[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
OMB'S FINANCIAL MANAGEMENT LINE OF BUSINESS INITIATIVE: TOO MUCH TOO
SOON?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
FINANCE, AND ACCOUNTABILITY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
MARCH 15, 2006
__________
Serial No. 109-164
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
______
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCHMIDT, Ohio (Independent)
------ ------
David Marin, Staff Director
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Government Management, Finance, and Accountability
TODD RUSSELL PLATTS, Pennsylvania, Chairman
VIRGINIA FOXX, North Carolina EDOLPHUS TOWNS, New York
TOM DAVIS, Virginia MAJOR R. OWENS, New York
GIL GUTKNECHT, Minnesota PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
JOHN J. DUNCAN, Jr., Tennessee
Ex Officio
HENRY A. WAXMAN, California
Mike Hettinger, Staff Director
Tabetha Mueller, Professional Staff Member
Erin Phillips, Clerk
Adam Bordes, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on March 15, 2006................................... 1
Statement of:
Combs, Dr. Linda, Controller, Office of Federal Financial
Management, Office of Management and Budget, accompanied by
Karen Evans, Administrator, Office of Electronic Government
and Information Technology, Office of Management and Budget 5
Kull, Joseph, PricewaterhouseCoopers LLP; John Marshall, vice
president, CGI Federal; and Clifton A. Williams, partner,
Grant Thornton LLP......................................... 43
Kull, Joseph............................................. 43
Marshall, John........................................... 54
Williams, Clifton A...................................... 68
Letters, statements, etc., submitted for the record by:
Combs, Dr. Linda, Controller, Office of Federal Financial
Management, Office of Management and Budget, prepared
statement of............................................... 7
Kull, Joseph, PricewaterhouseCoopers LLP, prepared statement
of......................................................... 46
Marshall, John, vice president, CGI Federal, prepared
statement of............................................... 58
Platts, Hon. Todd Russell, a Representative in Congress from
the State of Pennsylvania, prepared statement of........... 3
Towns, Hon. Edolphus, a Representative in Congress from the
State of New York, prepared statement of................... 90
Williams, Clifton A., partner, Grant Thornton LLP, prepared
statement of............................................... 70
OMB'S FINANCIAL MANAGEMENT LINE OF BUSINESS INITIATIVE: TOO MUCH TOO
SOON?
----------
WEDNESDAY, MARCH 15, 2006
House of Representatives,
Subcommittee on Government Management, Finance, and
Accountability,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 3:05 p.m., in
room 2247, Rayburn House Office Building, Hon. Todd Russell
Platts (chairman of the subcommittee) presiding.
Present: Representatives Platts and Foxx.
Staff present: Mike Hettinger, staff director; Dan Daly,
counsel; Tabetha Mueller, professional staff member; Erin
Phillips, clerk; Adam Bordes, minority professional staff
member; and Jean Gosa, minority clerk.
Mr. Platts. This hearing of the Government Reform
Subcommittee on Government Management, Finance, and
Accountability will come to order. The ranking member, Mr.
Towns, will be joining us shortly, and if he has an opening
statement, we will have him present it when he arrives or have
it submitted for the record as he so chooses.
In 2004, the Office of Management and Budget announced the
creation of its Lines of Business Initiative. This program was
designed to consolidate duplicative functions across the
Federal Government and ultimately save taxpayer dollars by
using a shared services model to provide back office functions.
While the concept has significant merit, we want to use this
hearing today to discuss several considerations and concerns
with respect to this initiative. The hearing will also provide
OMB with a chance to clarify its guidance to Federal agencies
and give this committee a chance to hear from outside experts
and private sector stakeholders. This hearing will provide a
very important dialog on this new and important issue.
Among the concerns that we will discuss today are timing
issues, contractual relationships between host and customer
agencies, the current state of Federal financial management,
and whether we are poised to make effective use of the shared
service model. We will also examine the Center of Excellence
concept. It's important to note that of the four COEs, only one
has received a clean audit opinion, with no material weaknesses
or reportable conditions, and is compliant with the Federal
Financial Management Improvement Act of 1996.
If this initiative is to be successful, we must ensure that
all stakeholders are fully informed and that the user community
is ready, willing and able to embrace this initiative. Further,
the Center of Excellence concept should advance the goals of
the Chief Financial Officers Act and FFMIA, strategic financial
management, timely information for program managers and
effective stewardship.
Our witnesses today will provide the subcommittee with
insight on the creation of Centers of Excellence and how
Federal agencies can best continue to improve their financial
management and reporting. We're pleased to have two panels of
witnesses today. On the first panel will be the Honorable Dr.
Linda Combs, Controller at the Office of Federal Financial
Management at the Office of Management and Budget. Dr. Combs is
accompanied by Ms. Karen Evans, Administrator for the Office of
Electronic Government and Information Technology at the Office
of Management and Budget who will participate in the question
and answer portion of the program.
Our second panel will include Mr. Joseph Kull, partner at
PricewaterhouseCoopers; Mr. John Marshall, vice president at
CGI Federal; and Mr. Clifton Williams, a partner at Grant
Thornton. I look forward to the testimony of each of our
witnesses. I also appreciate the efforts in preparing both your
written statements and your oral statements for today's
hearings.
As I say, when Mr. Towns arrives, after our initial opening
statement, if he has a statement to make, otherwise we'll
complete the opening statement of our first witness and then go
to Q and A.
[The prepared statement of Hon. Todd Russell Platts
follows:]
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Mr. Platts. It is the practice of the committee if I could
ask both our panelists to stand and take the oath.
[Witnesses sworn.]
Mr. Platts. Thank you. The clerk will note that the
witnesses affirmed the oath.
The subcommittee appreciates your testimony and preparation
for this hearing and the knowledge and insights that you're
able to share with us, and with that, Dr. Combs, if you'd like
to proceed, and I think we're set at 5 or 6 minutes but we want
to make sure you have a chance to cover, whatever you need to
complete your opening statement, and then we'll move forward.
Thank you.
STATEMENT OF DR. LINDA COMBS, CONTROLLER, OFFICE OF FEDERAL
FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET,
ACCOMPANIED BY KAREN EVANS, ADMINISTRATOR, OFFICE OF ELECTRONIC
GOVERNMENT AND INFORMATION TECHNOLOGY, OFFICE OF MANAGEMENT AND
BUDGET
Dr. Combs. Chairman Platts, Congressman Towns and members
of the committee, I thank you for this opportunity today to
appear before you to discuss the Financial Management Line of
Business Initiative. I am delighted to provide you with an
overview of the Financial Management Line of Business and to
explain how it supports our mutual and overarching objective of
ensuring that Federal managers have accurate and timely
financial information for decisionmaking. I greatly appreciate
the questions that you asked me to address in my written
testimony.
I believe that this subcommittee is identifying very
important questions, and I look forward to working with you to
answer those questions. This afternoon I would please offer
that I'd like to use the time I have to share with you my
overall vision for financial management for the Federal
Government and to talk a little bit about how the Financial
Management Line of Business actually fits in with that vision.
First of all, I truly want to emphasize that I share with
you that this vision is a very long-term vision and it is not
one that will be achieved overnight. My vision is based upon
some of the challenges that we face today in our overall
financial management arena and the opportunity we have to give
our financial leaders the tools they need to meet those
challenges.
And if I could for just a moment I'd like to share with you
what I envision. I envision that each agency will have a
financial system solution that seamlessly exchanges information
among its own organizational components and business systems;
in other words, they are able to talk to one another within
each agency. Financial management systems across the Federal
Government will eventually seamlessly exchange information and
provide leadership with essential financial information for
decisionmaking.
I envision that Federal agencies will operate their
financial organizations at the right cost by following standard
processes that strengthen internal controls and reduce
financial risk in government programs. I envision that there
will be transparency in terms of financial management
objectives, transparency in the options that agencies can take
to meet those objectives, and transparency in terms of how we
measure the result of those efforts.
I believe that agency Chief Financial Officers will spend
more time collaborating with program managers on improving the
actual stewardship of taxpayer resources and delivering the
right financial information to inform smarter decisions and
spend less time dealing with the heroic efforts required for
compliance and for daily operations.
I envision that there will be a limited number of truly
excellent, high performing and stable shared service solutions
providing a competitive alternative both to the public and the
private sector, and that price and quality will both be taken
into consideration for agencies that are ready to modernize
their financial management operations.
I envision that future financial management leaders will
indeed be as committed to excellence as the dedicated
professionals that I have the honor of working with every day
now. To ensure that we remain on the right track, we must share
our feedback and our programs more often, we must develop and
refine our plans more strategically, we must hold ourselves
even more accountable for outcomes, and, as with the financial
management line of business, we must identify more options that
actually deliver true results.
Rest assured that I will continually work to overcome the
barriers of uncertainty and open the roads of opportunity. I
look forward to continuing to work with you to achieve this
vision. And the remainder of my written testimony is submitted
for the record.
[The prepared statement of Ms. Combs follows:]
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Mr. Platts. Thank you, Dr. Combs. Your written testimony is
accepted in the record, and again I appreciate the in-depth
preparation of that testimony and your statement here today.
First, I'd say that your goal here is one that we do share
and that we truly get to state-of-the-art 21st century
financial systems across the Federal Government and find what
is the best match for each individual agency or department
depending on their own circumstances.
You mentioned that you are and continue to work through
clarification of what is expected and I think that's where
we'll start with some questions. In a broad sense in some of
the written documentation in the President's budget and your
memo of last December 16th in dialog between the committee
staff and your staff as to what is the mandatory nature of the
COE model and specifically for Federal agencies, I'm uncertain
based on what we've been given whether it's mandatory that
every agency will either become a COE within the Financial
Management Line of Business, or migrate to one, or is it
mandatory that they just have to do an analysis of whether they
need to become one or do one but not have to necessarily become
one to migrate. So if you could clarify that specific and start
there.
Dr. Combs. Thank you. First of all, we must start with the
specific systems that need either new financial systems or an
upgrade to their financial systems. Those are the ones that
would be in the category that you just asked about. And the
answer is they must consider the step of either becoming a COE
or they must consider migrating to a COE.
And as you mentioned in your question a moment ago, one
size does not fit all. We are aiming to look for alternatives
for specific agencies. First and foremost, they must make good
business decisions as they do the analysis, and I must also add
they're not in this alone when they're looking to make
financial management changes. They have a wealth of services at
their disposal in OMB to help them through.
We are looking forward to guiding many of these efforts as
we go along to make sure that they have all the right
information that they need. We're constantly updating and
upgrading some of our information that we've learned over the
past few years, and will continue to do that. We're continuing
to get information from both the private sector as well as from
you folks about what you think is working and what you hear. We
welcome those kinds of opportunities. But they do need to
consider the step and we just think they first and foremost
have to make a very good business decision.
Mr. Platts. So, one, if they're not making a major rewrite
or overhaul of their financial management systems then they
really don't fall into this area at all. It's only if they go
to make a change in their financial management systems then
this analysis has to be done.
Dr. Combs. Well, the thing I would clarify on that is that
there are certain thresholds that they need to look at and I
think within the financial management arena, as part of our
integration here with e-Gov, there are certain thresholds that
they need to meet and this would kick in.
Mr. Platts. Maybe we can expand so I know what those
thresholds are and because some of the confusion, Ms. Evans, in
your conversations with my staff, it's different than what
we're hearing today, that it is mandatory that everybody's at
some point going to have to become a COE or migrate to a COE.
Ms. Evans. And so this is where the partnership comes in
and this is the discussion that I have had with your staff, is
the way that we constructed the governmentwide business case
based on the analysis that came from the interagency task
force. So there was a task force that made recommendations to
us, there is a threshold, as Dr. Combs has laid out, and the IT
analysis, the IT portion of this is mandatory. And so that, for
lack of a better description, would be similar to application
hosting.
So you do have to do that analysis and you do have to go
forward. However, there is a piece that you brought up that if
you aren't doing a major upgrade, if there isn't a major piece,
so if an agency has a plan in place right now to implement a
financial management system and we are monitoring that through
several different processes that we have in place, if they meet
all their milestones to go forward with that implementation
from an IT perspective only, they don't fall into making the
analysis of becoming a Center of Excellence or going to a
Center of Excellence until that plan--they don't meet the
milestones in the plan. That's the threshold.
So if I'm an agency and 2 years ago I had a plan that's in
place and I have been executing that plan accordingly and going
along meeting my milestones, I'm within the policy where we say
it's like 10 percent of cost schedule and performance, and
they're going along, then they continue along with that because
we don't want to jeopardize the objective, and that is having
good financial management information and having a system in
place that allows you to manage that. But if they fall off of
that plan and say they have to go back and rebaseline because
they've missed stuff.
Mr. Platts. So if they have a plan in place and they're
meeting their stated benchmarks or thresholds that were
identified, then it's not mandatory to become a COE or migrate?
Ms. Evans. Not at this point in the life cycle. This is all
based on the life cycle of the investment. So as long as they
continue on the path and they're doing well, we wouldn't go to
that agency and say stop everything you're doing.
Mr. Platts. How about a specific example is NASA, where
they are with their enterprise resource system, and they've
taken some big steps trying to reorganize their financial
management. How would this apply to them?
Ms. Evans. In the particular case that we discussed with
your staff, with NASA, they do have an extenuating circumstance
where a vendor would come in and out of their control there's a
change that's occurring within the execution of that plan,
where they have to upgrade based on the product that they had
selected.
Because that's a major change in the system, that is where
we then ask the agency to go and do the analysis, does it make
sense for you to continue on this way making a good practical
business decision analyzing across the board of what does it
mean if I continue on this path doing it myself or I need to
look at can I share the resources of other agencies going
forward who will have this similar issue that NASA has because
that particular vendor is upgrading.
Mr. Platts. I want to try to make sure I'm following here
because your statement that with the IT component, the IT
portion it is mandatory for any IT investment----
Ms. Evans. Yes.
Mr. Platts. That you're going to become a COE or migrate to
one, not just do the analysis.
Ms. Evans. No. Let me restate that. It is mandatory that
you have to do the analysis and that you have to meet the
threshold in the business case, OK. So the business case, in
the governmentwide business case it's constructed in a tiered
approach, so when you look at it, the first tier, which is the
IT application hosting area, that is where you would become
either a service center or a center, or get your services from
somewhere else for the application piece only. So it doesn't
mean that all the financial services that the Government does
would automatically move to the Center of Excellence. So
there's a real fine line in the way that you're saying it.
Mr. Platts. So for every department, agency, for the
application hosting part of every department agency, it is
mandatory that either you are a COE or you migrate to a COE.
Ms. Evans. Yes. That you do that analysis. The basic black
and white line is yes, sir, from the IT portion.
Mr. Platts. I think our dialog right here is part of the
confusion within the financial management sector of the Federal
Government, is that just getting to what is mandatory if
anything I don't think has been real clear, and I think the
bottom line is that portion is mandatory.
Ms. Evans. Yes. A portion of it is mandatory the way that
the business case was constructed, and the simplest way to
explain it is the application hosting. So it's like where I buy
my servers from, where my servers would be housed, that type of
piece. And that is the floor, that's the basic mandatory piece.
So think of it as does it make sense that NASA has to buy a
whole host of servers and then DHS would buy a whole host of
servers and Justice. So it's like the hardware and then the
pipes that run that.
Mr. Platts. When you go beyond that, then it's maybe you
have to migrate or become a COE, depending on whether you're
meeting benchmarks in your delineated financial plan.
Ms. Evans. That's where it kicks over to the analysis that
Linda's team is doing.
Mr. Platts. You talked about the benchmarks. Can you expand
on that and what you mean by where the benchmarks are achieved
or reached?
Dr. Combs. I think the best way to describe it is that if
an agency comes in and they have compelling evidence that they
have a best value or a lower risk alternative, we really want
to help them consider that. So when we say, as Karen just
pointed out very well, a COE or the best alternative, we're
willing to listen to them if they have conscientiously
considered what good business decision there is to be made
relative to that financial management piece.
So I think exceptions to this policy will be made based
upon good business decisions when it kicks over to me at that
point, as Karen just made.
Mr. Platts. I guess before it gets to you, Ms. Evans, with
it being mandatory on the application aspect, obviously--what
assessment is done there as to whether they need to become a
COE or are determined to be a COE or migrate to one. There's an
assessment done I guess there first before that mandatory
effort takes place.
Ms. Evans. Yes. What happens is a series of activities, the
first starting with the business case that an agency would
submit. They submit that on an annual basis to us for their IT
investments and we go through an extensive analysis of how they
manage IT overall in an agency.
So this is one of many services that they provide. So we
look at all those business cases, we analyze those, we also get
their cyber security information through our annual reporting
requirements. We look at a whole lot of things, their
architectural efforts, and that is their overall plan, what
they have today, what they're moving toward in the future, and
we look at that in totality along with their ability to
execute.
So we also get on a quarterly basis reports from the
agencies of what we call a high risk investment. We have a list
of what we have as high risk investments in each of their
portfolios. So we monitor their performance on a quarterly
basis as well.
Mr. Platts. And then you'll make a determination that yes,
you're a COE?
Ms. Evans. Well, we made the determination, and this is
another one where I think I agree we need to do a better job
communicating out what needs to be done here. What we do is we
also have a due diligence list. If an agency comes in and says
I have decided that I do want to be a COE, we have very
specific instructions then that go out to the agencies every
year on an annual basis so that they can make this
determination through their internal capital planning process.
When we go through this list, and what they have to do is
construct their business case in a way that shows this is what
it costs for me to maintain this service for myself, meeting
all the objectives that they have to meet, the financial
management, measuring that information, doing everything that
comes out of the policy area from Dr. Combs' area.
Then what they have to do is construct the business case in
a way of showing what is the incremental cost associated with
bringing on additional customers, and then we evaluate that
business case based on their capability to provide the service.
So what we say, and if you go back when we announced these
in the President's budget the very first time, is we said this
group of people appear to have the capability to become Centers
of Excellence. So it's not like boom, you're a Center of
Excellence and that's it and all the business comes to you. We
were very careful about saying they appear to have the
capability to be able to do this based on the way that they
constructed the business case and their business plan in order
to meet the same objectives that they have now and then take on
additional services.
Mr. Platts. So your determination is they have the
capability, but you tell them so they know whether they have to
migrate to somebody else or stay in-house.
Ms. Evans. From an IT perspective we work through these on
a case-by-case basis. If you haven't been determined to have
the capability in this area to be a financial management Center
of Excellence, then their existing plan, so we'll go back to
the first answer I gave, they continue on those existing plans
that they have to meet their financial management system
implementations unless we have notified them through this
ongoing monitoring process that we have that you have missed
all your major milestones and then we go back and work with the
agencies, just as Dr. Combs said, to work on a plan to mitigate
that risk and work through with them what is the best solution
for that.
Mr. Platts. That agency knowing here's what we're doing or
here's what we think we're doing, perhaps. At some point you
have to give them a clear answer that you're authorized to go
forward as delineated, or nope, you have to migrate elsewhere.
You have to make that cut.
Ms. Evans. Sure. We do that every year through the
President's budget process. So when we get these business cases
in and we evaluate them and through the ongoing oversight that
we have through the quarterly reports that we get, I mean it's
a constant dialog so it's not like once a year we give them
this information and they don't know what they're supposed to
do for the next year. So we get this information and it's a
constant dialog both with my staff and Dr. Combs' staff. So an
agency knows maybe not as clearly as we need to do this and
that we have to continue to put frequently asked questions out
and update the policy, but they have based on the way that
we're working this and the process that we have, they know what
their plans are and how they have to--and the plans that we're
holding them accountable to.
Do we need to be clearer? I would say there are a lot of
questions out there that we need to answer as we move through
this. And as Linda's vision was, this is not going to happen
overnight; this is a longer term effort.
Mr. Platts. How about a specific example, the 600 pound
gorilla, Department of Defense, 4,200 different financial
systems out there. If it's mandatory that they are either
becoming a COE or migrating, based on my 3-plus years of
chairing this subcommittee, DOD has no chance of being a COE
any time soon. Hopefully some day or some lifetime, perhaps,
but I can't imagine who is out there ready to be a COE to say
yes, we're ready to take on all of your application hosting.
Just seems like an impossibility. So I assume it is not really
mandatory for certain agencies. Is that a fair assessment?
Dr. Combs. I think that is a fair assessment. I think one
of the things that I'd like to add, to clarify, when we get to
the point where we're having a migration document, and we're in
the process as I mentioned in my written testimony of upgrading
that documentation which we are going to share with this
committee and with a number of other outside entities by the
end of this month, it will spell out more completely a menu of
shared services and more completely the due diligence checklist
that Karen spoke about.
There's some changes that we need to make to that and we're
planning to do that.
I think the specific question you asked, Mr. Platts, about
the Department of Defense, the transition plan that was
submitted by the Department of Defense was looked at very
favorably I think by the General Accounting Office and that
does include a lot of business transformation, not just the
financial management piece of that, but that is all included in
that entire business transformation, and as the financial
systems investment piece of that we need to continue to work
with them to see what they can do now because anything we do to
help them now will help them with their audit, it will help
with internal controls and it will make them a more excellent
financial management arena.
Mr. Platts. So if you're at DOD though, so the answer is to
the mandatory requirement, it's not mandatory because of the
reality of their circumstances?
Ms. Evans. Right. They submitted their transformation plan
which they're required by law and there are several pieces to
that transformation plan which all of us have been involved in.
So they're moving through that part. So from our perspective
that would be what Dr. Combs talked about earlier where there
would be expectations we need to make good business decisions
in order to achieve the goal, and the goal here is
transformation of many things happening within DOD, one of
which happens to be the financial management systems.
Dr. Combs. Can I just add one thing to that? When I talked
about this being a very long-term effort, I'm really talking
long-term. I'm talking about some of the long-term you
mentioned when you gave me your question a moment ago about
Defense. Any time we start on this journey we're going to have
to look at some things that are not optimum right now but
they'll get us to where we eventually want to go. When we go on
any kind of journey, we may have to go across a mountain, we
make look at some stoplights along the way. All of those things
serve us in getting to the long-term vision. There may indeed
be some, ``best practices or some shared services'' right now
internally within the Department of Defense that they can use
and can standardize and consolidate and make use of right now.
If that's the case, and as we go through this we will
definitely look at those internal shared services as a
potential mid-level step for them. And I think that is a
reasonable and reasoned approach as we go through this, not
thinking that's going to be the most wonderful long-term
solution, but maybe it is. Maybe that's where we need to be
with a department like that.
Mr. Platts. If we set DOD aside, because it certainly is a
unique animal, I mean the size of the department and the
challenges it has, we look at the rest of the departments and
agencies and with the four COEs that are out there right now
certainly don't have the ability to assume the responsibility
for all the other department agencies, and everybody is not
going to be a COE overnight. So what is your timeframe for
everybody else becoming a COE or migrating, and how does the
private sector factor into here, and maybe a second part of it
is when we look to the private sector--I guess the first part,
right now for a department or agency out there, are they going
to do a more theoretical analysis of becoming a COE versus
migrating, since in reality they aren't one and can't migrate,
so in a sense it's theoretical right now?
The second part is if they're going to migrate to the
private sector, will an A-76 study have to be done for that to
occur?
Dr. Combs. Well, first of all, there is no requirement that
they actually move to a shared service solution at a specific
time.
Mr. Platts. But they have to be a COE or move at some
point, right?
Dr. Combs. Well, it's one option that they are looking at.
Mr. Platts. Now I'm backing up because I thought we just
said it's mandatory that at least on one part, the IT
application hosting that, yes, you must be a COE or migrate. So
it's not an option.
Dr. Combs. That's the IT perspective, in that they would be
that from the IT perspective.
Mr. Platts. On the IT perspective, what are they to do
today if they're not a COE and there is no feasibility of
everybody migrating to an existing COE, in the next year what
do all the departments and agencies do regarding their IT
portion?
Ms. Evans. The way that we have constructed this and the
way that we're working through this with the agencies is that
they would do, the business case itself only assumed that two
major departments would start down that path. That doesn't mean
that you are completed and totally migrated this fiscal year.
What it means is you start down the path and you do everything
that Dr. Combs was talking about. You look at this as one of
the options. You look at the IT portion of this and you say OK,
I'm not going to do this any more internally within my agency.
I have a contract up for recompetition that provides this
portion of the services. What is the best way for me to compete
that service.
So they start the planning activities moving down that
path, providing all of the activities that they need to have.
As Dr. Combs said, there is not a time line that says these two
agencies will be completed at the end of this fiscal year,
those five at the end of that fiscal year. It's that you are
starting down this journey, as Dr. Combs has outlined for us,
and you're doing the analysis and you have a plan that you're
going to implement that's going to address the mandatory
portion. It's not like you can turn it off 1 day and turn it on
the next day over at your other service provider.
So you'd have to have the plan, you'd have to migrate that,
and you'd have to mitigate the risk.
Mr. Platts. On that portion that is mandatory do you not
have a specific timeframe, these two this year, five next year,
that within 2 years, 5 years, 10 years?
Ms. Evans. The business case assumes 10 years in order to
realize the benefits, that this would all be analyzed and done
within a 10-year time period.
Mr. Platts. So that everybody would be migrated to a COE or
become a COE within 10 years on the mandatory portion.
Ms. Evans. Yes.
Mr. Platts. On the non-IT portion, that assessment will be
done as to whether they continue on their existing, like NASA,
or have to do something different with the COE.
Dr. Combs. Yes. I would say, you asked about the private
sector in your question as well, and we've had a couple of
agencies fairly recent, EPA and Agriculture have both submitted
proposals where they're considering both the Federal as well as
the commercial COE at the same time, and we think that's
healthy competition.
Mr. Platts. And the Circular A-76, is that review required
as part of that?
Dr. Combs. Yes. If it's 10 employees, the specific
regulations that are required of that. And we think that
competitive migrations are a good thing.
Mr. Platts. It would seem there's going to need to be a
healthy partnering with the private sector to handle the volume
we're talking about.
Dr. Combs. Absolutely. That's an excellent point. Because
we think that we can only get to the vision that we laid out in
the very beginning if we have a very healthy relationship and
collaborative effort both with private and public sector shared
servicing arrangements.
Mr. Platts. The 10-year timeframe that we talked about is
similar to Department of Transportation, which is kind of a
model out there. Basically what they've done in getting to
where they are, my understanding is they are a good model but
they're still kind of working on it. So when we talked about
all departments and agencies is it 10 years from kind of when
they begin the process or 10 years from now for everybody? I'm
not sure what is envisioned, how that general timeframe of a
10-year span applies.
Dr. Combs. Well, thank you for bringing that up because
that does bring up another important opportunity we have here.
We'd like for it not to take 10 years for every agency to do
that, we'd like for it to be done sooner, and because it was
the first in that it's the only still yet department that's
operating on one instance of software for their entire
financial management system, we think that it is a good model
and we very much would hope that there's some other agencies
and departments that can learn from the experiences that they
had and that there are opportunities for sharing those best
practices and maybe with future endeavors we can accelerate
that time line a little bit because some of the departments are
going to have more data integration difficulties than others,
and having been at DOT, I would say we had some very large
challenges there with the data integration piece, and that is
one of the more troublesome aspects of incorporating into any
new financial management system as you're aware.
So all of those conversions that have to take place are
very troublesome and take up a lot of time, energy and effort.
But we would hope we could learn from that and as we develop
further work through this, we can standardize more, we believe,
and we can make things more transparent, and we believe that we
can have better opportunities and that maybe it won't take
quite that long on the next one.
Mr. Platts. And I hope that's accurate, that we get better
and better at it and learn from each other within the
departments and agencies, and if we could get DOD to replicate
DOT on that one plan or one providing system, that would be a
miracle. But we won't hold our breath on that effort.
I want to move on to a couple other areas. Just what is
expected and the timeframe for the departments and agencies.
When we talk about the migration, what's mandatory, what's not,
the IT part versus the non-IT portion of the financial
management systems. That we work hard at making sure that's
very clear out there to the departments and agencies and what
their expectations are so that buy-in occurs if we're going to
be successful. We certainly need that from everybody. While we
hope it's quicker, that from some of the hearings we've had and
regarding expenditures of funds to adopt new systems that find
out that we spent $100 million and didn't get what we need,
using the Bureau of Public Debt, which seems to have taken a
very methodical approach in doing what they're doing, that
model of methodical deliberateness is appreciated so that we
do, whatever we migrate to, COEs or work with entities that
become COEs, that those models are truly followed in all
aspects.
I think, Dr. Combs, you mentioned earlier about the service
level agreements and getting more guidance I think by the end
of this month. That part of that, if there's a failure of a COE
to perform up to par, expectations, that the host COE is going
to bear the cost of the new migration, wherever it's to. Can
you share whatever you have today while you're formalizing or
finalizing this guidance and is there any kind of arbitration
plan envisioned as would be in the private sector? Typically,
there it gets to litigation, ideally arbitration. But what do
you envision for how to deal with that service level agreement
between a COE and somebody who's migrating to that?
Dr. Combs. I think we're continuing to look at and
encouraging good customer service and dual accountability
between anyone that would engage in a Center of Excellence
activity or shared service with their service provider and the
customer agency. And any way that we can work through the
transition of making sure that service level agreements are
laid out carefully up front, and one of the things we're going
to be looking at in the document I mentioned is trying to make
sure that we've built in some of the best practices and some of
the very best encouragements we possibly can to have that
accountability between those two parties.
But if something should happen and one does not live up to
their agreement, then I think for the most part we will look at
things that are going on today. I mean there are shared
servicing arrangements that are going on today in many
different aspects of what agencies, one agency does for
another. There are lots of agreements out there. And most often
those are able to be settled between the agencies. When that
does not happen, OMB plays a role, generally in arbitrating
between those two agencies. And for now, on this path I would
envision that's about where we would end up.
Now in terms of the mechanisms specifically, we need to
look at that, and I appreciate you bringing it up. We look
forward to any other arrangements that you feel like you are
aware of and we'd be happy to look at those so we continue to
evaluate best ways of doing that.
Mr. Platts. As part of that it will be kind of two types of
evaluation where OMB plays that role today between agencies,
but if we are going to use more and more the private sector
COEs, then it's a different ballgame because it's not internal
and so you have a whole different legal arrangement. Do you
envision that being some of the contractual terms of a private
sector COE up front agreeing that whoever the identified body,
if it's OMB, or go to court, or are envisioning something more
internal still to arbitrate yes, you failed to do as you
contracted to and you bear the cost?
Dr. Combs. Well, as I understand it, there are already
grievance processes in place to deal with private sector
entities of that nature. I was speaking to the public sector.
Mr. Platts. Grievances within the typical court system?
Dr. Combs. Within the systems that are laid out already
within the Federal Government where there are some grievance
systems already laid out for contractors that do not perform.
Mr. Platts. So basically nothing new, kind of following the
existing procedures in place?
Dr. Combs. Correct.
Mr. Platts. For disputes that exist. That does worry me a
little bit in the sense of in some of the oversight hearings
we've done where financial management systems at DOD, $100
million spent, and I ask how much has been recouped and the
answer is usually none that I know of but we'll check into it.
In these areas it seems that when it comes to Federal
Government getting its money back, it seems often to be a lot
harder or less common than when it's two private companies that
one or the other fails.
Dr. Combs. I certainly appreciate your thoughts on that.
We'll look at that and see if there are any different
opportunities we could look at relative to doing something a
little bit different.
Mr. Platts. Thank you. In your written statement in talking
about the current state of financial management, and we talked
about the nine agencies that are FFMIA compliant, in our
documentation there's only five that are deemed FFMIA compliant
per the requirement that the auditor report--that an auditor
finds they're in compliance, and that is only five agencies. So
I'm wondering what the basis of OMB's assessment is for when an
agency is FFMIA compliant.
Dr. Combs. The FFMIA allows for both the auditor and the
head of the agency to make FFMIA determinations and FFMIA
specifically requires that the independent auditor report
whether the agency financial systems comply with FFMIA. It also
requires that the head of the agency make a separate
determination based on the financial statement audit as well as
any other information deemed relevant. And when we use that
definition, we have Departments of Commerce, Education, HUD,
Labor, State, EPA, National Science Foundation, OPM and the
Social Security Administration as of fiscal year 2005 that were
in substantial compliance with FFMIA.
Mr. Platts. By that internal assessment the agency head,
not by the auditor's determinations.
Dr. Combs. Having been there, I can assure you that the
agencies certainly look at that, the agency head looks at that,
but the agency head, i.e., the secretary or the administrator
of an agency does have the determination.
Mr. Platts. Section 803 says FFMIA requires the auditor to
report whether the reporting entity's financial management
systems substantially comply. So what you're saying is that the
auditors have independently said 5 of our 24 major agencies
comply, 4 other agency heads have said well, we disagree with
the auditors' opinion and we deem our agency to be in
compliance. Does that kind of defeat the purpose of that
outside audit so it's not your own in-house decision?
Dr. Combs. I don't think it defeats that because, as I
said, having been there, I know that is a heavy, heavy weighted
part of an agency head's determination, but they do have the
responsibility if there is other relevant information that they
deem to be relevant to take that into consideration.
Mr. Platts. It seems that if I were being audited, I would
certainly want my auditor to know that other information in
making their determination because I'd rather not have an
auditor say to everybody you're not in compliance with the law.
So I guess I give greater weight to the independent audit in
assessing the financial.
And that question goes to where we are. The fact even if
we're at nine, less than half are FFMIA compliant, and the
intent of that act was to improve the business processes across
the Federal Government and we clearly have a ways to go if 15
of our 24, even internally, are believed to be in
noncompliance, if we use the independent audits, 19 of our 24
are not. It's that foundation, our focus of getting to FFMIA
compliance would probably help us moving forward on again a
shared goal but just that we're not jumping ahead.
Dr. Combs. No doubt. I share your concerns about compliance
and we continue to work on that through our internal controls
as well as we have not actually looked I don't believe at that
implementation guidance on FFMIA since 2001. We're currently
looking at that and we certainly will take your thoughts into
consideration.
Mr. Platts. And efforts like the regulations on internal
control assessment and compliance, I mean, I agree, you have
taken important steps toward that and that we not lose focus on
that as we're looking at other aspects such as the line of
business approach.
Related to again that foundation is that governmentwide
accounting code that you hope to get to by September 30th. Can
you expand on what you expect to have or hope to have at that
timeframe?
Dr. Combs. By September 30th the plan, and a lot of the
project management plan we hope to have in place; we certainly
don't expect to have the governmentwide accounting code spelled
out and the expectation is not that agencies are going to have
to do anything by then. We expect it's going to take us a full
6 months now to look at the project management plan for doing
that.
We feel like this is part of the standardization that we're
both seeking and we feel like if we can just get a set of
definitions and some common understandings about what the
governmentwide code structure would look like, that will help
us all in many, many different ways. I think the one thing that
we are sure of is that we're doing an assessment now to
determine exactly where each and every agency is at this
particular moment and even standardizing their own internal
accounting codes. And one of the things I think that you'll
hear both from the public and private sector folks who deal
with this is that if you're going to have a better financial
management system, you have to have good data quality and it's
got to be consistent. And the more we standardize, the better
data quality we'll have and the more consistency we'll have.
Consequently, setting up for the things we need to do with
audits governmentwide later on and internal audits themselves
and the first point of my vision that I articulated earlier
related to making sure these systems talk to one another
internally, this standardization will help us with that. But
the September 30th date that we have put on ourselves here is
for our own internal planning.
Mr. Platts. So on the internal layout what you hope to
achieve and then go to the departments and agencies and
developing an actual code?
Dr. Combs. They're actually helping with it. Part of the
as-is status that we have is that one of the things we're going
to ask all of the departments and agencies to share with us
what their current accounting system permits. And I know both
from my EPA experience and from my DOT experience and the
stream of accounting code that we had in both of those places
as we standardized it across the entire enterprise of EPA and
across the entire enterprise of DOT, there were certain
elements of that standard accounting code that needed to help
us with our financial management information. That was set
aside in the stream of accounting code and the standardized
code. Then there were certain other elements that the agencies
needed in order to do their own business management within
their own individual agencies within the department. And I
think we can accomplish something like that governmentwide.
Mr. Platts. The reason for the kind of where you are and
what you're hoping to have is again kind of that cart before
the horse question, and you touched on in your answer about
standardization being so important long term from the
deficiency standpoint and things and I asked about the FFMIA
compliance, and my understanding is by those outside auditors'
opinions, since we only have five departments or agencies
compliant with FFMIA, only five that are complying or using the
standard general ledger as they're supposed to, so we have a
long way to go to get compliance with a standard that's already
out there.
How are we going to add on a new standard or a new
uniformity when we haven't yet achieved compliance? That's why
it's kind of all wrapped together, those questions or those
issues, to what comes first. And the existing law is FFMIA
compliance. And if we keep focus on that, some of the things
you're doing are about FFMIA compliance, internal controls
especially, that will help us then get to maybe the next level,
which is a governmentwide accounting code and COEs and
consolidations of shared services.
I guess a subtle or maybe not subtle reminder of the laws
that Congress has already said are important should not be lost
in the effort of new initiatives.
Dr. Combs. Well, I can assure you, it will not be lost. We
have monitored, since this administration began, the
President's management agenda. That is one of the criteria that
we monitor, always, quarterly; and for many of these
departments and agencies we monitor it monthly. It is all in
our high-priority checklist. I have in my notebook that I look
at, every single day, which agencies are in compliance and
which ones are not.
Plus, it is transparent. There has to be a notation on
everybody's part that says there is a disagreement between the
auditor and the agency head, so that is not taken lightly. And
there must be compelling evidence for an agency head to make
that determination. So, one, it will not be lost. And, two, I
don't consider this a new initiative. I consider this to be an
ongoing attachment to what we are already doing in terms of
standardization.
Mr. Platts. And I certainly readily acknowledge here, and
with my conversation with Clay Johnson about these issues, the
efforts of the administration, the President's management
agenda from day one, the first year; you know, that is it is
important that we have and acknowledge that we have an
administration that is focusing on substantive financial
management reforms and improvements and staying with it. We are
seeking to do so with you as a partner.
Dr. Combs. I must say we truly appreciate the collaborative
operations that we were able to work through together, because
without the exposure and without the transparency that we both
created, we would not be where we are today. So we thank you
for that.
Mr. Platts. And when we get to our second panel, I know one
of the testimonies of at least one of the witnesses talks about
that foundation, that internal control, and that kind of
relates to FFMIA compliance; that all these feeder systems, if
they are not working well, then we can migrate everybody
wherever we want, but if the data coming in is unreliable and
inaccurate, it doesn't matter where we migrate to, we still get
the same outcome: bad information that can't be acted upon.
So that brings us back to that core level of where we need
to keep important focus as we look at strengthening the whole
system, the whole political process.
I am going to try to touch on a couple of other issues.
What we will probably do, because it is my understanding, the
remaining votes are in about an hour; is that right? Sometime
after 5, or maybe sooner. And with the second panel, we will
want to get to them, too. So we may ask you to followup some of
the questions just in writing, that we may not get to, that we
would like to have that clarification for us and for the public
at large as far as all the players and partners in this effort.
So now the tough thing is, where to go to, all the areas I
want to cover.
Why don't we talk about the issue of how agencies, in
determining if they are going to be their own COE or migrate,
one of the issues is going to be their ability to make the
investment. And then that relates to their financial structure.
And if it is an agency under compliance with the Economy Act
versus franchise fund agency, there is certainly different
abilities from their capital opportunity, year to year.
How are you going to acknowledge that or deal with that as
agencies make these assessments of what they can do or would
like to do as far as keeping it in-house or having to migrate
elsewhere?
Dr. Combs. I will say that our ultimate goal for each of
the COEs is that they should be in the best position possible
to meet the business needs of their customers. And I think one
of the things that we are continuing to look at right now is
how to evaluate these different financing alternatives. And we
look forward to working with you to see which is the best path
forward.
Mr. Platts. In the sense of how to fund them.
Dr. Combs. Correct.
Mr. Platts. Whether it is direct appropriations or
revolving funds? That is something you are assessing now?
Dr. Combs. Yes. We are looking at that right now, and we
would welcome thoughts from you related to that; because,
obviously, if you are in the private sector and you decide you
want to invest and do some venture capital and become a private
sector COE specializing in a certain area, and you have the
capability of doing that already, you decide you just need a
little bit more seed money to put into that, you can certainly
do that.
If you are in the public sector, it is a challenge for many
of these, what might be very best practices in shared services,
to come up with whether or not they are ready; and, if they are
ready, maybe they just need some capital to help them get
started to get on to enrich some of their current systems.
Maybe they have to get some additional equipment in to be
able to provide the service that somebody might want from them.
Mr. Platts. How does an agency deal with that right now? I
mean, because we have all the different types of financial
arrangements out there. Yet they are all under the same
requirement. On the IT side, you must do this; one or the
other, you know, your own center or migrate; and then, even
beyond that, for the broader picture you're going to have to
make a factual determination of whether you can keep it or
migrate.
So when do you expect to resolve this issue? Because I
would think for a department agency this is a huge issue for
them, to know up front what our expectations and abilities are.
Because if there is going to be a new source of funds that OMB
is going to ask from Congress for this purpose and that we need
to spend some more money so that we can create these centers
and here is how much it is going to cost, that is a different
scenario than if you are going to do it with what you have.
Dr. Combs. Right. And that has not been our model thus far.
For example, the Department of Transportation has a franchise
fund. They are able to keep about 4 percent, I believe, of that
in order to upgrade their equipment and do various things. And
for the most part, that is probably a pretty good model right
now.
But when I said a moment ago that we were looking at what
the other alternatives and other models are, we are not ready
to speak yet to those other models.
Mr. Platts. When do you think a final determination is
going to be made that the departments and agencies know that we
are going to advocate for you to become a franchise agency with
the 4 percent, you know, fee collection or retention.
Again, it seems like that is an issue that needs to be
addressed up front for the departments and agencies.
Dr. Combs. Well, one of the things that we have done thus
far is the--it is my understanding when these were
established--is that the agencies that were chosen to be a COE
were worked within their own--their own legislation. They had
their own legislation. And we just worked with that.
I have not yet seen the need to come forward with something
additional for that.
Ms. Evans. I would like to add--and this is one of the
alternatives that Dr. Combs is talking about--is that through
the E-Gov Act we authorized an E-Gov fund. And one of the
purposes of the E-Gov fund is to be able to do some--have some
of the flexibilities and things we are talking about. The
administration has gone forward, and we have asked, and it is
included in the President's budget. But as we go forward and we
determine exactly what needs to be done, such as capital
improvements and those things for COEs, that is a flexibility
that Congress has already given us through the E-Gov Act. So
that is there.
And we have to look through on a case-by-case basis. And
Dr. Combs is right: Given the current appropriations of the
COEs that we said had capabilities now, it was--the plan was to
work within their current appropriations and then request any
modifications that we may need going forward, working with the
agencies and working with the Hill.
Mr. Platts. That approach now, though, will create an
inequity as far as agencies, departments, which are more likely
to be able to be their own--versus those that have to migrate--
doesn't it, because their source of funds vary in what they
have in-house?
And that is kind of what I was after is how do you deal
with the inequity between departments and agencies; what their
vision is hey, we would like to be a COE, but we don't have the
same funding source that they have. How do you deal with that?
Or are you just thinking you don't; you deal with what you
have, and if you can't do it, then you have to migrate?
Dr. Combs. We are looking at the current authorities that
are available to each one of the areas or agencies that would
consider those--that as an option.
And I would say to the extent that we find any competitive
disadvantage, as you just talked about, we would want to work
with those potential COEs or those COEs, if we find they are
already there, to identify what potential options are out there
for them. And we would certainly need to work with you in order
to talk through that, before we do that.
Mr. Platts. I guess that falls into that category of part
of our hearing today is just trying, with you, to work through
the kind of the gray area out there of how this is going to
play out, so that, you know, you're able to give this clear
delineation to departments and agencies, and our
responsibilities of overseeing those same agencies; we know
what is a fair expectation of them within these new efforts and
this initiative.
Let me touch on a couple of other quick questions, and then
we need to move to our second panel. One of the challenges of
the Federal Government has been getting full cost accounting
and true cost of what we do. And we have not been very
successful, I guess, I would say across the Federal Government.
How can we in making the assessment that is part of the
decisionmaking process, of moving, you know, migrating
somewhere else, doing it in-house, or we don't have to become a
COE or migrate, what we are already doing is the right thing,
without full cost accounting being well embraced--maybe is the
right term I am looking for--by the Federal Government, how do
we make that factual determination today?
Dr. Combs. Well, obviously, I share your concern that we
need full cost accounting and we are continuing, as you know,
to work toward that.
But there are other ways that agencies today are capturing
cost. And every year they have to submit their annual cost
information through their exhibit 52s as part of circular A-11
to Karen's office.
And I think through the performance measurement work stream
that we have, as part of our financial management line of
business, we are continuing to figure out different ways that
will help agencies to identify these costs and quality, as well
as the timeliness and metrics, and I think that agencies have
the potential to look at other pricing proposals of potential
providers. They don't have to just depend on the cost
information that they have within their own disposal.
Mr. Platts. The more we get to that shared goal of full
cost accounting, the more accurate any of these types of
assessments are going to be, so the more emphasis we put there,
again, will help us in coming back to that foundation approach,
to have the best out of possible to make an assessment on this
issue.
In your written testimony, the Financial Services
Integration Office did a cost analysis of what is expected
here. Is that something we could have shared with us?
Dr. Combs. Certainly. We are happy to share that original
FMLOB business case with you.
Mr. Platts. Great. Appreciate your doing that.
Let me maybe just conclude with one final question. And the
original intent of the CFO Act was really to take financial
management kind of out of that, ``back room,'' and we're
talking about the back room services here, and really put it in
the front room; in fact, put it right where the secretary for
that day-to-day strategic planning decisionmaking--you name it.
Is there some concern or something you have thought of that
you are, in moving it out in essence, offsite, that you are
moving financial management to the CEO over here, not internal;
that you are diminishing that level of importance that Congress
intended with the CFO Account Act?
Dr. Combs. No, sir. In fact, I would say that the more we
can take the CFO and continue to keep the CFO in the boardroom,
the better. And the way we do that is to solidify their seat at
the table, the CFO's seat at the table, by adding value to what
they do.
And the more that they have an opportunity to give better
data to their colleagues who are around the table with them,
and to do better analysis for their colleagues around the
table, and for the secretary and deputy secretaries in these
departments, the better they are going to be at the seat at the
table in the boardroom, not in the back room.
So the more they can do shared services, which they
obviously still--they have to spend a lot of time right now
when they are in-house when they are doing heroic efforts to
get the clean audit and to take care of some of those daily
functions that add value right now--the more we can take that
and move it to something that is truly excellent in financial
management, the better the CFOs are going to be, because they
are going to have more time to do the analysis and more time to
do a normal CFO function.
Mr. Platts. I share the assessment if the premise is that
CFOs are getting that reliable good information in a timely
basis. My reason for the question is when we had Gwen Sykes
with NASA here a year and a half or so ago, and we talked about
her oversight of the 10 centers, and the fact that CFOs in
those 10 centers didn't answer to her, but she was responsible
for giving, you know, the NASA, the administrator, the reliable
information, being responsible to make these, but she had no
control over those center CFOs, they didn't answer to her. Her
ability to tell them, ``I need it today, I need this,'' is a
lot different than today, where they have restructured
appropriately so she has more direct control.
So my worry is if it is over here, that COE is
contractually responsive to that CFO in the customer agency or
department, but as far as direct hiring, firing, disciplining
of whatever may be, that CFO doesn't have that direct control
over the personnel that he is relying on the information from.
And so if they do the job well, it is accurate, it is
excellent information, but he gives up some of his authority or
control over the people he is relying on providing the
information. And that seems to be going more toward what NASA
used to be than what we have tried to make NASA become. That is
the reason for the question.
Dr. Combs. Well, thank you for the question. If I thought
that were the case, I would definitely not be an advocate for
it. But I don't think that is the case.
In fact, I think that it will give the CFO even greater
control because they, like today, they're responsible for the
information, period. And if we do the contractual agreements
correctly, and the CFOs truly know what they are getting, they
will actually do better.
Mr. Platts. I think the key there is the terms of those
contractual agreements with the host COE, whether it be a
public or private, maybe even especially if it is a private, of
how responsive they need to be to that CFO, and to those terms.
One final area that I meant to ask about when we were
talking earlier about the FFMIA compliance in general is, Ms.
Evans, I think you referenced your due diligence review to
become a COE and that review process.
It is my understanding of the due diligence review, GSA
would not have met that in the past with an audit; 2005 audit
not being a clean audit, and 2004 being rescinded, a qualified
audit being rescinded. If that was the case when they first
were certified, they wouldn't have passed the due diligence
review.
So what is their status today? Are they still deemed a COE,
despite the 2005 audit findings and the rescission of the
qualified 2004?
Ms. Evans. And I would defer this particular question to
Dr. Combs because----
Dr. Combs. The answer is yes. GSA will continue to be
recognized as a CFO.
We expect as potential customers want to go to GSA, that
they would closely evaluate whether or not they are losing
their clean audit opinion, would affect them or would give them
any additional risk by going to GSA.
We believe that GSA's reasons for losing their clean audit
was based on not anything related to their shared services
arrangements with their customers, but other problems that are
isolated in other program areas.
And so we believe that agencies looking to migrate to a
shared service provider, they need to certainly understand
whether their findings could impact their own audit. But at
this point, we don't believe that is the case.
Mr. Platts. So having a clean opinion is not a requirement
to become a COE?
Dr. Combs. It was a requirement in the original.
Mr. Platts. So, from here on out, any agency that wants to
be a COE in the future does not have to have a clean opinion to
become one?
Dr. Combs. Yes. Yes. They do have to have a clean opinion.
Mr. Platts. I am not sure, then, how you retain your status
as COE if you no longer have clean opinions.
Dr. Combs. The entity itself should have a clean opinion.
For example, the Bureau of Public Debt does a great, great job,
and everybody--I think some of your staff even visited with
them. We are proud of the job that they do.
They are part of the Department of the Treasury, which of
course does have a clean audit. They have a material weakness,
for example, but it doesn't relate to the Bureau of Public
Debt, it relates to another entity.
So, yes, departments that are considering a COE should look
at whether or not the entity, the COE, has a clean audit
opinion.
If that entity does, then they need to take that into
consideration. If it doesn't, they need to take that into
consideration.
If it is a case like GSA where they have lost their clean
opinion, we wouldn't just take all those customers out of there
because they lost their clean opinion. That would not be a
practical approach.
Mr. Platts. When would you take the customers? What has
happened, or has to happen, for somebody to lose their COE
status so that their customers have to migrate somewhere else?
Dr. Combs. The customers would need to come to us and say,
``We are extremely unhappy,'' to begin with.
Mr. Platts. So it is not a factual determination, you are
no longer a COE, so now you have to go somewhere else? Because
it seems that is what it is up front. Maybe the customer
doesn't get to decide who is a COE, OMB does. But then whether
they stay with them as a COE is up to the customer. It seems
like a different standard.
Dr. Combs. Well, the customers are going to look at that
performance of that COE based on the services that they are
getting. And if they have sustained poor performance, I expect
that in the daily, monthly, weekly meetings that I have with
the COE recipients, I would hear about that. And we would
certainly need to address that.
But the sustained poor performance is probably the key
factor that would cause customers to want to leave.
Ms. Evans. And I would like to add, I want to go all the
way back. When we made the determination based on the due
diligence list, I want to stress again it is they appear to
have the capability to provide the service.
So everything that Dr. Combs is talking about now is their
actual performance. And so every--all the decisions that the
agencies have to make, have to be based on risk and their
ability to address that risk, as Dr. Combs has laid out.
So even though you have the designation, that you appear to
have the capability to do it, that is why we are stressing and
Dr. Combs has talked specifically about the competition piece
and structuring what agencies need to have in order to meet the
financial management improvements and get a good clean audit.
So we are relying on the agencies also, just like they
would any other procurement, to be looking at what are all the
risk factors as I am planning and going forward on this. And so
that is--clearly, as you have highlighted, that is a risk.
Mr. Platts. But their requirement is to migrate to a COE,
that they--I mean, that is the requirement that is going to be
placed on them. Mandatory at some part, and perhaps mandatory
or at least possible on other parts of the effort.
And so they don't have a say in that determination. And
once they are there--so, if I am reading correctly, when they
first go to COE, you are going to say, this entity is
certified, so if you go with them you're complying with this
requirement that you are either a COE or migrate to a COE,
because they have been certified; this providing agency has
been certified. They do go there.
If that agency does things that takes them out of a COE
status, will they still have the choice to say, well, for us we
think it is still working for us, so we can stay here even
though they are no longer deemed a COE? That is a question I am
not sure there is an answer to right now.
Dr. Combs. I think you're right. There is no answer to that
right now.
Mr. Platts. I think the department's and agencies need to
know that answer before they are expected to migrate anywhere.
Because if I am a guy at agency A and I say, well, we don't
want to make the investment to become a COE, and the Bureau of
Public Debt is doing a great job so we are going to them, but
if next year they are deemed to no longer be a COE, I need to
know what my choices are, what the consequences for me are in
deciding to go there. You know, am I going to have to spend
money? Are they going to spend money? Those are the things you
need to know up front.
Ms. Evans. We have this issue on all of the E-Government
initiatives where we cross-service on all the E-Government
initiatives. I am going to tale it up a level, maybe a little
higher than just financial management.
The issue that you're outlining right now is a major risk
area that we have with all of the 25 initiatives in all the
lines of business.
And so we have implementation plans that we work through
with each of the agencies, not just on this initiative but on
all of them, because of what exactly you are saying. Like we
have based on like E-Travel, it is when we go and we do that
competition and we awarded who the travel providers are, the
assumption is everybody is going to do their job. And the
agencies had plans to migrate to those travel services because
of the policies we had in place.
That is a good initiative to share, where we have had a few
of the service providers did not do what they said that they
were going to do. So we had to specifically go back and work
with those agencies to work with what those migration plans
are, what the effect of that is, how that addresses the
governmentwide initiative from a whole, how to mitigate that
risk with that agency because they are depending on those
services. All of these agencies are depending on these cross-
services across the board. So that--I don't disagree with you,
that is a big risk on the cross-agency governmentwide
initiatives.
Mr. Platts. I think whether it is travel, financial
management, whatever it would be, those answers should, as best
possible, be known up front. If the provider you go to fails,
is no longer a COE, here are the consequences, your options;
and whether you have the option of staying, you know, because
they are serving you well, and you can show that, or you don't
have the option, that goes to that just knowledge based up
front.
And the reason, you know, in the financial report for GSA,
why I asked is, the November 12 Report of Independent Auditors
on Internal Control noticed significant weaknesses in GSA's
financial management system surrounding processes and controls
relating to budgetary resources arising from the primary GSA
service of customer agency order processing. Further down it
says, weaknesses cited in the past included that GSA's
financial management systems and feeder systems were not
configured to support budgetary financial reporting.
That sounds like my read on that, and as a layperson I
qualify, that there is financial management problems at GSA
that I would think relate to whether they are a center of
excellence for financial management as a financial management
line of business.
So, and the fact that they no longer have a clean opinion
and the 2004 was rescinded, seems that this goes to financial
management at this financial management COE.
Dr. Combs. I think your concern I share. But the other
mitigating circumstance here revolves around the actions that
we take at OMB for any agency that has even any identified
material weakness.
And one of the things we do is we immediately put them on a
corrective action path and a corrective action plan.
And that is where GSA is right now. And we are monitoring
that very, very closely.
And based on the corrective action plan, they are held
accountable for making a lot of corrections and resolving the
problems, both through the President's management agenda and
through other work that we have.
And as I said, if we have customers of theirs that do not
believe they are getting the kind of service they feel like
they deserve and the excellent service that they think they are
paying for, then we will definitely look at that. But thus far,
that has not happened.
Mr. Platts. As more and more agencies and departments
migrate to COEs, this is going to be an issue that is going to
be more likely occurring. All the more why I think it is
important to address now if an agency is a COE, everybody
migrated to them, their clean opinions are rescinded, in their
area especially of financial management, so now they have a
corrective action plan in place. What does it mean long term,
you know, if you are a customer agency, you have the right to
go somewhere else that does have that clean opinion, like the
Bureau of Public Debt, and the host COE has to pay for that.
Those are the type questions I think you really want to
work out up front, not to when you get--not just when you have
a few COEs but many, or many agencies going to those COEs.
Dr. Combs. And I think that is excellent forward-looking,
because right now, obviously, we don't have that many different
choices. But we will eventually, both in the private and public
sector.
Mr. Platts. And even if it is 10 instead of 4, or you are
going to have many more agencies migrating. And that is the
real--where that migrating agency has that answer, more
importantly than the actual COE has the answer. And that might
be a good place where we stop, because it really is the purpose
of today's hearing and the ongoing dialog is thinking through
all those scenarios of what is expected of these departments,
agencies. What happens if these scenarios play out from an
oversight, you know, what are we going to look to in providing
our oversight, fulfilling our responsibilities, the
expectations of these agencies?
So I appreciate the exchange and very much the good-faith
effort of achieving this very worthy goal, which is that
economy of scales. Whether it is public, private, this is
obviously something we want to be pursuing and especially when
it is taxpayer funds.
So we look forward to continuing to work with you, Dr.
Combs and Ms. Evans, with your efforts at the committee level,
members and staff; and ultimately, short term and long term,
have success in this important initiative.
Thank you for your testimony.
Dr. Combs. Thank you. And we appreciate your help and the
help of your staff.
Thank you.
Mr. Platts. We will take maybe a 2-minute recess while we
reset the second panel, and hopefully we will not have that
vote board go off in the meantime.
[Recess.]
Mr. Platts. OK, we will reconvene the hearing and
appreciate our second panel's patience as we proceeded with Dr.
Combs and Ms. Evans, and again are very grateful for your
participation, your written testimonies that you have provided,
as well as your being here for testimony today and Q and A.
First thing we will do is have you all stand and be sworn
in and then we will get into statements and questions.
OK, if you raise your right hands.
[Witnesses sworn.]
Mr. Platts. I think what we will do is just go down the
line: Mr. Kull, Mr. Marshall, Mr. Williams, and we have 5
minutes. I would like to say take more time if you need. My
only worry is I think getting to the questions will be helpful,
and we have no idea when the votes are coming. So we have been
trying to get an answer, but they have not been very
forthcoming. But we will do the best we can. But we wanted to
also allow each of you to have that opportunity to capture the
sentiments of your written statement.
So, Mr. Kull, if you would like to begin.
STATEMENTS OF JOSEPH KULL, PRICEWATERHOUSECOOPERS LLP; JOHN
MARSHALL, VICE PRESIDENT, CGI FEDERAL; AND CLIFTON A. WILLIAMS,
PARTNER, GRANT THORNTON LLP
STATEMENT OF JOSEPH KULL
Mr. Kull. Thank you, Mr. Chairman. I appreciate the
opportunity to comment on OMB's Financial Management Line of
Business Initiative. I will summarize my written testimony and
ask that it be inserted in full into the record.
Currently I am a director in the Washington Federal
Practice of PriceWaterhouseCoopers. My comments are based on
almost 32 years with the Federal Government, including 4 at
OMB, 10 years as a CFO, and over 20 years as a budget director.
The views I express will be my own and not necessarily
represent the views of PWC.
The FMLOB Initiative proposes to improve the cost, quality,
and performance of financial systems by leveraging shared
service solutions and other governmentwide reforms that enable
efficiencies in Federal financial management.
It is hard to argue with an idea that embraces those
objectives, and I believe it will and should happen. But it
will take time, leadership and vision.
So the question is: How best to manage the process for
success?
First let me comment on the current state of Federal
financial management, which I believe is good and getting
better. Every year agencies are improving the quality and
timeliness of their information, providing managers with
realtime data so they can run their programs better. This is
remarkable progress and the Federal financial management
community should be proud of its contributions to achieve this
level of performance.
Of course, there is still plenty of room for improvement.
Agencies need to resolve major issues so they can get and
sustain unqualified or clean opinions. The key to that effort
is the need to complete efforts to improve their internal
controls. This wider effort will focus attention and resources,
people and dollars, on building a strong controlled
environment. This should be the highest priority. Our core
systems are only as good as the data flowing into them from the
feeder and subsystems. Agencies need to be sure that the feeder
and subsystem business processes and controls are working
effectively before moving to a shared services environment. The
private sector can play important roles in these efforts. Many
firms can provide the accounting, auditing, software, hardware,
and consulting services that will be necessary to help agencies
improve as they move toward the new environment.
Many firms also have knowledgeable staff and experience in
similar private sector efforts and can leverage that knowledge
and experience to ensure agencies benefit from best practices.
There are valuable lessons to be learned from these
experiences, including developing appropriate performance
metrics, drafting enforceable service level agreements,
transition migration issues, and strategies in developing
backup and continuity of operation plans, just to name just a
few.
Moving to a shared service environment will also have audit
implications for the agencies serviced as well as the service
provider. Under the revised A-123, agencies must obtain an
understanding of the controls of the service provider, as well
as evidence that such controls are operating effectively.
There will also be an increased need for cooperation and
communication between the auditors, management, and the service
providers to ensure that requests for information by the
auditor are met adequately and on time.
We should not assume that moving to a shared services
environment will magically standardize business processes in
core accounting systems. Transformation on this scale is
difficult and tedious, made more so by the fact we are dealing
with the largest, most complicated business enterprise in the
world. It would be like trying to standardize information for
the 24 largest corporations in the country. The financial and
performance data needed to run Exxon or Wal-Mart will not be
the same data necessary to run Microsoft or Bank of America.
Even good proprietary accounting systems must deal with the
fact that the principal financial driver for most agencies is
the budget. For many agencies, compliance with budgetary
accounting requirements and appropriation law is a higher
priority than GAAP accounting.
In fact, my experience as a CFO was that most program
people were very happy to let me worry about the GAAP
financials as long as my systems gave them the reliable and
timely budget information they needed to run their programs.
There is another way to use and reuse the disparate data
without wholesale system changes, and that is with the
standards-based recording through XBRL, which stands for
Extensible Business Reporting Language. XBRL is a standardized
way to tag data, similar to bar coding. It does not change the
current USSGL and Federal GAAP standards. It simply captures
those standards in electronic or digital format that
applications and systems can process and understand.
That data element, wherever and whenever it is used,
retains that tag, allowing it to be permanently identified and
remembered by any application or system. It is a viable
alternative that should be looked at.
Finally, and perhaps most importantly, the financial
management line of business represents a major change in the
way many agencies do business. Such change takes time,
commitment and leadership.
Many system projects fail or falter because we have
inadequate resources to train, educate, and communicate with
our people throughout the process. Whether creating new systems
or improving old ones, people issues are often far more
difficult to overcome than the technological ones. In the end,
people can make a bad system work and a good system fail.
Leadership and commitment are absolutely critical for
success. In 1990, the National Science Foundation set a goal of
being entirely paperless in 5 years. This was visionary as well
as ambitious, considering the Internet didn't even exist at the
time. Each NSF director--and there were about four of them in
the nineties--subscribed to this vision and kept it as a
priority. The target date kept moving, largely due to
technology changes and resource constraints, but NSF management
remained flexible and focused. Today, NSF is virtually
paperless.
Vision, leadership, and commitment made this effort
successful. Decisions about business process, reporting
programs, and technology were made in the context of working in
a paperless environment. Equally important was remaining able
to adapt to changes. It was by no means a perfect process, but
it was more successful than most ventures like it.
Shared services, centers of excellence, and standardization
are good ideas that can work with adequate time, leadership,
sustained commitment and excellent people. The government has
an abundance of all four if it chooses to use them. Thank you
Mr. Chairman.
Mr. Platts. Thank you, Mr. Kull.
[The prepared statement of Mr. Kull follows:]
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Mr. Platts. Mr. Marshall.
STATEMENT OF JOHN MARSHALL
Mr. Marshall. Thank you, Mr. Chairman, CGI Federal
sincerely appreciates the opportunity to appear today. You have
asked for our views on the current state of financial
management, the Federal Government, and the Line of Business
Initiatives.
My written testimony has been submitted for the record and
I will quickly summarize it here.
CGI is vitally interested in these matters. They are
central to our business. We have spent 30 years implementing
Federal financial systems in more than 500 of the largest, most
complex organizations in the world. This includes more than 20
years' experience building, implementing, and maintaining
Federal financial management systems and 34 years in delivering
managed IT services to industry and government.
CGI now offers these services through our CGI Center of
Excellence. We are currently migrating the General Services
Administration and the Corporation for National and Community
Service to our Center of Excellence, with other Federal
customers to follow.
We also partner with GSA and the National Business Center
of the Department of the Interior to deliver services through
their Federal COEs. Based on our experience, we have four
central observations for this hearing.
First, we support the line of business and center-of-
excellence concept. The FMLOB and COEs, if structured properly,
hold promise for achieving the next stage of evolution and
improvement in financial management.
The government has evolved from establishing financial
systems to certifying and implementing modern systems to
achieve unqualified audit opinions.
A few agencies have tied financial and program information
together for strategic decisionmaking. These successes deserve
recognition, but there is still very much left to do.
In many agencies, back office administrative functions are
underresourced and lack the capabilities they need to meet
rising expectations for financial performance and
accountability.
The LOB Initiative can eliminate wasteful duplication,
establish world-class centers of excellence, and even enhance
the Federal financial management work force.
As low-value operational workload is shifted to a COE,
agency resources and jobs can be concentrated on the remaining
higher-value analytical functions of financial management that
directly contribute to mission performance. This opportunity is
a win-win for the Federal work force and the taxpayer.
Leveraging government investments to achieve these outcomes
makes good business sense. But the current operational model
must change to support this evolution, and that change is very
challenging.
To better understand the challenges to LOB success, CGI
recently hosted a series of forums for Federal technology and
financial executives. Two of these forums benefited from the
personal participation of OMB Comptroller Dr. Linda Combs. And
we thank her for bringing her important insights and leadership
to these discussions.
Listening to Federal CFOs and CIOs in these forums, we have
identified four policy and execution recommendations.
No. 1, OMB should extend its FMLOB vision to a blueprint
for the end state from an agency's perspective. This would help
agencies visualize how they can apply FMLOB services in their
mission context. CGI has developed a potential vision for this
end state and welcomes the opportunity to share it and discuss
it with Congress, OMB, and FSIO.
Second, there is an immediate need to establish a level
competitive playing field for centers of excellence.
As you have discussed with the earlier panel, public COEs
are not operating under the same rules. Legal constraints
prevent them from taking basic business actions, such as
creating financial reserves to refresh their technology,
conduct marketing and make other improvements to their
services.
Third, the competitive playing field is not level for
public COEs and private sector COEs. As one example, private
COEs must account for all their costs in a bid to protect
against liabilities that affect shareholders. It is unclear
whether or not public COEs fully account for all their costs,
such as items in direct departmental overhead appropriations,
in their bids.
Fourth, increased process and data standardization is
required. CFOs and CIOs cited standardization as critical to
reducing the complexity and cost of integrating feeder systems
with their financial systems. We don't recommend a drawn-out
standards creation process, but useful standardization can be
done and approached iteratively.
In the 1990's, CGI and other industry representatives sat
down with Federal experts to develop the JFMIP financial
certification program. That effort has evolved to set the bar
for software quality that enables Federal financial management
compliance.
We believe a similar degree of formal collaboration between
industry and Federal policymakers can help address LOB process
and data standardization issues.
Our second overall observation is that success of the LOB
initiative ultimately depends on agency-level leadership and
execution. In terms of agency readiness for using COEs, the
biggest implementation challenge is managing the required
change in mind set, culture, and day-to-day operations.
Agencies will have to transform from how they manage
operations today to how they would manage in a whole new and
different environment, with a partnership with a shared service
provider, a COE. They will have to shift their orientation from
buying software to buying a fully provisioned financial
management service.
In this new business model, agencies must view COEs as
extensions of their operations and their enterprise
architecture, bound and managed by an SLA.
By managing a COE-shared service as an extension of other
architectures, agencies mitigate the audit implications of
migrating to a COE. The CFO Council's implementation guide
accounts for necessary procedures to ensure proper internal
controls and reduce audit exposure of using a shared service
provider. If these procedures are combined with a strong
governance model, agencies using COEs can retain control and
maintain full compliance with Federal audit requirements.
In addition, as you discussed, Congress might consider
facilitating change by establishing new funding models for
public COEs.
In terms of agency readiness to become COEs, the quality
bar should be set very high.
We see five core critical competencies that COEs must
possess. The first is competency in large-scale business and IT
transformation backed up by many years of experience and
successful engagements.
The second, COE professionals must be experts at linking
financial management with technology and able to configure
daily financial operations to enforce strong internal controls,
integrate external systems and roll up data for reporting.
Third, COEs should offer tested best practices that are
continuously improved to leverage proven standard business
processes and technology.
These should extend beyond IT and application hosting to
include turnkey business process services offering efficiencies
and process improvements.
Fourth, COEs must be competent IT managers with proven
track records in applying technology across a wide range of
Federal programs and organizations.
Fifth and last, they should offer a framework for
delivering standardized services in a manner that acknowledges
inherent differences in agency missions and embraces agencies'
variety by offering flexible service options and
configurations.
Our third overall observation is the private sector has the
capabilities to deliver on these promising concepts.
IT firms like ours have invested substantially in the
expertise, standard processes, and proven technologies to
support for formal back office functions like financial
management. The government can leverage the private sector to
deliver its back office efficiently, under enforceable service
level agreements, so that Federal agencies can focus on their
core missions. The key challenge is demonstrating agency value
while managing cultural change. It works in the commercial
sector, and it holds great promise for the Federal Government,
if committed leadership, discipline and thoughtful execution
are present.
Our fourth and final overall observation is that the
private sector should actively engage in resolving these
challenges to realize the full potential of the FMLOB and COEs.
The Federal financial management community is blessed with
extensive expertise and robust participation from the private
sector. The industry stands ready to help evaluate improvement
opportunities and to develop creative solutions. Government can
benefit greatly by establishing a formal mechanism for
incorporating industry as an active advisory participant in LOB
policy development.
The President's management agenda emphasizes that
government should focus on its core competencies and leverage
private sector strengths to provide services outside its core
competencies. The FMLOB and COE concepts, if structured
appropriately, can do this. COEs are an opportunity for
government to purchase services, driven by expected financial
management outcomes, from service providers that can be held
accountable for quality service delivery.
COEs with large-scale IT, business transformation and
financial management expertise can reduce government cost and
risk. However, without the active support of top-level agency
leadership and diligent execution fundamentals of managing
tranformational change at the agency level, the FMLOB will fall
short of its promise.
We support OMB and the committee in your work and would
like to offer more input through a formal mechanism for
industry participation in the ongoing LOB effort. We can help
bridge our agency customer perspectives with governmentwide
policy perspectives to make the next stage of financial
management evolution a success.
Thanks again for the opportunity to testify today.
CGI holds the work of the subcommittee, OMB, and the FMLOB
Initiative in the highest regard. We share your deep commitment
to improving Federal financial management and ensuring the
confidence that true accountability brings to American
citizens. It is a privilege to work with you toward these ends.
Mr. Platts. Thank you, Mr. Marshall.
[The prepared statement of Mr. Marshall follows:]
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Mr. Platts. Mr. Williams.
STATEMENT OF CLIFTON A. WILLIAMS
Mr. Williams. Chairman Platts, thank you for the
opportunity to testify about OMB's Financial Management Line of
Business Initiative. My testimony source includes interviews
with Federal CFOs and other financial managers done as part of
an annual CFO survey conducted by Grant Thornton LLP on behalf
of the Association of Government Accountants.
The AGA is an organization of accountability professionals
dedicated to the enhancement of public financial management.
Among other education-related activities, AGA sponsors
professional development for government financial management
personnel, and administers the certified Government Financial
Manager [CGFM] program.
Grant Thornton is an accounting and business advisory
services firm headquartered in Chicago, IL. Our global public
sector practice is based in Alexandria, VA and provides
financial, performance management, and systems solutions to
governments and other international organizations.
The 2006 CFO survey includes questions about the Financial
Management Line of Business [FMLOB]. This year's survey is
still in progress, with the completed results due in June.
Today, I report on 40 interviews completed by early March of
this year. We guaranteed anonymity to our survey participants,
which encourages their candor.
I can summarize the findings of the survey related to FMLOB
in one sentence: Most Federal financial managers that we
interviewed favor the concept of the FMLOB. But they are
concerned about how the initiative will be executed. For
example, survey participants pointed out that the OMB Financial
Management Line of Business and Centers of Excellence concepts
are not new. Center of Excellence refers to shared service
providers for the Federal Government. One example would be the
Department of Agriculture's National Finance Center's work
related to payroll processing for other agencies. The NFC has
been a successful shared-services organization for over 23
years.
Indeed, the FMLOB Center of Excellence is part of a
broader, older trend of transferring routine infrastructure and
administrative activities to a shared-services provider.
Almost no survey respondent opposed the concept of shared
services, just as long as the service quality is good and it's
reasonably priced. Perhaps the only difficulty respondents had
in understanding the Centers of Excellence concept was the
scope and range of services to be provided by the centers. Some
respondents want more time to consider the option of becoming a
Center of Excellence or transferring financial activities to a
center. They say they have not had enough time to study the
pros and cons in general and their internal investment
equation. In addition, they want more guidance from OMB, such
as better definitions and the services to be provided.
Respondents were aware that OMB intends to provide additional
guidance in the near term. Some interviewees thought pressure
brought by the initiative is good because it accelerates
positive trends. These include consolidating information
systems, reducing cost, increasing standardization and
benchmarking their systems and operations. All want a fair and
honest comparison done before agreeing to a Center of
Excellence arrangement.
The respondents identified specific issues that must be
addressed for the concept to proceed; capital funding; lack of
true competition between public entities versus private sector
versus public-private consortia; the ability to fairly assess
the bids and proposals from the just mentioned types of
competitions; developing service quality measures and
performance standards; and establishing governance structures
for the relationship between the parties involved. The
structures need to give customers a voice in a provider's
operations. And, last, where will the money come from for
transitioning services and data?
There should be no negative audit implications for a
Federal agency that transitions to a shared-services provider.
This means that a Center of Excellence provider should comply
with regulations for information systems and internal controls
so that their customer agencies can rely on their controls for
their own financial statement audit purposes. However, several
respondents said that Centers of Excellence are not yet in
compliance with these rules nor will they in the near term.
You asked about the private sector's role in shared
services. Many respondents said that the private sector will
continue to supply much of the support and information
technology solutions used in public sector shared services.
Private companies are better able than Federal entities to
obtain funds for capital investments in new technology. Also,
the private sector has more experience in managing technologies
and processes of shared services. Most survey respondents who
answered this question also said that they prefer public-
private joint partnering over private-sector-only or public-
sector-only Centers of Excellence.
To conclude, financial leaders in our survey like the idea
of the FMLOB initiative but are concerned with its
implementation. Sound execution will depend on the following
factors: The ability to develop standard financial management
process throughout government; sound governance structures and
agreements between shared-services providers and their
customers; effective change management, to ease the transition
to a new way of doing some financial management operations;
excellent performance management, including service level
agreements and performance measures; good management of
customer relations and the technology and processes involved.
Thank you for the opportunity to testify. I would
appreciate your inserting my statement in the record. I will be
glad to answer questions.
[The prepared statement of Mr. Williams follows:]
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Mr. Platts. Thank you for your testimony, and the
information is included in the record. In your written
testimony and all three of your testimony here today is the
general appreciation for the benefits of this type of
initiative but a clear focus on a lot of the unanswered
questions. That, as you heard, was a big part of our discussion
with Dr. Combs and Ms. Evans.
One of the questions I asked, which the answer was clearly
not definitive, that there is no timeframe. That seems contrary
to the message of the President's budget. And then in Dr.
Combs' December memo that OMB has instituted a policy that
agencies seeking to modernize their financial system must
either be designated a public COE or must migrate to a COE.
Those statements now, I mean, not over the next 10 years, they
didn't share a timeframe of when they think this has to happen,
but based on those statements and the feedback we get from
within the departments and agencies, there is a belief out
there that it is really now that they need to be working toward
being a COE or looking to migrate.
Is that read an accurate one in your interactions with
CFOs, CIOs throughout the Federal Government? Maybe
specifically with your survey results, is that this is
something they are expected to be doing now?
Mr. Williams. Sir, I would tell you that almost every
respondent in our survey would tell you that they know they
need to be positioning for the Center of Excellence initiative.
They absolutely feel that way.
Mr. Platts. Any contrary belief?
Mr. Kull. I think part of the issue is that there is no end
game to look at here in terms of where am I going to be in
2010, 2012. And if people were to have a focus on a particular
place or level of performance, I think they would be able to
manage toward that in a more coherent way. Instead of looking
at it step by step, looking at the vision and working backward.
Mr. Platts. Mr. Marshall, in your written testimony, you
kind of capture where OMB has laid out a high level mission or
view, but to that frontline financial manager, what does it
mean to me today to get to that high level view?
Mr. Kull. It gets to the cultural issue, if people
understand what's driving the behavior and the organization
because they all see the same place they have to be, then there
is more of an understanding of how to get along, how to work
with the rest of the team in order to get there.
Mr. Marshall. We've had discussions with Dr. Combs and her
staff about what is the mission, what is the end game, and
we've had our own takes on what that ought to be. I think what
Dr. Combs said today is starting to spell it out a little more
clearly than it has been before, but we think there still is an
opportunity to really present a bold vision of a business
architecture that enables agencies to focus their resources on
strategic decisionmaking and core mission delivery. Then LOBs
like finance and the others that have been cued up can be
managed in a consolidated shared service environment that is
driven by the Federal enterprise architecture. There's a lot of
good work that's going on, and it really gives those agencies
that ability to focus on the mission and do what's critical.
Mr. Platts. As they try to get to that point where they can
focus on their critical mission and allow others' expertise to
help them in day-to-day management, one of the items touched
on, Mr. Kull, in your testimony about the governmentwide
standardization and specifically about standards-based
reporting as another option, and in your testimony, you say in
moving forward that one of the things that should be looked at
is this data standardization to allow the applications to come
together.
Is that something that you think, in your opinion, OMB is
looking at as an alternative at least in the short term? Is
that what's going to the governmentwide accounting code, along
those lines? Do you see something different?
Mr. Kull. I think they're fairly consistent. We've been
talking to OMB, as I'm sure other people have, about the
potential for XBRL. It's becoming more and more recognized as a
possibility for using information; by tagging it once and using
it over and over again, it's permanently tagged, permanently
recognized. Works like bar coding. It forces the discipline
that's been lacking over the many years of getting standards in
place and then using them. It takes those standards and makes
them digital so that if everyone is able to employ that, then
you can have data that's coming from different systems but that
can be read by virtually any system.
So I think it's something that should be looked at, and I
think they are looking at it. I think, like most people, it's a
new idea and so getting a new idea out there and testing it is
very risky and sometimes people are hesitant to step forward.
Mr. Platts. On the specific issue of governmentwide
accounting code, and Dr. Combs talked about the September 30th
deadline that they've set out there as they see more as
internal--what's your read on the feasibility on what can we
have in 6 months?
Mr. Kull. It was interesting because I think today she
mentioned something about that they would have a plan in place.
We do a lot of planning in the government. Having worked there
32 years, I'd rather see a phase where perhaps certain
functions or activities are targeted for coding generation, if
that's what it is, and we start actually doing it to see in
fact if it can work, if we can get people to the table to agree
on these standards.
If we pick certain areas and we start to build on a success
and a framework, we may be actually able to move this along.
Mr. Platts. My read was the same, that it wasn't actually
having----
Mr. Kull. There was no end date in terms of when we would
actually have a code.
Mr. Platts. That we'll have a plan how to move forward in
achieving a code.
Mr. Kull. I'm sure we will have a plan by September 30th,
if that's the case. But there are other things I think could be
looked at in the interim.
Mr. Platts. We touched in the first panel also on the lack
of FFMIA compliance, that cart before the horse, that if we are
doing better there, that will make everything else a lot
easier.
I guess one, in a general sense, to all three of you, your
read on that focus, that it's great to pursue this new
initiative and ultimately it can be a real benefit, but do we
need to do a better job on FFMIA compliance that will help us
get to that alternate goal, and then specifically from an audit
standpoint, if you migrate to a COE, your opinions on how
you're going to be treated in your audit if your COE that you
migrate to is not FFMIA compliant, how does that impact the
customer agency's audit?
Mr. Williams. I would say in every interview we've had,
each of the other COEs or those that might migrate to one
expressed concern about not having a SAS 70 done and what the
implication would be on their financial statement audit.
Agencies are concerned, trying to figure out what that means
downstream. My personal opinion is it would be hard for an
agency to get a clean opinion if the Center of Excellence it
uses had a qualified opinion.
Mr. Kull. I think there is a difference, too, between an
audit opinion and an opinion on a control environment at a
particular service provider. We have situations now where we
have service providers not compliant and yet they are able to
somehow provide enough evidence about controls that allows
people to use their systems and get clean opinions on their
financial statements.
Mr. Marshall. I think Dr. Combs' answer to that question
was right on in that if your COE is part of a larger
organization that has some issues, it doesn't necessarily mean
the COE--that it would apply to the COE. It wouldn't
necessarily get in its way of delivering good audit results to
its customers. We see no incompatibility at all between the
objectives of FFMIA and the line of business if they're managed
appropriately.
Mr. Kull. This could also be, if you're looking at
standards for COE, if one were to establish principles or terms
and conditions around which they're built, this may be
something that allows that.
Mr. Platts. That was going to be my followup; should a
standard be that you need to be FFMIA compliant to be a Center
of Excellence?
Mr. Williams. The survey would say yes. All the respondents
of the survey feel that way very much.
Mr. Marshall. I think we would agree, but we might differ
if the issue is not within the management purview of the COE,
that might be a different story.
Mr. Platts. In assessing whether an agency is FFMIA
compliant, would you give more weight to the outside auditors'
opinion on that compliance or the agency head's opinion?
Mr. Kull. I'm going to express my personal opinions for
sure. FFMIA is very clear that the determination rests in the
agency head's hands. When I was at OMB, we had a number of
agencies in that situation where the IG audit opinion on
compliance was noncompliant, whereas the agency head believed
that they were compliant. In every case, the agency presented
us with facts as to why they believed they were compliant and
in every case that I'm aware of, OMB accepted that as a
compliance situation. And in the end, the evidence for me would
be, is this agency head willing to sign a statement that they
believe this information to be true, that they use this
information to make decisions, and that they support the people
who generate it, in a sense their own staff, absent anything
contrary to that.
Mr. Marshall. I have seen similar issues from the agency
side, and I would have to agree with Mr. Kull, that first an
agency head would have to be very, very careful before he signs
his name to something that counters an IG or an auditor's
report. But sometimes the issues are very close judgment calls,
and honest differences of opinion can exist. And I would think
that wouldn't happen very often that an agency head would make
that decision, but if and when it does happen, I think it would
be very well considered and again consistent with the law to
give them that flexibility.
Mr. Platts. Seems that if you have that evidence that
suggests that you are compliant, that you would make sure
that's presented as part of the audit, because if the agency
head makes the determination and then OMB accepts it, that's
still in-house, meaning it's still within the Federal
Government and within the administration. That, I think, is in
Section 803 of FFMIA's reason to have the auditor give that
opinion, is to get that independent. And a concern that we
have, a practice that allows that to happen, but how it's
reviewed or weighted, I guess.
Mr. Marshall, you talked about your looking at being a
Center of Excellence, and GSA, and there is one other.
Mr. Marshall. National Business Center at Interior.
Mr. Platts. Where do you stand in that effort? And one
who's looking at doing this, what's your comfort level and the
guidance you have been given for this process and how it would
be structured and what your perhaps liability would be if you
don't match up and fulfill what your customers believe as far
as paying for them to migrate somewhere else?
Mr. Marshall. Our COE is up and running. We have customers
coming to us, and it is fully operational. We're actively
applying our experience in managing agency transformation and
financial management systems. We're delivering an accountable
service. It's delivered under strong, rigorous, enforceable
service level agreements, and there remain some gaps, we think,
in how agencies acquire our services and how they compare
private services versus public COE services.
We understand that a public COE could be engaged through an
agency-to-agency memorandum of understanding without business-
like, enforceable service level agreements. So the level of
accountability we see going to a private COE is much stronger
and much more empowering of the agency customer than might
exist through a public COE. And this is, again, one reason we
advocate that government and industry to develop a sustainable
framework so we can move together into this new environment in
a measured and business-like way.
Mr. Platts. Two followups, one is, can you walk me through
the process of your being deemed a COE by OMB? And one of your
customers is GSA, which is a COE. Are they in essence just a
pass-through since they are also an identified COE?
Mr. Marshall. Let me explain. CGI services GSA in two ways.
First, a number of years ago, GSA selected our software
Momentum to be its core financial system for the agency. They
call it Pegasus; that's what they christened their accounting
system. Pegasus now is in place as the financial system of
record for both GSA's own agency operations and for the
services that GSA provides to other agencies as a COE.
For the last several years, GSA has hosted Pegasus on a
commercial platform operated by another company, and at the
same time, CGI has been providing systems integration and
application support for Pegasus. So they've had a public-
private partnership involving two contractors as well as the
government.
Recently, GSA decided to consolidate all of these services,
including system integration, hosting and application support
under a single provider which is CGI. They think this will help
give them a better handle on their services, increase
accountability, and improve performance to have everything
related to Pegasus and its COE handled by one contractor. So
it's a great example we think of an effective public-private
partnership being delivered now in this COE context.
Bottom line relative to ourselves and CGI, we support GSA
as a software provider and as the host for their official
system of record. We provide the same services to GSA and to
GSA's customers through the COE. It may be a little confusing
for some, but those insiders who know the market and the way it
works seem to understand it pretty well.
Mr. Platts. And how are you deemed a COE?
Mr. Marshall. Our financial management software has been
certified by JFMIP, the predecessor to FSIO, and it's now
offered on a hosted platform that's CGI. We've had discussions
with OMB, told them where we are, and they have allowed us to
all call ourselves a private COE.
But there's no other certification requirement aside from
those associated with our software. Of course, we're meeting
all Federal security in our platform, and in our entire
infrastructure, we will incorporate best practices and meet all
appropriate Federal standards.
Mr. Platts. Seems less stringent or involved of a
certification process than what is talked about by Dr. Combs
with the agencies themselves, that to become a COE that they
are going to have to go through a more involved assessment and
a lot of benchmarks and reviews to establish, in other words,
have a pretty heavy burden of proof to be able to do it
themselves. Is that a misperception on my part?
Mr. Marshall. I don't think so. I think the due diligence
checklist forms the structure of OMB's evaluation framework for
a public COE, and we conform to all the elements in that
checklist. We do conform. It's a certification process that we
all participate in.
Mr. Platts. So they work with you in running through their
due diligence checklist, and you net all those before being
certified.
Mr. Marshall. That's right. Of course, our software, as I
said, has gone through the entire process itself.
Mr. Platts. Now as one who's not an insider on these issues
as far as understanding them, a lay person, why would anyone
contract with GSA as a COE versus just directly to you as a
COE?
Mr. Marshall. Why would an agency go through another?
Mr. Platts. Rather than coming to you.
Mr. Marshall. It may be because the agency, the COE offers
value-added services in addition to the core hosting and the
application support that we provide through them that provides
to them a greater value, or they might--there may be a personal
relationship between the government agency. Some agencies, as I
think Mr. Williams' survey reflected, just have a comfort level
doing business government to government with another private
sector provider behind the scenes. I think it's a matter of
preference and culture.
Mr. Platts. One of my last questions to Dr. Combs, and it
goes to this issue, is I think there is a real benefit when we
allow the financial policymakers, CFOs and things to be able to
focus on the strategic decisions based on the good information,
and if we are effective in getting to COEs, that can be an end
result, positive, of this effort.
But my question was that concern about getting removed from
having actual authority, if you're the CFO, over who's doing
the information gathering and the assimilation and everything,
and seems like that would be even complicated further if I
contract with GSA as my COE, but they're actually contracting
with you. So if there's something that now it's two levels
away. Is that a legitimate concern or is it not as involved as
it seems?
Mr. Marshall. That's an issue in the minds of some
customers who would rather have the direct SLA relationship
with the ultimate service provider rather than through another
party. And so you get, I think, throughout the market,
different preferences, different cultures, different customers
would prefer one approach to the other. We are here to do
business with the government, whether directly or indirectly,
through a COE. We'll respect their preferences.
Mr. Platts. Yes.
Mr. Kull. I'd like to make a comment about that. Part of
the thinking around the President's management agenda back in
2001 when the financial management part of it was developed was
to move financial management in agencies from a processing
environment to an analytical one. The thinking was that
machines can do the processing, and it's getting more and more
evident that they can do probably a better and faster job with
good controls. What we needed to do was to change the way
people handled their functions to be able to use that
information analytically to find out how to run the business
and their programs better.
Mr. Platts. Right. Again, everybody focusing on their
expertise. If we have the pure hosting COE versus one that's
broader and more of a full service relationship, I think in the
survey results the Association of Governments published an
account, not the actual survey, but that one of the COE's for
that paper said it does not encourage the pure hosting
relationships, that it's better if you're going to be more
comprehensive, full service. Opinion from the three of you.
Sounds like, Mr. Marshall, your COE at least for some of your
work is a pure hosting but not necessarily limited to that.
Mr. Marshall. That's very true. A number of our customers
just want the basic hosting, but we offer levels up. We have
tiers that we describe: The first tier being the hosting; the
second tier running applications for them; and then third and
fourth running up to systems integration and process management
and all the way to full business process servicing. So we're
prepared to grow with the market all the way as the government
evolves in that direction. We think there is a better value
proposition, that the more integration you get, and with more
specialization, the agency gets more ability to offload work
that it may not do as well as we do. Again, all those benefits
of specialization--focusing on what you do best, us in the back
office and the agency in the front office--keeps compounding as
you move up the four tiers.
Mr. Williams. I would say, based on the survey
respondenses, there is a great range of opinion as to what
agencies want. Several want just hosting only. We heard from an
agency 2 days ago that said they really would prefer to do
accounts receivable themselves because it's so critical to
their mission, but they'd like to see the whole accounting
operation function being provided by some type of Center of
Excellence. I think the key is one size does not fit all.
Mr. Platts. Mr. Kull.
Mr. Kull. I agree with the comments made by Mr. Marshall
and Mr. Williams. It's neither good nor bad, it's the comfort
level of a user. As a COE host, however, I would want to see
more services offered because it means you can distribute your
overhead over more activities, lower your cost and be more
efficient. I could see why you would want to get out of just
strictly being in software processing.
Mr. Platts. Interesting, because in my understanding, if I
got it right with the first panelists, is, there is a mandatory
requirement regarding in essence the hosting of the
applications. Either you are a COE or you go to one. We're
mandating that hosting aspect but not the rest of it, so we are
separating it; although it seems like there is a benefit of
having taken that more comprehensive look.
Mr. Marshall. As you move up those four tiers, you're
moving up the value chain within the organization and driving
more and more value through that.
Mr. Platts. One of our concerns is, in getting a better
understanding today, is that mandatory, just hosting and
breaking that out as opposed to waiting and making a more
informed decision on the whole package, it's a good goal, but
we get a better result if it's a more deliberate, comprehensive
approach; that maybe we're jumping the gun on one aspect rather
than waiting and being more comprehensive. Let me check here.
Looks like we're maybe about 5 to 10 minutes before the
vote board goes off.
What about the impact on the financial management work
force across the Federal Government with COEs? Maybe it's too
broad a question because we don't know how many will become
COEs, how many are going to migrate to COEs, public or private.
But any assessment, or did the survey----
Mr. Williams. The survey asked a bunch of those questions,
and we submitted the entire survey. We asked one about the top
concerns, and virtually all the respondents put HR and the
skill set for financial management personnel in the top three
concerns. Many believe that COEs done right can actually
augment the shortage of quality people today. Many have some
concerns about, if they can't get good people, how could a
Center of Excellence get good people? You hear it somewhat both
sides of the conversation, but most think it's going to be of
benefit to them.
Mr. Marshall. We would agree with that. It's definitely a
net positive. Many of these financial management staffs today
are under-resourced relative to their rising work loads. You
have to remember, many were hit as all the administrative
functions were across the Government by the downsizing cuts in
the 1990's. The process and streamlining improvements that were
supposed to happen back then didn't happen, so they're stuck
with platforms that haven't been modernized, and as you shift
that to COEs, it will free them up to do what they do best--
policy, standards, and oversight--and let the COE's do what
they do best, executing those back-office functions. So it is a
win-win for the work force and taxpayer.
Mr. Kull. I think the issue of finding the people to do the
analysis and not the processing is going to be the real
challenge.
Mr. Platts. I'm going to squeeze a couple questions in. How
about thoughts on the level playing field between--within the
government franchise funds versus the various forms where
they're able to set those sums apart year to year? There are a
lot of variables out there as far as an agency assessing what
their ability is versus a different one. Sounds like that
they're looking at that issue with not a specific
recommendation or approach right now. Any thoughts?
Mr. Kull. I think that's probably going to be one of the
biggest challenges of this whole effort, because we have the
private sector firms that have to deal with return on
investments and equity and those kinds of issues and very
competitive pricing models, whereas you mentioned earlier about
the full cost disclosure, what do these Federal COEs really
cost? Are they recovering those costs? Where do they get the
seed money to invest in hardware or software? Those are major
issues, and there needs to be some coming to the table in terms
of what is the playing field so that we really understand what
the competitive environment will look like.
Mr. Marshall. We agree with what Mr. Kull said, and I think
you have hit the public-versus-public issues pretty directly.
We need to get them on a comparable business model so they can
compete fairly. Regarding public versus private, remember,
agencies serviced by commercial entities go through the Federal
Acquisition Regulations [FAR] process. It's a whole lot
different than going through a memorandum of understanding
without always a requirement to compete. So we're at a bit of a
disadvantage, and we don't think that the playing field is
exactly level. We have to account for all of our costs in a
bid. We don't know that those are necessarily fully disclosed
in a public bid. If an agency accepts a bid from both private
and public entities and decides it wants to go public, it can
cancel the acquisition and make an award directly through an
MOU to a public COE, and we have no protest or appeal channel
because the procurement has been canceled. Therefore, the FAR
appeal rules don't apply.
So we think we need to rethink these approaches to
acquisitional and level the playing field, and it's a place
where better dialog between industry and government should be
used.
Mr. Williams. The survey results would support that. Every
agency would love to see more guidance on how to evaluate those
bids and proposals fairly for the good of the agencies.
Mr. Platts. If you're a public entity, such as the Bureau
of Public Debt, and you'd have a major agency saying we want to
migrate to you, which would require a significant increase in
manpower, where do you get the funds for that since you have
already got your appropriation. Currently there's no provision
for hiring a huge new work force. Those are some of those
uncertainties out there that I think we need to work through,
and I think Dr. Combs and her staff are seeking to do that, but
I think there is a lot of uncertainty, a lot of those types of
core questions of how you do it, not is this a good initiative
or worthy goal, but how to do it in a responsible way.
Two final ones, one is on the service level agreements
issue and OMB looking at the hosting, COE paying the cost of
someone migrating to a new COE if things don't work out as
intended. Thoughts on the appropriateness and how that
especially relates if it is a private COE.
Mr. Marshall. Speaking for a private COE, we're very
concerned with that idea. A point of agreement----
Mr. Platts. I'm not surprised.
Mr. Marshall. A point of agreement with people at OMB is
that we thought we were on the same page and that the SLAs
should be based on a commercial best practices model, as much
as possible. This just isn't the way business is done in the
private sector. If a customer agency isn't happy with the
services, it should have plenty of control by including
financial penalties defined in the SLAs. SLAs are a great
control mechanism to ensure corrections to service and so
forth, and it's a whole lot better to manage the relationship
in that kind of context than jumping into the divorce
proceedings and asking, how do we split the blanket?
Mr. Platts. The cost of that transition to a new one, your
starting over again. Actually, did either of you have comment
on that premise?
Mr. Williams. All I would say is respondents felt very
comfortable there was a course of action if a private sector
COE didn't do well. They felt very confused what the course of
action would be for a Federal or public entity.
Mr. Platts. Again, comes to an appropriations question of,
all right, you are not doing well, so you have to spend money
to migrate me somewhere else; well, where does that money come
to pay for that migration in your appropriation that's already
set? I have not seen any proposal or am aware of any that would
set kind of a sum aside for that contingency with OMB.
I think we covered most of the areas I wanted to touch on.
I think one is, I guess, I just want to emphasize again your
insights are very helpful, and my hope is, as we go through and
seek clarification, that there will be continued and enhanced
dialog between your industry individually or collectively with
OMB because you bring a lot of great insights into how this is
going to play out and the likelihood of it succeeding, such as
the issue of if you're the host agency and you have to pay for
that new migration, how many private sector COEs are actually
going to want to participate, which is certainly what the
administration sees is an advantage here of competition
generating a good marketplace. But if that's hanging out there,
what competition outside of the government itself are we going
to have.
Your testimony is again very helpful and really kind of
helped to well frame my insights as we addressed Dr. Combs and
Ms. Evans, even with reading it at midnight or 1 am. It was
well stated so I could capture the essence of the concerns
individually or of the survey results. If you have any
additional information, we'll be keeping the record open as we
do for 2 weeks. But again, my sincere thanks for your testimony
and your preparation and your patience here today with the
previous panel. Thank you. We will keep the record open for 2
weeks for any additional documents and including from Dr. Combs
on some of those written questions that we'll be submitting.
This hearing stands adjourned.
[Whereupon, at 5:46 p.m., the subcommittee was adjourned.]
[The prepared statement of Hon. Edolphus Towns and
additional information submitted for the hearing record
follow:]
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