OMB's new approach for IT financial system projects may be risky, GAO says

White House officials have estimated $760 million in savings from their new approach to guiding agency IT financial system modernization projects, but the Government Accountability Office raises questions about the risks of that approach in a new report.

Jeffrey Zients, acting director of the Office of Management and Budget, and Daniel Werfel, controller at OMB’s Office of Financial Management, outlined the financial savings and new approach in a news conference Sept. 15. The funds were recovered by canceling or revising financial modernization projects at four agencies: the Veterans Affairs and Housing and Urban Development departments, the Small Business Administration and the Environmental Protection Agency.

OMB and agencies took those actions after reviews that began in July, when the White House froze spending on all agency financial system upgrades while it re-evaluated the programs and started a new management strategy that included using milestone reviews to keep the projects on track, and segmenting those projects into smaller, short-term pieces.

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“We recognize that OMB’s new approach is in an early implementation stage and guidance is still being developed. However, implementing this approach without certain policy guidance carries risk,” the report states.

OMB should create new guidance for the new approach, including a concept of operations with goals and performance plans, to reduce those risks, GAO concluded. For example, it is unclear how the solutions under the new approach will integrate with existing plans, the congressional auditors said.

OMB officials, responding to the report, said it was too early to evaluate the new approach and it should be considered a work in progress while policies are being developed.

Currently, 14 civilian agencies are planning financial system upgrades through fiscal 2018. Under a previous OMB program started in 2004, the White House encouraged agencies to move toward shared services, but that approach had limited success, GAO said.

Under the new approach, OMB emphasizes shared services for transaction processing, a segmented approach for deploying systems, oversight over the life cycle that involves milestones and benchmarks for progress, complying with financial system requirements on an ongoing basis, and a vendor self-certification process for systems, GAO said.

The report raises a number of questions for consideration that include:

•  How will the new approach for transaction processing shared services be implemented, and what governance structure will be established?
• How will new solutions for transactions processing work with current core financial systems and solutions?
• What actions will be taken to ensure interoperability across agency systems without a central testing and certification program?

In a related development, an SBA official today offered additional details on the status of the agency’s Loan Management and Accounting System. Werfel said on Sept. 15 that the project was canceled, saving $113 million for taxpayers.

Michael Stamler, a spokesman for the SBA, said today the agency’s related efforts at upgrading its financial systems will continue. The additional work is expected to cost about $97 million over 10 years, he said. Data center hosting is one of the related areas that will continue, he added.