The Data Act's unexpected benefit

Common standards don't come easily, but the demands of complying with the Data Act could give agencies a leg up when migrating to a financial shared-services provider.

Shared financial management

The Digital Accountability and Transparency Act sets an aggressive schedule for creating governmentwide financial standards. The first challenge belongs to the Treasury Department and the Office of Management and Budget. They must come up with a set of common data elements for financial information that will cover just about everything the government spends money on and every entity it pays in order to give oversight bodies and government watchdogs a top-down view of federal spending from appropriation to expenditure. Those data elements are scheduled for completion by May 2015, one year after the act's passage.

Two years after those standards are in place, agencies will be required to report their financial information following Data Act guidelines. The government currently supports more than 150 financial management systems but lacks a common data dictionary, so there are not necessarily agreed-upon definitions of how to classify and track government programs and types of expenditures.

"As far as systems today and how we can get there, they don't necessarily map in the way that the act described," U.S. CIO Steven VanRoekel said in June. "It's going to be a journey to get to where the act aspires for us to be."

However, an Obama administration initiative to encourage agencies to share financial services could be part of the solution. In May, OMB and Treasury designated four financial shared-services providers for government agencies: the Agriculture Department's National Finance Center, the Interior Department's Interior Business Center, the Transportation Department's Enterprise Services Center and Treasury's Administrative Resource Center.

There are some synergies between shared services and data standardization, but shared financial services alone will not guarantee Data Act compliance, especially considering that the government expects the migration to take 10 to 15 years. Nevertheless, the discipline required under the Data Act could boost agency efforts to prepare financial data when it comes time to move to a shared service.

"I would say that unless an agency already has their service provider or is in the process of moving to a provider, the agency will be responsible for complying with the Data Act without great assistance from a third service provider," said Elizabeth Angerman, executive director of Treasury's Office of Financial Innovation and Transformation (FIT), in an interview with FCW. "However, I think the data standard that comes as a result of the Data Act could be a longer-term solution to streamlining and standardizing the business process across the shared-service providers."

The designation of financial shared-services providers was accompanied by a request for information from Treasury seeking ideas and ultimately proposals from private-sector firms to supply services to help agencies migrate to shared services, minimize risks, plan for disaster recovery, improve cost structures and manage data in compliance with governmentwide standards.

Although those procurements were not necessarily developed with the Data Act in mind -- President Barack Obama signed the bill into law just two days after the RFI was posted -- the focus on data quality, data portability and common standards supports the goals of the legislation. Indeed, Treasury's Bureau of the Fiscal Service has been working on a plan for governmentwide financial data standards similar to the Data Act's mandate.

"We expect there to be some common themes that we get from the RFI," Angerman said. "One of those is likely to be the opportunity for industry to help look at the quality of the data before agencies move to the shared-services provider." One possibility, she added, is a contract vehicle devoted to helping agencies clean up their data.

Quote from Christina Ho

Christina Ho, executive director for data transparency at the Bureau of the Fiscal Service, is looking for vendors to support the development of data standards. "Part of the requirement in the Data Act is to require Treasury and OMB to consult with external stakeholders in the development of the data standard," Ho told FCW. "The vendors that support shared services and also vendors that support agencies currently in terms of those financial systems or even other types of products, we want to consult with them. We are interested in their input and thoughts on that."

Then-OMB Controller Danny Werfel sent a memo last year announcing the shift to shared services, saying better data is a goal of the initiative, which seeks to "improve data quality and provide greater transparency into federal finances, including through the production of auditable financial statements at the governmentwide level."

The four shared-services providers will be on the front lines of implementing the new data standards for their government customers. For agencies, the Treasury procurement could supply some of the resources needed to support the changes required by the Data Act.

"The big complaint that we hear today about the Data Act as we talk to the financial management community is you could characterize it as another unfunded mandate," said Carlos Otal, managing partner of global public-sector financial management advisory and audit services at Grant Thornton.

"It's another reason to think about going to a shared-services provider that's implementing the Data Act and all these other agencies are taking advantage of it," Otal told FCW. "Why spend your dollars trying to comply? Share in the cost that others are already incurring to do that."

'Apples, oranges, pears and bananas'

Migrating to a shared financial service is not a cure for bad data, said Danny Harris, CIO at the Education Department and a former deputy chief financial officer who is active in efforts to forge connections between technologists and accountants.

"When you look at some agencies that are struggling from a financial management perspective, it's not the IT or the service that's the problem," Harris said. "In some cases, the data is so bad they have reconciliation nightmares and operations nightmares. Is moving to a shared-services provider going to help? The answer is no."

Quote from Dany Harris

 

How bad is it out there? It depends. On the one hand, every CFO Act agency except for the Defense Department has had clean audit opinions; the Department of Homeland Security was added to the list in December 2013. But the government itself still has not achieved a clean audit. And agencies can merit clean opinions and still have problems with their data.

"Some of those challenges can be allayed by having more shared services, more standardization of that data and making sure the definitions are the same across the board," Otal said. "Right now, it's apples, oranges, pears and bananas out there. You have agencies that have a single [accounting software] solution, but when you dig under the covers, they have multiple instances of that product and all the configurations are different. The programs aren't coded the same in one instance and the other."

Angerman backed up this sentiment. "The customization has made it very difficult and very expensive to maintain those systems in any sort of a consistent way," she said.

The kind of discipline mandated by the Data Act has the potential to help reverse bad data hygiene, provided the implementation proceeds at a granular level.

"Typically in the federal space, we implement processes, and after the fact, we get together and we talk about a data dictionary and what things really mean," Harris said. "We need to do that on the front end. What stops us from truly standardizing as a government is we can't agree on what the basic terms are."

Even before the Data Act became law, Ho was leading the charge for data standardization at Treasury. The new law, however, has provided some impetus for other agencies to get involved. "We definitely have been getting a lot of interest from the agencies on what we're doing with the Data Act," she said. "That's why we want to make sure we organize it appropriately to make sure we have a collaborative structure."

However, it appears that the Data Act will not be used to expand the government's data infrastructure. "We're not thinking of an approach that is very typical of how we've been doing things in the past whenever we have a mandate to publish a lot of data," Ho said. "We don't want to build a massive data warehouse. We don't want to make massive data system changes."

Angerman said she thinks the government could reap even more benefits from the effort to standardize data if it reduced the number of financial systems. "While I think Treasury's approach for the Data Act implementation minimizes the need for system changes," she said, "similar requirements and changes could be more efficiently and effectively implemented and at lower cost if the landscape of systems was reduced to a much smaller number."

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