Financial systems modernization plan faces management challenges

A new strategy to modernize federal financial management systems might not mesh with the government's complex financial and management requirements, according to an analyst who tracks federal spending.

A draft memo from the Office of Management and Budget calls for an overhaul of the federal government's approach to overseeing costly financial management systems information technology projects with shorter, more manageable deadlines and greater agency oversight and accountability. But observers say the Obama administration will face challenges when putting these policies into practice.

"Commercial practices have a lot of flexibility and adaptability, build a little, change a little, but don't necessarily work under the kinds of constraints that federal agencies have to operate under," said Ray Bjorklund, senior vice president and chief knowledge officer at market research firm FedSources. "They are trying to encourage commercial best practices that mitigate risk, but they're doing it in the environment of the federal government that has unique set of rules and a unique set of controls."

According to the draft memo, OMB would halt new financial management systems projects worth $10 million or more and existing task orders valued over $500,000 pending further review. Agencies would be required to break development projects into segments no longer than 90 days, with total projects lasting for two years or less. OMB then would apportion project funds on a quarterly basis rather than in a lump sum.

From OMB's perspective, this breaks complex requirements into smaller, more manageable segments, said Bjorklund, allowing agencies to focus more intensely on specific projects. It could cause them, however, to lose sight of long-term goals and force them to develop new technologies and demonstrate progress in a compressed time period.

"I don't get a sense that they are suggesting a big picture look at things, which is so essential to make sure you can get yourself on a path that's going to achieve those ultimate goals of the larger architecture," he said.

Agencies must submit within 60 days a revised project plan to OMB, which will review them within 30 days, the memo stated. Gary Therkildsen, federal fiscal policy analyst at the nonprofit OMB Watch, said the centralized oversight will force agencies to adopt the principles outlined in the memo, but added the cultural shift will not be easy.

"It's going to place a lot of power in the hands of OMB," he said. "Before you had agencies that had a lot of leeway in IT projects, but now you have OMB that will call the shots. I wouldn't be surprised if there's pushback over lost control."

The memo also calls for a new Financial Systems Advisory Board, comprised of agency chief information officers and chief financial officers, to guide OMB's review of agency projects.

"This is very good, constructive oversight," said Bjorklund. "[The advisory board] should be able to say to OMB, 'This program office has a good game plan; we have confidence in the project manager.' They should be able to say OMB should apportion money for the next three quarters."

Bjorklund applauded efforts from federal CIO Vivek Kundra and Chief Technology Officer Aneesh Chopra to integrate modern technology into government, but added sometimes their ideas are like a "square peg in a round hole" for federal systems.

"Part of the sense of those initiatives is to create a tech environment that is more modernized, more current with technologies that agencies can plug in to, but I hope that just because there's new technology out there the administration won't force agencies to use it if it doesn't make sense," he said. "Some won't make economic or security sense, but the concept of even having more centralized oversight may help guide some of these programs to use more common, modern solutions."

Therkildsen called the plan solid, but cautioned that it could take time to see results.

OMB did not respond to a request for comment.