Rising out of financial chaos

The U.S. Agency for International Development is responsible for overseeing $6 billion in U.S. foreign economic and humanitarian assistance programs each year. Yet by most measures, USAID's financial systems more closely resemble those of the developing countries it assists.

USAID has had perennial financial management problems and was one of three agencies to receive a failing grade this year on Rep. Stephen Horn's (R-Calif.) financial management report card.

The problems were typified by the agency's decision to scrap its failed New Management System in 1999. Despite a five-year effort, the agency has little to show for its $100 million investment, said Richard Nygard, acting assistant administrator for USAID's Bureau for Management, speaking before a House subcommittee recently.

The custom system was modeled on an enterprise resource planning approach designed to consolidate USAID's information systems into a single integrated network. From the start, however, the system was plagued by delays, cost overruns and error rates.

Still reeling from past mistakes, USAID officials have been methodical about the agency's new system, Phoenix.

So far at least, the agency has learned from its mistakes, according to outsiders. USAID Inspector General Everett Mosley said recently that despite significant outstanding issues, the agency "has made progress toward resolving some long-standing problems with its financial management systems."

USAID marked a milestone in December when it brought Phoenix online at its Washington, D.C., headquarters, said Steve Crabtree, USAID's Phoenix project manager. The agency is now preparing to enable its overseas bureaus to feed data into the system.

Unlike their approach with prior systems, USAID officials were determined to choose a commercial product—Phoenix uses the Momentum Financials software suite from American Management Systems Inc.

Furthermore, USAID officials declared early on that they would not change the AMS software. Instead, the agency worked at redesigning its business processes, according to Crabtree. Making software changes would only lead to another customized package that is expensive to maintain and update.

The Phoenix project also receives senior management attention. "The true focus of the organization was to make this happen," said Zip Brown, vice president of AMS' e-government solutions group. "You really need the client having a real stake in the game."

Still, USAID officials were cautious about implementing Phoenix. "There were a lot of skeptics both within the agency and outside" because of the agency's troubled history with financial management systems, Brown said.

To bring Phoenix online, USAID had to transfer data from its legacy systems. That involved converting more than 100,000 accounting items. USAID officials instituted an extensive effort to ensure that the conversion processes were accurate. Teams of contractors validated the data both from USAID and from the inspector general's office. "There were tests of the tests," Crabtree said.

Those efforts were rewarded with a less than 1 percent error rate for the data transferred to Phoenix, Crabtree said, and nearly all the rejected data has now been fixed.

"We believe the quality of the agency's financial statements will be markedly better this year," Nygard told lawmakers at the subcommittee hearing.

Despite its success in Washington, the team still faces the difficult task of enabling its extensive overseas missions to file financial data. The overseas rollout is complex, in part, because of the diverse locations and the poor technology infrastructure of many host countries, Crabtree said, citing woeful phone communications as one example.

Fortunately, AMS' Momentum, which is Web-based, has worked well in USAID's early pilot programs with missions in Egypt and El Salvador, he said. But the full rollout will take several years. In the meantime, USAID is creating an electronic interface for the field data between Phoenix and the Mission Accounting and Controls System, which stores the data.

But the controls system is not scheduled to be replaced until fiscal 2003.