Even though agencies are under a federal mandate to migrate their financial systems to a public or commercial shared-services center as part of the Financial Management Line of Business initiative, FM LOB managing partner Mary Mitchell can’t help but empathize with those who find the whole prospect just a little bit daunting.
“Agencies understand the logic behind the need to do this, which helps,” says Mitchell, who is deputy associate administrator for technology, strategy and financial systems integration for the General Services Administration’s Office of Governmentwide Policy. “But the devil is in the details, and the reality is these major financial migrations represent a pretty dramatic change. It definitely is not easy.”
But it’s also not impossible, as Michelle Horowitz, CFO for the Federal Housing Finance Board can attest. She and her staff decided in early 2005 that the time was right to upgrade the agency’s financial system. After performing a cost-benefit analysis, they took the plunge and began migrating their accounting system, as well as their procurement and travel systems, to the Bureau of Public Debt’s Administrative Resources Center (BPD ARC).
The board completed its migration in three months. And though it wasn’t a bump-free transition, the end result clearly justified the decision. For the second straight year, FHFB produced a clean audit, no reportable errant financial conditions and no problematic management or other issues. That’s no easy feat. Only nine of the 26 major agencies can claim this accomplishment, according to Mitchell.
The move to the shared-services center “has brought so much more ease in the work that we’re doing because we can focus not just on the transactional issues, but we’re able to take a look at the bigger picture and make better management decisions,” Horowitz says.
Of course, that oasis of expertise, standardization and shared business processes is what the Office of Management and Budget envisioned that the FM LOB program — all the LOB efforts, in fact — can accomplish for agencies, ultimately improving the cost, quality and performance of financial services, as well as case, health data, grants, human resources and systems security management. The ultimate goal, of course, is to save money, and OMB estimates that moving just the government’s financial systems to the shared-services model will save $5 billion over 10 years.
Follow Their Path
Despite the possibility of reaping real benefits, many agencies — especially large ones — have been hesitant to begin the migration process, mostly because they’re unsure of how to proceed.
But FHFB’s experience is no mirage. At least 80 small agencies, bureaus and commissions have successfully navigated the difficult journey of moving their financial systems to one of the four centers of excellence (see box below).
Although a small agency clearly has a less complicated financial environment than a large department, Mitchell says there are basic steps that, when followed, can help provide smooth and smart migrations. According to those heavily involved in the process, agencies need to follow eight steps:
1. Move for the right reasons. Just because the shared-services center concept is up and running doesn’t mean that agency officials should be pressured to immediately take the plunge.
OMB policy is clear: An agency should migrate when it needs — and is ready — to modernize information technology. Mitchell notes that although a number of agencies have performance gaps, many of them compensate for that gap with manual labor and other measures. But, she adds, there will come a time when, in doing a cost-benefit analysis, “agencies will realize that they really need to close that performance gap because they’ve got a truly outdated or unsupported financial system, or based on their review of internal controls, audit findings or security reviews, they have weaknesses that they need to go ahead and fix. And the migration may just turn out to be the best way to solve it.”
2. Set the stage early. Proper upfront analysis and planning are critical to a successful financial management migration effort, and that starts with good information.
Agencies must take the time to truly understand the performance gaps between their existing system and what they want their new system to achieve. “The critical point is that agencies have to understand what their business needs are and exactly why their current system is not meeting those needs,” according to one OMB official, adding that an agency’s enterprise architecture should always be the road map. “If you do, then as you move down the path of migrating to the FM LOB framework, you are on top of what the new system needs to be able to do to close those gaps.”
3. Talk, talk, talk. Debbie Shreeves, director of the Accounting Services Division at BPD ARC, strongly suggests that agencies do extra homework by consulting with current customers at the various shared-services providers.
Another best practice, she says, is to consult with staff at the different centers, learn exactly what services are available, fully evaluate all the software options and set realistic expectations about the agency and provider roles, service-level agreements and other issues. “The providers are not all alike,” Shreeves says. “We have different strengths and services, so agencies will be disappointed if they come into an arrangement assuming that a cooperative can do any and everything they want.”
4. Be specific, but flexible. Although agencies are moving to common processing standards, they still need to outline all of their business requirements and any agency-specific requirements they have or expect to have later.
At the same time, Horowitz says, it’s extremely important not to go into this with a sense of being overly unique. “When you’re on your own, you tend to think: ‘We’re so special. We’re so customized,’ ” she says. “But with this move, you’re going to their methodology of accounting, so you have to prepare yourself mentally by realizing you’re really not that special, and you can’t customize everything.”
5. Balance costs and benefits. Depending on the size of the agency and the number of systems involved, the cost-benefit analysis may or may not be terribly complex, but it should always be thorough. In the case of FHFB, Horowitz took into account numerous factors beyond the obvious, including whether or not resources were reliant on contractors, timing of payments, segregation of duties, system upgrades, FISMA compliance and the timeliness of reporting.
6. Think small. The best way to make it through what could be, for some agencies, as long as a two- or three-year journey is to break everything down into small, manageable pieces. As such, assigning a qualified project manager to the project is imperative to the migration effort. For her part, Horowitz says having at least one member of her team well-versed and well-practiced in project management “helped us make sure everything was thought through beforehand, allowed us to identify our critical path and kept us apprised of what was going on each step of the way.”
7. Work together. The relationship between the agency’s CIO and CFO is critical to making this work, but so is the relationship between the agency and the shared-services provider and any third-party vendors that might be involved.
Horowitz suggests that agencies take the time to determine the roles and responsibilities of everyone involved before starting the migration. She also says that setting up oversight procedures is crucial. “Realize that when you have someone else doing the work for you, it’s still your responsibility,” she says and notes that the BPD ARC has positioned FHFB’s procedures as a model for other agencies making the transition.
8. Be transparent. As with any change management initiative, it’s imperative to have senior management on board. But agencies also need to get ongoing buy-in from technology and financial managers and other personnel affected by the new framework. John Sindelar, executive sponsor for the FM LOB program and acting associate administrator of governmentwide policy at GSA, suggests using a scorecard or other mechanism that can provide easy but accurate visibility into the progress being made.
Help Is Out There
There is a lot of hands-on advice available to agencies. In fact, there are so many agencies working at this and willing to share their experiences that, this past September, OMB and GSA released the much-anticipated Migration Planning Guidance (Version 1) to provide assistance. The document, available online at www.fsio.gov, includes Frequently Asked Questions (FAQs); a due diligence checklist; a menu of services and service offerings from the four centers; and guidance and tools to help with procurement, change management and implementation.
Mitchell is quick to point out that the reference guide is based on feedback from agencies that have navigated or are in the process of navigating systems migrations. It includes numerous lessons learned that can help reduce risk and also identifies tools that can help with planning. But, she notes, it’s just a start. “This is an ongoing effort. We are continuously working to identify best practices that will help agencies be successful.”