takes steps to offset the rise. The president can still escape defeat by ending the recession - but it will require replacing some of the Federal Reserve governors with qualified appointees instead of quants and those without the appropriate educations. Consider: if you have a heart problem you would not consult a dermatologist, if you have a legal problem you would not consult a chiropracter. We have a macroeconomic problem so the president should not be consulting administrators who came up through the Federal Reserve system or macroeconomic quants whose vision of the economy all too often assumes away reality. He needs new Federal Reserve appointees and quickly. Comments to J398112@yahoo.com.

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