[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
THE STATUS OF VA FINANCIAL MANAGEMENT BUSINESS TRANSFORMATION
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HEARING
before the
SUBCOMMITTEE ON TECHNOLOGY MODERNIZATION
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
TUESDAY, JUNE 20, 2023
__________
Serial No. 118-21
__________
Printed for the use of the Committee on Veterans' Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via http://govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
53-080 WASHINGTON : 2024
COMMITTEE ON VETERANS' AFFAIRS
MIKE BOST, Illinois, Chairman
AUMUA AMATA COLEMAN RADEWAGEN, MARK TAKANO, California, Ranking
American Samoa, Vice-Chairwoman Member
JACK BERGMAN, Michigan JULIA BROWNLEY, California
NANCY MACE, South Carolina MIKE LEVIN, California
MATTHEW M. ROSENDALE, SR., Montana CHRIS PAPPAS, New Hampshire
MARIANNETTE MILLER-MEEKS, Iowa FRANK J. MRVAN, Indiana
GREGORY F. MURPHY, North Carolina SHEILA CHERFILUS-MCCORMICK,
C. SCOTT FRANKLIN, Florida Florida
DERRICK VAN ORDEN, Wisconsin CHRISTOPHER R. DELUZIO,
MORGAN LUTTRELL, Texas Pennsylvania
JUAN CISCOMANI, Arizona MORGAN MCGARVEY, Kentucky
ELIJAH CRANE, Arizona DELIA C. RAMIREZ, Illinois
KEITH SELF, Texas GREG LANDSMAN, Ohio
JENNIFER A. KIGGANS, Virginia NIKKI BUDZINSKI, Illinois
Jon Clark, Staff Director
Matt Reel, Democratic Staff Director
SUBCOMMITTEE ON TECHNOLOGY MODERNIZATION
MATTHEW M. ROSENDALE, SR., Montana, Chairman
NANCY MACE, South Carolina SHEILA CHERFILUS-MCCORMICK,
KEITH SELF, Texas Florida, Ranking Member
GREG LANDSMAN, Ohio
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
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TUESDAY, JUNE 20, 2023
Page
OPENING STATEMENTS
The Honorable Matthew M. Rosendale, Sr., Chairman................ 1
The Honorable Sheila Cherfilus-McCormick, Ranking Member......... 2
WITNESSES
Ms. Teresa Riffel, Deputy Assistant Secretary for Financial
Management Business Transformation, Financial Management
Business Transformation Service, U.S. Department of Veterans
Affairs........................................................ 3
Accompanied by:
Mr. Charles Tapp II, Chief Financial Officer, Veterans
Benefits Administration, U.S. Department of Veterans
Affairs
Mr. Daniel McCune, Deputy Chief Information Officer, Software
Product Management, Office of Information & Technology,
U.S. Department of Veterans Affairs
Mr. Sidney Getz, Senior Vice President, CGI Federal.............. 5
Mr. Nick Dahl, Deputy Assistant Inspector General for Audits and
Evaluations, Office of Inspector General, U.S. Department of
Veterans Affairs............................................... 6
THE STATUS OF VA FINANCIAL MANAGEMENT BUSINESS TRANSFORMATION
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TUESDAY, JUNE 20, 2023
U.S. House of Representatives,
Subcommittee on Technology Modernization,
Committee on Veterans' Affairs,
Washington, D.C.
The subcommittee met, pursuant to notice, at 3:06 p.m., in
room 390, Cannon House Office Building, Hon. Matt Rosendale
(chairman of the subcommittee) presiding.
Present: Representatives Rosendale, Self, Landsman, and
Cherfilus-McCormick.
OPENING STATEMENT OF MATTHEW M. ROSENDALE, CHAIRMAN
Mr. Rosendale. Good afternoon. The subcommittee will come
to order. We are here today to review VA's progress in the
Financial Management Business Transformation program, or FMBT.
FMBT is the VA's third attempt to modernize its hodgepodge of
aging inadequate financial and accounting systems. These
systems are a serious problem. Every year, the VA barely
manages to pass its financial statement audit with a clean
opinion, despite carrying the same material weaknesses and
deficiencies for a decade. At the same time, the Department's
purchase card spending continues to be much similar to the Wild
West.
It has been nearly 10 years since the former VA senior
procurement executive blew the whistle on billions of dollars
of unauthorized commitments, and nothing has fundamentally
changed. With so many purchase cards in so many different
facilities and no central tracking, the Department is
practically helpless to enforce its policies, much less root
out waste and fraud. Basic financial management functions
stretch the capabilities of the systems, like maintaining
records when the VA transferred the Coronavirus Aid, Relief and
Economic Security (CARES) and America Rescue Plan (ARP) funds.
When the committee asked basic questions about how the
funding was handled during last month's hearing, the VA
witnesses struggled to answer. Additionally, one witness showed
contempt to members for even trying to perform our basic
oversight duties. This situation is untenable, and I appreciate
that our witnesses today are attempting to solve it. Simply
put, the FMBT program has to succeed. After a false start in
2016 and 2017, VA relaunched the effort in 2018. Since then,
the Integrated Financial and Acquisition Management System, or
iFAMS, has been implemented in the National Cemetery
Administration, a few offices within the Veterans Benefits
Administration, the Office of Information and Technology, the
Office of the Inspector General, and part of the Office of
Acquisition, Logistics, and Construction.
From the information we have, the system seems to be
relatively successful in those offices, but there is still
reason to be concerned. These organizations only add up to a
few thousand users and a small fraction of the VA's budget.
Implementing the iFAMS in the major organizations like the
Veterans Health Administration and the big spenders within the
Veterans Benefits Administration keeps getting pushed out, and
now it is not scheduled for a rollout until 2024 and beyond.
Meanwhile, the program's implementation costs continue to
rise. I am not suggesting that we have another Electronic
Health Record (EHRM) here on our hands. Let me be clear. I
believe most of the premises of the FMBT are sound. This effort
does seem to be suffering from some of the familiar problems,
like poor coordination between the various organizations within
the VA, struggles to fit VA's operational practices with
commercial software, and extremely long schedules. It has been
3-1/2 years since the subcommittee last examined the FMBT
program. I think veterans and taxpayers are overdue for an
update.
I appreciate our witnesses joining us today to help us
better understand the challenges that you face. I look forward
to working to overcome the difficulties and deliver this system
successfully. With that, I would yield opening statement time
to Ranking Member Cherfilus-McCormick. Thank you.
OPENING STATEMENT OF SHEILA CHERFILUS-MCCORMICK, RANKING MEMBER
Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. First, I
would like to say that I am happy that we are having this
hearing on an IT modernization program that is so important to
the future of VA. As the Inspector General has reported, the
use of the aging financial management system has led to manual
workarounds which impedes VA's and Congress's ability to
conduct oversight and spending. VA is the second largest
Federal agency, and it relies on IT infrastructure that is
decades old.
While we are all aware of the failures in healthcare record
and supply chain modernization, this program has largely gone
unnoticed. This is a good thing. When an IT program goes well,
we usually do not hear about them. Unfortunately, this program
is now experiencing delays. Given the importance of this
program, this committee needs to understand the underlying
issues. This program is foundational to creating not only
financial efficiency for the Department, but for accountability
and oversight of Congress. I hope to hear from our witnesses
from VA and the CGI Federal today an honest account of how we
can ensure the successful and timely development of iFAMS.
I will not belabor a point I have made at every hearing we
have had in this subcommittee this Congress. VA obviously does
not have the management infrastructure in place to coordinate
and ensure the success of these large IT modernization efforts.
There are bills that have cosponsors that would, at the very
least, start moving them in the right direction. I hope that we
can start acting on these soon here in the House.
IT modernization is mandatory, not optional. It is in
everyone's interest to finally do this in a way that does not
upset veterans and employees and waste billions of dollars.
Commitment to management and standardization of processes
across the Department is essential to our future success. Thank
you again, Chairman. I look forward to hearing from our
witnesses this morning.
Mr. Rosendale. Thank you Ranking Member Cherfilus-
McCormick. I will now introduce the witnesses on our first
panel. First, from the Department of Veterans Affairs, we have
Ms. Teresa Riffel, the Deputy Assistant Secretary for Financial
Management Business Transformation. We also have Mr. Charles
Tapp, the Chief Financial Officer for the Veterans Benefits
Administration, and Mr. Daniel McCune, Deputy Chief Information
Officer for Software Product Management at the Office of
Information and Technology. Next, we have Mr. Sidney Getz,
Senior Vice President for CGI Federal. Finally, we have Mr.
Nick Dahl, Deputy Assistant Inspector General for Audits and
Evaluations at the Office of Inspector General for the
Department of Veterans Affairs. If you all would please rise
and raise your right hand.
[Witnesses sworn]
Mr. Rosendale. Thank you. Let the record reflect that all
witnesses have answered in the affirmative. Ms. Riffel, you are
now recognized for 5 minutes to deliver your opening statement.
STATEMENT OF TERESA RIFFEL
Ms. Riffel. Good afternoon Chairman Rosendale, Ranking
Member Cherfilus-McCormick, and all members of the
subcommittee. Thank you for the opportunity to testify today in
support of the Department of Veterans Affairs Financial
Management Business Transformation program and its
implementation of the Integrated Financial and Acquisition
Management System. I am accompanied by Daniel McCune, Deputy
Chief Information Officer for Software Product Management, and
Charles Tapp, Chief Financial Officer of the Veterans Benefits
Administration.
VA cannot continue to rely on its legacy financial
management system due to the enormous risk it presents to VA
operations. It is becoming increasingly difficult to support
from a technical and functional ability standpoint, cannot
correct new audit findings, and is not compliant with today's
internal control standards.
I am proud to report that iFAMS is no longer proof of
concept. It is successfully replacing VA's antiquated 1980's-
era financial management system. It has been successfully up
and running at VA for almost 3 years. VA completed six
successful deployments of iFAMS, encompassing 20 offices and
4,700 users across the enterprise. That includes the entirety
of the National Cemetery Administration, a portion of Veterans
Benefits Administration, and several major staff offices,
including the Office of Information and Technology, Office of
Inspector General.
iFAMS users have collectively processed over 3.5 million
transactions, representing almost $10 billion in treasury
disbursements. iFAMS is stable, achieving over 99.9 percent
uptime. On June 12, 2023, VA went live with its largest
deployment to date, increasing the current user base by 60
percent. It was also the first time VA went live simultaneously
with both the finance and acquisition components of iFAMS,
which demonstrates iFAMS is a viable solution capable of
becoming the next generation financial and acquisition solution
for VA.
It is important to understand that iFAMS is not just a new
core accounting and acquisition system. It is crucial to
transforming VA's business processes and capabilities both so
we can meet our goals and objectives in compliance with
financial management legislation and continue to successfully
execute our mission to provide veterans with the healthcare and
benefits they have earned and deserve. With so much at stake,
both in terms of taxpayer dollars and the Department's ability
to serve veterans, it is vital that VA accurately track and
report how funds are used. Fortunately, iFAMS significantly
improves funds tracking capabilities, which, among many other
benefits, will help ensure proper tracking of The Sergeant
First Class Heath Robinson Honoring our Promise to Address
Comprehensive Toxics (PACT) Act expenditures.
Through the use of iFAMS, VA is increasing the
transparency, accuracy, and timeliness, and reliability of
financial information. VA is gaining enhanced planning,
analysis, and decision-making capabilities because of improved
data integrity, reporting functionality, and business
intelligence. VA is demonstrating these achievements through a
range of metrics and associated targets based on industry best
practices.
iFAMS and process changes are part of VA's strategy to
resolve long standing financial material weaknesses and
strengthen internal controls. For example, and in contrast to
our current system, which cannot capture transaction approvals,
iFAMS routes documents to approving officials and allows
supporting documentation to be attached directly to the
transaction. Additionally, iFAMS requires additional levels of
approval for high-dollar transactions.
iFAMS also eliminates the need for an external tool to
adjust entries for financial reporting. Perhaps most
importantly, iFAMS complies with reporting requirements from
the Office of Management and Budget and the Department of the
Treasury, to capture various account attributes and conform to
the U.S. Standard General Ledger. VA's current system is unable
to meet those requirements, which has led to extensive and
inefficient manual workarounds, and iFAMS will remediate all of
these.
Our success has been, and continues to be, built on
partnerships, mutual respect, and two-way collaboration with
our users. Accordingly, iFAMS established a dedicated chief
experience officer to coordinate user interactions and change
management activities. FMBT's change management practices place
a heavy emphasis on continuous improvement. Using customer
feedback in our own observations, audit findings, and industry
best practices, we establish lessons learned during each wave
and incorporate those lessons into subsequent wave deployments.
FMBT continues to stay on budget despite changes. Our
successes would not be possible without the ongoing support of
Congress, and we appreciate the opportunity today to discuss
this important initiative. We will continue to work judiciously
with veterans foremost in mind to modernize VA's financial and
acquisition management system and provide you with updates as
we make further progress.
Although we are encouraged by our success to date, we are
keenly focused on the difficult work that lies ahead and are
steadfast in our commitment to see this initiative through its
successful conclusion. Chairman Rosendale, Ranking Member
Cherfilus-McCormick, and subcommittee members, this concludes
my opening statement. I would be happy to answer any questions.
[The Prepared Statement Of Teresa Riffel Appears In The
Appendix]
Mr. Rosendale. Thank you, Ms. Riffel. The written statement
of Ms. Riffel will be entered into the hearing record. Mr.
Getz, you are now recognized for 5 minutes to deliver your
opening statement.
STATEMENT OF SIDNEY GETZ
Mr. Getz. Chairman Rosendale, Ranking Member Cherfilus-
McCormick, and other distinguished members of the subcommittee,
thank you for the opportunity to appear today. My name is Sid
Getz, and I am a senior vice president at CGI Federal. For the
last five years, I have served as the project manager on CGI
Federal's contract with the VA for the Financial Management
Business Transformation program, known as FMBT. At the
subcommittee's invitation, I am here today to provide the
requested status update and underscore CGI Federal's ongoing
commitment to the success of VA's FMBT program.
As you know, in 2016, the VA established the FMBT program
to modernize its 30-year-old legacy core Financial Management
System, FMS, in compliance with applicable regulatory
requirements. To accomplish this complex modernization effort,
the VA selected CGI Federal to deploy its Momentum Enterprise
Resource Planning Solution.
Momentum, known at the VA as the Integrated Financial and
Acquisition Management System, or iFAMS, is an Office of
Management and Budget (OMB)-approved financial management
system that is operational at many Federal Government agencies.
To mitigate program risk, the FMBT program is migrating users
from the VA's Legacy financial and acquisition systems to iFAMS
using an incremental deployment approach. Each deployment, or
wave, delivers specifically configured iFAMS capabilities to a
defined set of the VA's organization using an agile-based
implementation methodology. To date, the FMBT program has
completed six waves deploying iFAMS to 4,700 users at 20
different VA offices.
While there are still milestones and challenges ahead to be
sure, iFAMS is already delivering benefits to the VA's finance
and acquisitions user communities. These benefits include
improved strategic and daily decision-making, process
automation, compliance with Federal accounting regulations,
maintaining clean audits, and accommodating new regulatory
requirements. A prime example of how iFAMS is helping the VA
user community is the power of its real-time transaction
processing and on-demand reporting. Today, iFAMS users can
easily generate standard financial acquisitions reports and
drill down into current accurate data on demand. This is
because when transactions are entered in iFAMS, they are first
verified to meet VA standards and then automatically update
budgets in the general ledger in real time. iFAMS users also
have the capability to refresh reports hourly rather than
daily, and can run most reports at the enterprise level,
administration level, or lower levels of the VA organization.
Before iFAMS, some similar reports took days to produce
through a manual, resource intensive, spreadsheet-based
process. As with other complex programs, success often depends
on the stakeholders' focus on key performance factors. The same
holds true here, where the team's focus on collaboration and
transparency, enterprise-wide standardization, continuous
improvement, diligent change management, and execution of its
risk-based incremental delivery approach has kept the program
moving forward.
To illustrate this point, let me share how the team has
maximized the value of formal user acceptance testing, also
known as UAT. In the first few waves, users performed hands-on
UAT toward the end of each wave. This is a common and standard
approach. Lessons learned taught us that we would improve user
adoption by having users perform iterative hands-on testing of
iFAMS functionality and business processes much earlier in each
wave. We refined the program implementation methodology and
applied this approach to the three most recent waves.
By helping users gain an earlier appreciation of iFAMS, the
team gained useful feedback for change management and training.
It also has allowed us to identify and resolve issues earlier,
saving both time and resources. I end this testimony where I
began by reiterating CGI Federal's unwavering commitment to
collaborating with the FMBT program to deliver iFAMS to the
entire VA user base for the benefit of our veterans. I look
forward to answering your questions.
[The Prepared Statement Of Sidney Getz Appears In The
Appendix]
Mr. Rosendale. Thank you, Mr. Getz. The written statement
of Mr. Getz will be entered into the hearing record. Mr. Dahl,
you are now recognized for 5 minutes to deliver your opening
statement.
STATEMENT OF NICK DAHL
Mr. Dahl. Chairman Rosendale, Ranking Member Cherfilus-
McCormick, and subcommittee members, thank you for the
opportunity to discuss our oversight of VA's financial
management challenges. Since 2015, the audit of VA's financial
statements has reported a material weakness due to problematic
financial management systems. Full implementation of iFAMS
could help resolve this persistent material weakness and
increase the transparency, accuracy, timeliness, and
reliability of financial information across VA. Accordingly, we
began oversight of the implementation shortly after it went
live at National Cemetery Administration (NCA) in November
2020.
Prior modernization efforts failed in part because of poor
planning and flawed execution combined with challenges
transitioning from legacy systems. Decentralized oversight,
unrealistic timelines, inadequate engagement of stakeholders
and end users, and minimal testing have plagued IT projects.
The resulting delays, changes in direction in vendors, and user
resistance all carry steep costs. In the most recent audit of
VA's financial statements, the auditor found three material
weaknesses and two significant deficiencies. The material
weakness most pertinent to this testimony focuses on the
limited functionality of the current system to meet VA's
financial management and reporting needs. Over time, VA's
complex and antiquated financial system has deteriorated and no
longer meets increasingly stringent requirements mandated by
the Treasury Department and OMB.
Deficiencies in VA's financial management system are
illustrated in findings we made related to VA's use of COVID-19
funding, which showed VA lacked assurance that those funds were
spent as intended. Generally, our three reports found VA is
complying with Transparency and Trust Act reporting
requirements. However, we identified concerns with the
completeness and accuracy of VA's reporting. A major cause for
this is Veterans Health Administrations (VHA's) reliance on
several systems for payroll and purchase card transactions
requiring manual entries by staff, which increases the risk of
reporting errors.
The practice of manual expenditure transfers led to a lack
of transparency and accountability over VHA purchases seen in
our audit on VA's use of CARES Act funds. We found VHA staff
not properly documenting the transfers and inadequate guidance
from VHA's Office of Finance. This happened because of
financial reporting systems limitations and a lack of oversight
that resulted in VHA medical facility staff determining on
their own what constituted appropriate documentation.
Additionally, staff did not follow basic controls like
documenting purchasing authority, splitting duties between
requesting and purchasing items, and verifying ordered goods
were received. As a result, we reported an estimated $187
million in questioned costs.
We felt early oversight of the iFAMS project was critical
to help VA achieve program goals, and we initially issued two
memoranda. One detailed that FMBTS had not ensured NCA had the
comprehensive reports needed to monitor budget and operations
for months after the initial iFAMS go-live date, requiring
staff to engage in workarounds. The second identified other
potential risks related to financial reporting for FMBTS to
consider addressing.
In March 2023, our audit found FMBTS needed to do more work
to fully address some barriers related to the program's goal of
streamlining processes and improving information reliability,
with a focus on contracts converted into iFAMS from the legacy
contract system. Our findings related to system functionality
and procedures, and we made five recommendations to implement
controls and processes to reduce risk and enhance communication
on requirements, develop methodologies to prioritize user
feedback, and include legacy systems, converted contracts, and
system testing. We will soon begin the follow-up process on
these recommendations.
In summary, the transition to iFAMS could mitigate major
issues in producing VA's financial statements and improving VA
operations. These initial findings are early opportunities for
improvement that may yield results for VA as they continue
implementing this complicated system. We urge VA to dedicate
the resources to resolve issues and remain ready to identify
the challenges that may arise in the months and years ahead.
That concludes my statement, and I will be happy to answer any
questions you may have.
[The Prepared Statement of Nick Dahl appears in the
Appendix]
Mr. Rosendale. Thank you, Mr. Dahl. The written statement
of Mr. Dahl will be entered into the hearing record. We now
move and proceed to the questioning, and I will recognize
myself for 5 minutes.
Ms. Riffel, during last month's hearing on VA CARES Act
spending, I asked the Chief Financial Officer, Mr. Rychalski,
about a $714,235 expenditure transfer where the medical center
could not produce any documents establishing an audit trail
because the person who processed it had retired. VA has still
not explained how much money was actually paid out, for what
purpose, and who approved it. How would the iFAMS system
prevent or resolve this type of a situation?
Ms. Riffel. Thank you for that question. iFAMS will resolve
that. We have the ability now for those customers that are in
iFAMS to actually trace expenditures down to that level, so we
are able to load the budget and actually reflect expenditures
against it. I want to give one caveat around payroll, and I
think in the response that VA recently provided, we stated this
as well, is that we do have to work with our interface partners
predominantly on the payroll side to make sure that they are
sending us the information to be able to trace it and record it
appropriately against the right account. The answer is yes,
sir, iFAMS will address this 100 percent.
Mr. Rosendale. As long as the proper information is entered
in.
Ms. Riffel. That is correct, sir.
Mr. Rosendale. Junk in, junk out. Good information in, good
information out.
Ms. Riffel. Correct.
Mr. Rosendale. Ms. Riffel, VA struggles to manage its
purchase card spending because employees at thousands of
individual facilities make purchases, and the data on those
purchases is fragmented. Can you explain why this is the case
and how the iFAMS system would track that data?
Ms. Riffel. Yes, so in iFAMS, the purchase card ability to
purchase with a purchase card is substantially different than
what it is in legacy system today. We will see advancements in
terms of traceability on what individuals are purchasing. I
would also defer to Office of Acquisition Logistics and
Construction (OALC), as I know I am on a couple of
subcommittees with them, and they are making concerted efforts
on reducing the use of the purchase card and driving users to
contracts where contracts are appropriate. Again, I would defer
to them on more elaboration on that effort that is underway.
Mr. Rosendale. Thank you very much. In last month's
hearing, Mr. Rychalski touted the reduction in VA's improper
payment rate. You still had $3.5 billion in improper payments
last year. Your annual purchase card spending is about $5
billion. How much of that $3.5 billion represents purchase card
spending? Would the iFAMS system ever allow you to get that
number down to or at least near zero?
Ms. Riffel. Yes, so I will have to take that particular
question for the record in terms of the amounts there.
Mr. Rosendale. Okay. Mr. Dahl, your report on VA CARES Act
spending found that every single one of the 10,064 supply
purchases and service contracts had some sort of procedural
noncompliance. This led to your office questioning over $187
million of transactions, most of which were made using purchase
cards. Which of the VA's current systems process the purchase
card transactions? What is wrong with them? Why is this such a
big liability for financial management?
Mr. Dahl. I think the issue with the purchase card comes
down to oversight. Purchase card, as you have mentioned, many
purchase card holders in VA that use their cards without
appropriate oversight from the purchase card accountable
officials, you know, there is nothing that is going to stop
people from using the purchase cards. Every cardholder has an
accountable official who should be reconciling the spending on
a monthly basis to make sure that the purchases are appropriate
and supported, and we are just not seeing that.
Mr. Rosendale. Is it that the, in your opinion, are the
supervisors not given good guidance on what is acceptable and
what is not, and the processes, or are they not conveying that
information down to their subordinates?
Mr. Dahl. I would say it is likely a mix of both of those
situations.
Mr. Rosendale. Okay. Mr. McCune and Ms. Riffel, I
understand the iFAMS system went live in the Office of
Information Technology last week, and all the purchase card
transactions are now being run through the system. How is it
that Office of Information and Technology's (OIT's) process is
different now, and what improvements has it made?
Ms. Riffel. Thank you for that question. Actually, I just
talked with OIT a few minutes ago before this hearing, just to
check in, make sure how things were going, going very well.
Again, the purchase card module within iFAMS is substantially
different than what they currently do with Integrated Funds
Distribution Control Point Activity Accounting and Procurement
(IFCAP) today. We are consistently working with users to make
sure that they understand those differences.
I would tell you also that the reconciliation process
substantially different in iFAMS than what it is in legacy. So
far, and again, we are only one week in with that user
community, but we have no issues that have been expressed or
concerns from that group at this time.
Mr. Rosendale. Very good. Thank you very much. I will now
yield 5 minutes to Representative Cherfilus-McCormick for your
questions.
Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. As the
Office of Inspector General highlighted in their report last
month, the need for modernization for VA's financial system is
imperative. VA is the second largest agency in the Federal
Government and has to rely on a 30-year-old system to manage
billions of dollars it receives from the Congress every year.
Mr. Dahl, the limited functionality of the financial management
system continues to be a material weakness in VA's financial
system audits. Can you explain the ramifications of not having
a modern financial management system, not only to your work,
but to the success of managing the funds of VA?
Mr. Dahl. Well, without a modern system, VA is very likely
to continue to have a material weakness on their annual
financial statement audit. They are going to continue to have
to rely on manual processes and interventions to accomplish
certain transactions. They are going to be lacking the
transparency and accountability over the use of funds. I would
say those would be the key concerns.
Ms. Cherfilus-McCormick. Now, with the manual overrides,
how do you catch any mistakes?
Mr. Dahl. Well, that would come down to if there is a
supervisor checking on that, and, frankly, I am not sure that
that is always happening. Of course, if you are doing that,
there is always a risk of error. You know, as Mr. Rosendale
said, ``garbage in, garbage out.'' It is probably more likely
to happen when someone is having to manually process a
transaction.
Ms. Cherfilus-Mccormick. When we look at waste, do you feel
like we have an adequate understanding of how much waste is
going on without an automated system that is fully functioning?
Mr. Dahl. It would be hard for me to characterize that. FMS
was conceived in the 1980's. I mean, it is so far back in the
past. Certainly, people were not envisioning the current needs,
the current environment. I think it would be a huge step
forward to bring a modern system online.
Ms. Cherfilus-Mccormick. Thank you Mr. Tapp, I am sure you
have heard about the manual workarounds that we have required
as a result of not being able to use FMS for the transfer of
supplemental funds. Can you provide to the committee some
insight into the restrictions that antiquated technology puts
on you as the Chief Financial Officer (CFO) of the Veterans
Benefits Administration?
Mr. Tapp. Yes, ma'am. Thank you for the question.
Antiquated systems basically limit our ability to have
strategic decision-making capability for us to be able to look
across the enterprise and be able to look at the resources that
we have been provided to be able to make decisions on changes
in priorities and also make changes day to day. Those certainly
limit our ability. It also limits our ability to implement new
legislation and to provide the proper insights in terms of what
has been spent and how quickly it has been spent without using
Excel spreadsheets or other things that are offline. You
certainly want to use your system of record to be able to
capture that information.
Since we have implemented iFAMS, we can certainly say for
the general operating expense, we have been able to provide a
more granular response when it comes down to reporting on
expenses that we have in Veterans Benefits Administration
(VBA). The system is working as intended for the general
operating expense, but certainly using the legacy system, it
had some limitations that we are glad that iFAMS will help
resolve.
Ms. Cherfilus-Mccormick. Now, in my past experience, I was
a Chief Executive Officer (CEO) of a healthcare company, and it
was extremely difficult to--I could not imagine doing a manual
override to forecast expenses and also forecast what we are
saving. How are you able to realistically forecast the next
year of savings and actually what you are actually losing, such
as waste?
Mr. Tapp. That has certainly been a challenge with FMS
because of how expenses are grouped together by a budget object
class, or by BOC, because they are lumped together. Certainly,
iFAMS again, allows us to be more dynamic in terms of seeing at
a more granular level what we have spent and allow us to
certainly do more analysis as we look forward using, again, the
granular details that we are able to pick in iFAMS. Again, the
transparency and the level of granularity is certainly enhanced
with iFAMS.
Ms. Cherfilus-McCormick. Thank you. Mr. Chairman, I yield
back.
Mr. Rosendale. Thank you very much, representative. I yield
5 minutes to Representative Self.
Mr. Self. Thank you, Mr. Chairman. Mr. Dahl has basically
said people are involved in everything. I think that is a fair
summary. Ms. Riffel, are you getting pushback from the field on
fielding this new system?
Ms. Riffel. Thanks for that question. Certainly, we are
carrying a risk around change management from a program
perspective overall. What I would tell you, though, is that as
we get more and more into VA, what we are starting to see is
people really coming around and being encouraged by what they
see. I think that we are I would not say we are over the hurdle
by any means, because change is hard, but I will tell you that
we are not seeing as much pushback as we were if you were to
ask me this question 2 years ago.
Mr. Self. Okay. Now I understand you have got about 4,700
users out of a workforce, total workforce of 400,000
thereabouts. You have spent a billion dollars on 1/2 of 1
percent of the users out of a budget of, what, $7 billion odd.
Are you going to make the $7 billion? You now have 1/2 of 1
percent that you have rolled the system out to.
Ms. Riffel. Yes, so actually, we are expected to have
124,910 users on the system at full deployment. We have
currently got, as we said, about 4,700 on the system. What I
will acknowledge is that obviously, VHA is the largest
organization that we have yet to implement. I would also tell
you that that is by design. We want to make sure that we are
addressing any improvements that we need to make with our
deployment strategy before we tackle VHA. Also, the complex
programs that VBA has remaining. Those obviously would impact
veterans in some way if we do not do them correctly. We have
purposely established the schedule in the manner that we have
so that we can ensure that we are learning from what we have
already done. By the time we get to VHA, we will leverage all
of those improvement activities when we implement.
Mr. Self. Is there any chance that your delayed systems,
VBA loan guaranty, VBA insurance, VBA acquisition can be moved
faster as you learn lessons, or are you committed to your as
late as 29?
Ms. Riffel. Yes, so thanks for that question. What I would
tell you is right now we just completed a 3-day lock-in with
VBA on loan guaranty. We have addressed the six items that were
remaining to ensure that we are in agreement with VBA on
exactly how we are going to implement Loan Guaranty Service
(LGY). We are in the process of rebaselining that schedule
right now. As soon as we finalize that, we will actually
address whether there is opportunity to accelerate and move
other VBA programs to the left after we finalize that rebase
line.
Mr. Self. Okay, very good. In your written testimony, you
talked about the two Government Accountability Office (GAO)
reports and the eight recommendations. I pulled the most recent
GAO recaps of this program. You said that there was one
remaining open. The GAO currently references seven are open and
one is closed. As recently as February 2023, they have at least
three open with that date. Can you reconcile for me your
testimony with the GAO updates?
Ms. Riffel. Yes, I believe that those I will get back to
you. I will take that for the record. We will reconcile that.
It may be a timing issue on some of those, but we will make
sure we have got that reconciled for you, sir.
Mr. Self. Okay. Again, at least three of them, I can find a
date of February 2023, they were still open according to the
GAO. I know that GAO makes recommendations, but I still would
like to see a response on your implementation of the GAO
recommendations. With that, Mr. Chairman, I yield back.
Mr. Rosendale. Thank you very much, Representative Self.
Ms. Riffel, you are getting near the midpoint of the FMBT
program and many of the important milestones are being delayed
while the cost estimate continues to rise. These are the
concerns that I have when I start looking back at some of the
other software programs that we have invested in. I understand
you did not initially include the operations and maintenance
costs for the life of the systems through 2047, but the
implementation costs have also been increasing from $2.3
billion up to $4.2 billion, and completion has slipped from
2028 to 2030 or later. Similar to Representative Self's
question, why is the implementation cost increasing? Can you
guarantee me it will not go above that $4.2 billion mark?
Ms. Riffel. Thanks for that question. Currently the
projected lifecycle cost estimate is at 7.46 going out to 2047,
which is accounting for the useful life, as you indicated. What
we will tell you is that based on the methodology that we are
using to deploy, there will be instances from time to time
where we find, for example, a new interface that was not
originally identified. As you can imagine in VA, we are doing
constant modernization across the enterprise. We are going to
have discovery from time to time. What I would tell you is that
the way that we are structured in an agile fashion, it has
allowed us to continue to proceed, to actually move other waves
forward or begin activity on another wave while we are pending,
getting more intel on a modernization interface or something
like that.
Although you are seeing some increases, what you are also
seeing is our ability to flex with that and to ebb and flow as
those modernization efforts continue. I can tell you in VA the
size that it is, we will continue to have modernization that is
happening simultaneously. Our program, the way we are
structured, you have to be structured to be able to absorb that
and to be able to flex with it.
Mr. Rosendale. Look, I understand, I really do. I
understand as you are going through this process and you find,
like you say, some enterprises and some functions that nobody
had anticipated. It is sort of like doing the renovation on an
old home, okay, and you pull the wall out and you start finding
additional things. That is why all these jobs are based on
typically time and materials, okay, when you come to old
construction. However, we are using taxpayers' funds. All I am
trying to do is establish some kind of a cap. Can you assure me
that we are not going to go over that $4.2 billion range?
Ms. Riffel. That is our lifecycle cost estimate at this
point in time, sir.
Mr. Rosendale. Okay. That would be an estimate. You cannot
guarantee that that is where we are going to finish up for
that?
Ms. Riffel. Not guarantee that, no.
Mr. Rosendale. Mr. Getz, the VA has spent over $1 billion
on this project so far. How much of that has your company
received?
Mr.Getz. Approximately $440 million since----
Mr. Rosendale. Excuse me?
Mr. Getz.--$440 million since the inception of the contract
in August 2018.
Mr. Rosendale. Mr. Getz, how much of the $7.5 billion life
cycle cost, including implementing the system as well as
maintaining it, does your company expect to get paid?
Mr. Getz. Sir, I have not even thought about that. At the
moment we are focused on just the implementation piece.
Mr. Rosendale. You have not run a lifecycle cost estimate
and to determine how much you should estimate?
Mr. Getz. We have not, no.
Mr. Rosendale. How is it that the VA then has their
estimate if you were not included in that?
Mr. Getz. I think the I would certainly defer to Ms. Riffel
on this, but what we look at is what is the cost implementation
plus the operations and maintenance costs for, you know,
whatever contract we have. At some point, the lifecycle turns
over to operations and maintenance, and then, you know, that is
a different way of looking at what those future costs are.
Mr. Rosendale. Again, so, I have got the----
Mr. Getz. Yes.
Mr. Rosendale.--lifecycle estimate, but they had to get
those numbers from somewhere. That is why I am trying to figure
out how much of it would be from you. They had to get some kind
of estimate from you.
Mr. Getz. I would defer to Ms. Riffel if I could on that.
Ms. Riffel. Yes, thanks for that. We have data that we have
used, obviously, from the implementations to date. When you do
a lifecycle cost estimate, you are forecasting for the rest of
that, obviously understanding what your implementation has been
to date based on size, complexity of the wave. That was a lot
of the basis that was used in going into it. Then certainly we
have got program costs related to the organization supporting
the wave.
Mr. Rosendale. Sure, you were forecasting. I understand.
Ms. Riffel. Yes.
Mr. Rosendale. I understand the estimate and best forecast
of information. How much have you plugged in for Mr. Getz'
company then?
Ms. Riffel. What is in front of you I believe there, sir,
is the overall categories of cost that we have. From a
technology and program management perspective, it is inclusive
of a couple of the other contractors that are supporting some
activity in that area. I would have to take for the record
specifically what is out of that category is CGI.
Mr. Rosendale. Okay, thank you very much. I will yield
another 5 minutes to Representative Cherfilus-McCormick.
Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. Ms.
Riffel, with the task of executing a program of this size is an
incredible challenge in itself, the dependency of this program
to integrate with IT modernization efforts that are currently
not in existence seems to me to be a recipe for failure. We
know that this program has gone from needing to integrate with
EHRM to now being required to integrate with a modern supply
chain system that has suffered from years of delays. What are
you, as the leader of FMBT, able to do to mitigate the risk of
your program?
Ms. Riffel. Yes, thank you for that. A couple of things
that we have done recently is that we have worked significantly
with VHA and with supply chain. In order for FMBT to proceed
with VHA, understanding where the other initiatives are right
now, we are proceeding with integrating with legacy supply
chain. As we move into VHA, which obviously we have been
working with VHA for the past 2 years, but we are at the point
now where we need to start really, in earnest, working on the
implementation we will implement with legacy.
With EHRM, we have been coordinating with that office since
inception. They have all of our requirements, detailed
requirements. We will continue to do that collaboration across
the board. Then, you know, as they continue to move out, when
they do, we will be prepared for that integration.
Ms. Cherfilus-McCormick. How confident that these
mitigations that you just mentioned are going to be successful?
Ms. Riffel. For VHA they will because it allows me to
integrate with what is available right now as I am going to
implement at a site. Also understanding that when the
enterprise supply chain solution becomes available, we will
pivot and we will actually integrate with that future solution.
We know we need to do it, but in the interim we are going to
integrate with what is available right now so we can proceed.
Ms. Cherfilus-McCormick. Do you feel that FMBT should be
allowed to deploy across VA without having to depend on
successful implementation of programs like EHRM and the supply
chain?
Ms. Riffel. Yes, so I think what I just laid out in terms
of how we are going to actually do the future state for VHA and
then the end state for VHA once supply chain is known, is a
solid plan to allow us to proceed with FMBT.
Ms. Cherfilus-McCormick. Thank you. Mr. McCune, OIT has an
impossible task of coordinating a number of large IT
modernization programs at once included in EHRM, supply chain,
and HR modernization. How does OIT manage the development and
delivery of these disperate power programs?
Mr. McCune. Thank you, ma'am, for that question. Thank you
for appreciating the complexity of managing three modernization
efforts at the same time. I think a solid project management
process allows us to do this effectively. I look at, number
one, having clear business objectives. Number two, looking at
solid risk and issue management process. I look at tight
coordination with the customer around change management. By
following these established best practices in project
management, we are allowed to keep these projects moving at the
same time.
Ms. Cherfilus-McCormick. Who is ultimately responsible for
the timing and coordination of these programs?
Mr. McCune. Yes, that is a joint responsibility. In the
case of FMBT, the business office is office management, and
accountability is the CFO. In OIT, we focus on the technology
and the security of the system. We use Federal Risk and
Authorization Management Program (FedRAMP), Authority of
Operate (ATO), and Federal Information Technology Acquisition
Reform Act (FITARA) process, and that falls under the Chief
Information Officer (CIO).
Ms. Cherfilus-McCormick. Does OIT have enough authority
within VA to make significant changes to schedules of these
programs to mitigate issues as they arise?
Mr. McCune. Yes, ma'am, we do, given the tight coordination
with our customer. I think we are seeing that now as we build
the wave schedule for FMBT. Now even adjustments with LGY, OIT
is at the table helping build that schedule.
Ms. Cherfilus-McCormick. Thank you. Mr. Chairman. I yield
back.
Mr. Rosendale. Thank you very much, representative.
Representative Self, I recognize you for an additional 5
minutes.
Mr. Self. I think I will yield for the time being, Mr.
Chairman. Thank you.
Mr. Rosendale. Okay. Mr. Getz, how are payments structured
in your contract?
Mr. Getz. A couple of different ways. There are parts of
the contract that are for fixed price, and there are parts of
the contract that are time and materials.
Mr. Rosendale. Are you being paid for each implementation
wave or another method?
Mr. Getz. Another method. We are being paid--the wave
implementation component of the contract is time and materials
because of the, you know, a lot of uncertainty around that. We
are what we do is for each the beginning of each fiscal year,
prior to the beginning of each fiscal year, we would work with
the program to determine what the work is to be done in the
next fiscal year, agree to that, provide an estimate, and then
we are paid on a time and materials basis for that piece.
Mr. Rosendale. Okay. Some of the most important waves have
been delayed by multiple years. How has that affected your
payments, if at all?
Mr. Getz. Since they are all time and materials, again,
those payments are determined by the work done in whatever the
next Fiscal Year is.
Mr. Rosendale. Okay. We have got the estimates of what the
rollout of this project is supposed to be, and yet, as we have
been discussing, the smallest portion of them has been
implemented and we have the back end, okay. A lot more work is
left to be done. How much is each implementation wave worth,
and roughly what percentage is that of the contract's annual
value?
Mr. Getz. Sorry, sir, could you repeat the question?
Mr. Rosendale. If it is not being based on the wave, okay,
it is being based on estimates of time and material, and we
have the total estimate of the cost of this project. We know
that this is getting to the crux of what is the eventual cost
going to be. We see that not that many people are being served
right now, okay. Not that many services are being accounted for
right now. The back end is where the work is going to be piled
up, and yet a lot of this contract value has been burned up
already. What I am trying to get at is, how are we going to
reconcile that?
Mr. Getz. Well, again, I think Ms. Riffel has referred to
the fact that there is some planning going on with VHA and VBA
to determine what the rest of the waves would look like, in
what order, and the degree to which they would be parallel or
combined. Once we have that, we will be able to provide a solid
estimate on what the rest of the work looks like.
Mr. Rosendale. I am just having a really difficult time
reconciling this because you are telling me you have estimates.
Again, when a layman looks at this and sees that there is a
very small percentage of this work that has been done and the
contract value, a lot of that has been utilized already. This
is not reconciling. Mr. Dahl, does the structure of this
contract sound typical based on what you have seen elsewhere in
the VA?
Mr. Dahl. I personally do not have any teams that have been
involved in looking at the contract. There is a team within the
Office of Audits that is looking at the contract. I could take
that for the record.
Mr. Rosendale. I would really appreciate that. Do you
believe it is sufficient to drive accountability when they look
at this contract? Someone is going to need to report back to us
and let us understand if it was structured in such a way as to
provide accountability for the work that is being done based
upon the projected total cost of that project.
Mr. Dahl. I would not be in a position to answer that, sir.
Mr. Rosendale. Okay. Ms. Riffel, you have already spent 5
years and more than $1 billion to implement the iFAMS system in
seven offices. I understand this project has a lot of startup
costs and fixed costs. Got that. This is an enormous amount of
money to cover with just a few of the offices. Where is the
money going besides the implementation of the waves?
Ms. Riffel. Yes, so, I think it is important to understand
what all it takes to actually implement a wave. We have a large
portion is going to a project management contract to help us
make sure planning the execution of the documentation
surrounding project management and how you are going to
actually implement. We also have data conversion, which is a
huge effort for us. We do a number of mock conversions up front
for every wave to make sure of the accuracy, et cetera.
Development effort in terms of interface development that is
needed. Substantial cost. You know, this is an enterprise
solution, both acquisition and finance. The cost is going to be
significant to get it done.
The other huge piece of the Project Management Office (PMO)
contract is the organizational change management activities.
Substantial work there. We have been actually increasing some
of the work there based on lessons learned, making sure that we
get that user adoption as we need to. You know, to me, there is
a lot going on to make sure we get it right.
Mr. Rosendale. I agree with that and this is exactly the
concern that I have, okay. As you go through and do all these
conversions and all these startup costs, okay, with the smaller
institutions, we are going to have to do those exact same
things for the larger ones, are we not?
Ms. Riffel. Mm-hmm, absolutely.
Mr. Rosendale. How is it then that you can tell me that you
can sit here in front of this committee and not tell me that
this estimate is going to be too low?
Ms. Riffel. Well, part of it is how we are estimating that
future for VHA. We are talking about predominantly VHA here.
For VBA, we have probably about 300 additional users and we
have a lot of activity due around interfaces for the remainder
of VBA's, complex programs.
For VHA, that is where a lot of the hard work is going to
come in. We have been working with VHA for 2-1/2 years now. We
have a lot of information and understanding about VHA. VHA, and
credit to them, has actually been working on data cleanse
activities, which is substantial for data conversion for the
past couple of years. They continue to do that. VHA has worked
on standardizing their accounting classification structure and
where possible, looking at standardizing business processes. A
lot of work has gone into VBA. A lot of discovery is already
known about VHA, which has helped contribute to our estimates
on what VHA is going to look like.
Mr. Rosendale. I, again, still do not understand when you
say that they are larger institutions, we have to go through
the conversions, we have to go through the startup, how that is
going to cost less than the much, much smaller organizations
that we have already brought on. I am not reconciling that, so.
Representative Cherfilus-McCormick.
Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. As is
often the case when discussed issues with IT modernization
programs, technology is usually not the root cause of VA's
issues. Many joke that when you have been to one VA, you have
been to one VA. I personally do not find that funny. This
organization has languished progress in IT modernization
specifically because there is little to no standardization
across the system. Ms. Riffel, has your staff begun efforts
with VHA to standardize workflows for using the new financial
systems across the country?
Ms. Riffel. Thanks for that question. Yes, so as I just
mentioned, we have actually been working with VHA for the past
couple of years. We have standardized their accounting
classification structure at a certain level so that they will
have visibility and to spend at an enterprise level. There is a
few uniquenesses to VHA, though, I would say. Some medical
centers have spinal cord and injury activity, others have, you
know, open heart surgery. Where necessary, we will look to be
able to record and track cost for those specific organizations
that are a little bit different.
Otherwise, from an accounting perspective, a lot of it is
very similar and they are looking at it from a standardization
perspective there. That does not mean that the business
processes are universal at each medical center. Change
management at VHA is going to be critical to make sure that we
meet those users where they are. You know, how they operate at
their medical center, what they do. We will work with them to
make sure that we standardize as best we can their business
processes. We absolutely are standardizing their accounting to
be able to track.
Ms. Cherfilus-McCormick. Given the uniqueness of the VA's
facilities, each individual one, has it been difficult to
identify best practices?
Ms. Riffel. Well, we have not gone out into VHA in earnest
yet, but I can tell you that the senior executive that is
leading that effort for VHA, and she actually has field
experience, which I think is very good, she is looking to
actually do that standardization where it makes sense within
VHA.
Ms. Cherfilus-McCormick. How long do you perceive that this
process of standardization, identifying best practices will
take?
Ms. Riffel. Well, our intent is that we will address that
in the first couple of pilots so that we can make sure that we
take the lessons learned from those pilots and that we are
prepared at that point to evaluate can we accelerate VHA at
all. You know, we want to get a couple of pilots under our belt
to make sure that we get it correct for VHA.
Ms. Cherfilus-McCormick. If we are looking at full
implementation, what is the rough timeline?
Ms. Riffel. Right now on the schedule it is 2029. We
actually have a sit-down schedule session with them coming up
in the month of July based on the known direction now with
supply chain. We will start to lay in that work a little bit
more definitively with VHA now.
Ms. Cherfilus-Mccormick. What are the risks to success of
FMBT if user adoption is not prioritized in the medical and
contracting centers?
Ms. Riffel. Obviously, you know, user adoption is front and
center for all of us. I would tell you that our upfront,
collaboration, and transparency with the users all the way from
the senior executive down to the person doing the receding, is
critical to being successful and, you know, meeting people
where they are.
I feel like our program is structured in a manner that we
are geared for success the way that we have approached the
change management within VA. I have been with VA 37 years. I
understand the cultural, you know, really difficult change that
VA is going to undergo here. I think that you have to make sure
that people are heard, they feel like they are heard, and you
actually not just feel like, but that you are and that you are
listening to them making adjustments where you need to.
Ms. Cherfilus-McCormick. Now, Mr. Tapp, I saw you nodding
your head, so I would like you to answer the same question.
What are the risks to success of FMBT if user adoption is not
prioritized by VBA?
Mr. Tapp. You hit the nail on the head. The biggest risk is
user adoption. In VBA, and I would definitely say across VA, we
are in the people business. We are people serving people. As we
start looking at iFAMS, it is so important that we keep our
employees and the users of the system at the center. Again, as
we implemented and started at the beginning, we use them as a
part of our user stories and then use them as a part of the
testing.
The most important thing as we look point forward,
particularly for the General Operating Expenses (GOE) wave, is
that training is not a one-time event. It is iterative and we
have to be engaged. For me, particularly around iFAMS and its
adoption, implementation, and to continue to be a part of the
culture that we have as far as this is not a tool, it is a part
of our culture. It requires that I am personally engaged in
terms of reaching out to our user community to understand,
number one, they have an advocate, number one. Number two is
that you have someone who is going to listen. Number three, we
have a great partnership and we will use that with Ms. Riffel
and her team to continue to make the improvements that we need
to so as different generations of users come on board, that
they are able to use the system, get the training they need to
be successful.
Right now, we have at least three generations of users,
folks who are 5 years or less, people who are mid-tier, and
some folks who have been working with VA for two decades or
longer. Each of them see the system differently. We have to
make sure we meet them all where they are from a training
perspective.
Ms. Cherfilus-McCormick. Thank you so much. Mr. Chairman, I
yield back.
Mr. Rosendale. Thank you, representative. Representative
Self, you are recognized your 5 minutes.
Mr. Self. Thank you, Mr. Chairman. I have been doing some
scratching here, and I am with the Chairman. I just cannot make
the figures work. What are you using as an estimate of
inflation? Let us just start there.
Ms. Riffel. Yes, so, sir, I will have to take that for the
record, but we certainly can give you the detail and the
methodology behind our lifecycle cost estimate.
Mr. Self. That is going to degrade your figures here.
Ms. Riffel. Yes.
Mr. Self. Is this scalable, because it looks to me like, of
the users that you gave us, you have got about less than 4
percent of your users are currently on the system. If I am
reading your charts right, you have already used right at 25
percent taking out operations and maintenance. I just do not
know how you are going to get there.
Let me ask you a specific question, though. There is a huge
percentage of your implementation--your development and
implementation costs--in project management. Break down for me
of your development cost and implementation cost--and let us
get a little more granular than your chart--how much is let us
just use procurement, training, infrastructure, organizational,
organizational change. I am just trying to get a handle on why
there is such a huge percentage in program management.
Ms. Riffel. Yes, thanks for that question. I can partially
answer, sir, is the program management includes implementation
cost are within that particular category, as well as
organizational change management. In the piece for technology,
that is really the hardware and some of the licensing and,
where appropriate, the interface development work there. That
is where I can tell you the preponderance of the category of
things that make up those cost components.
Mr. Self. I question your lifecycle the way you have got it
laid out. I just do not think you have got enough to get it
done. We will see if it is--because you are going to have to
get a whole lot more efficient as you move forward.
Ms. Riffel. Yes.
Mr. Self. A whole lot more efficient.
Ms. Riffel. Yes, we would expect to get efficient. The
other thing I would just offer, which is part of the GAO audit,
sir, is we have an independent group doing a lifecycle cost,
independent lifecycle cost right now for the program. That will
certainly inform us if we are off base with what we have done
ourselves on this cost estimate. That is expected in the
December timeframe, sir.
Mr. Self. Well, I will tell you in the GAO summaries of
these eight that we mentioned, eight recommendations that we
mentioned, the word metrics is scattered throughout many of
them. I think that goes back to what I am asking here. What are
the metrics of moving forward that you are going to have to
meet in order to meet your goals? I look forward to that
explanation. Thank you. Mr. Chairman, I yield back.
Mr. Rosendale. Thank you very much, representative. Ms.
Riffel, separate from your FMBT project, VA has attempted two
different supply chain modernization efforts over the past 4
years. I understand that you need to integrate the iFAMS system
with an inventory management system, and you still do not know
what the inventory management system is going to be. First of
all, how long have you been waiting for this decision and what
problems has the uncertainty caused?
Ms. Riffel. Thanks for that question. As I indicated, we
have been continuously working with VHA. Even absent
understanding what the future supply chain solution was, there
was still valid work that we could do with VHA to move that
particular implementation forward, which we continue to do. In
terms of the inventory package, because we are going to be
implementing with legacy, at least right now in the beginning,
until enterprise supply chain is known, we will integrate with
the generic inventory package, which is part of the Veterans
Health Information Systems and Technology Architecture (VistA)
application in order for the facilities to maintain their
inventory levels. We do not want to do any disruption to what
happens today.
Mr. Rosendale. Do you anticipate, because of working with
these other programs and the investment of time and energy and
resources that you are using, that you are going to--once
another decision is made--that you are going to have to go
through all of the conversion work and everything again, to
have this duplication of efforts when a final decision is made?
Ms. Riffel. In terms of conversion, for us, it would be no.
Certainly, supply chain will have to evaluate how they are
going to do conversion activities. We would want to be in
alignment where there is interdependencies on that data, and we
would certainly work toward that with them once they understand
exactly where they are going. We have accounted for
understanding that once they get an enterprise solution and the
integration is known that we will move to that at that point.
We understand that, and we are, you know, going to continue and
work that direction.
Mr. Rosendale. Okay. Right on that same line, what
capabilities does the interim state lack that are supposed to
be in the final State, and what do you need in order to proceed
to that final state?
Ms. Riffel. Yes, so I can respond as it relates to the
iFAMS solution. What we are doing is implementing the inherent
Momentum Commercial Off-The-Shelf (COTS) functionality across
the enterprise. There is two major components that are
specifically supply chain driven that obviously iFAMS does not
do. One is the catalogue ordering capability where they need to
go in and determine what they are ordering out of the
catalogue. The other is the inventory piece.
The other components that IFCAP performs today, iFAMS will
do. Again, we will work directly with, and we have commitment
from supply chain on our legacy, you know, integrating with
legacy. It is a slightly different group, but we will want to
work in close coordination because obviously we are touching
VHA. It could impact patient care, all of that. Very mindful of
that.
Mr. Rosendale. How long have you been waiting for the
decision to find out exactly what you are going to be dealing
with for this other system?
Ms. Riffel. For us, particularly, and I do not want to
speak for supply chain because I am not sure how long they have
been working the effort, but for us directly, it is probably
been, you know, almost close to 2 years. As I indicated, we
continued to work with VHA in the absence of understanding what
that would look like. I do not think that we have had like
significant wasted time. We have continued to move that effort
forward.
Mr. Rosendale. Okay. Mr. McCune, is this a technical
problem or a lack of management?
Mr. McCune: Sir, I appreciate the question. I think I would
defer to the supply chain program office. I am not sure we have
got the right people here to answer that question today. I
would be happy to take that for the record.
Mr. Rosendale. Please do. Please do. You cannot address a
problem if you do not know what it is and who is responsible
for, you know, bringing the answer forward. Please have them
check in.
Mr. Dahl, your office has written many reports about
problems with VA's inventory management and the current
inventory system called Generic Inventory Package (GIP). How
much improvement will adding iFAMS make? What else does VA need
to truly improve the inventory management?
Mr. Dahl. I think an updated system is obviously overdue.
GIP is an old system as well. You know, again, though, people
are involved. Part of the issues we see when we go out is that,
you know, people are not accurately tracking what they take or
what they put into inventory. We go to facilities where they
are not using, you know, barcodes. They are ordering based on
walking rather than, you know, relying on automated software
that should trigger ordering.
Mr. Rosendale. Some of this stuff is just personal
responsibility. People not taking the initiative to do what
they are supposed to do, to follow process.
Mr. Dahl. I would say that that is certainly part of it.
Part of it could be the frustration with the system.
Mr. Rosendale. Okay. Well, that is the purpose.
Mr. Dahl. Right.
Mr. Rosendale. Right. Right, right, okay. Thank you very
much. Representative Cherfilus-McCormick.
Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. Mr. Dahl,
what are the risks at VA for not standardizing their financial
management practices and implementing this system?
Mr. Dahl. Well, I talked a little bit about, you know,
continuing material weaknesses would be likely. They would
still be doing the manual workarounds for certain things. I
would say bigger picture, you have to look at it that VA
recognized the need to replace FMS more than 2 decades ago.
They were not successful with Core Financial and Logistics
System (CoreFLS) or Financial and Logistics Integrated
Technology Enterprise (FLITE). They are now working with iFAMS.
I would say that, you know, if this system is not successful,
how much longer will it take to get a modern system? How much
effort? How much financial resource? I am very hopeful that
iFAMS is going to be successful, because obviously we are
dealing with a system that is 40 years old, and it is not
meeting the needs. It really is, I think, vital that VA does
all they can to get this system online.
Ms. Cherfilus-McCormick. Now, I have a broader question
which is in the same vein. What would it take for VA to change
their culture around IT modernization? We have seen the issue
from your report with compliance, with cybersecurity, best
practices. I am assuming there is an even larger issue that
have contributed to the lack of success for all IT
modernization programs.
Mr. Dahl. I think that VA is in a challenging situation
right now, needing to replace these number of major systems all
at once. I think it is an opportunity right now for improved
communication and coordination with the various aspects of the
Department that need to be involved in these.
I think that there is opportunities or a need for people to
engage the stakeholders, adequately define requirements, come
up with reliable and reasonable project schedules, cost
estimates. I think it is important that they do systems
testing, that user feedback stays at the forefront, that they
consider the concerns of the users. That they take the lessons
learned from whatever system they are currently working or any
other system that they have implemented in the recent past,
take those lessons learned and go forward with that.
Ms. Cherfilus-McCormick. Mr. McCune, could you please
answer the same question? What would it take to change the
culture?
Mr. McCune. Thank you for the question. I think what we are
finding is that all these programs are not the same, right.
Some of them, FMBT in particular, has the advantage of an early
start, and we are definitely looking at best practices from
FMBT and applying those to the other products. I am excited
about what we are seeing on FMBT, the success to date.
Certainly, that early coordination, particularly that business
process reengineering that happens early to make sure we have
got consistency and standardization on the business processes,
the incremental releases, the wave strategy, which allows you
to do multiple things in parallel. Those are all best practices
that we are seeing on FMBT, and we are looking at applying
those elsewhere as well.
Ms. Cherfilus-McCormick. How could Congress assist and
support you in changing that culture?
Mr. McCune. I think Congress is supporting us in that, and
we certainly welcome your ongoing support.
Ms. Cherfilus-McCormick. Thank you so much. Mr. Chairman, I
yield back.
Mr. Rosendale. Representative Self.
Mr. Self. Thank you, Mr. Chairman. I am not going to be-
labor this, but my questions, I will turn to the Fiscal Year
2022 audit findings. There are 10 findings here of the previous
year's findings. Of the 10, three are modified repeat material
weaknesses. These are financial audits. Two are significant
deficiencies. Five are noncompliance. Those are the internal
audits, I do believe. Mr. Dahl, would you like to comment on
these 10?
Mr. Dahl. VA has a number of challenges. We have talked
quite a bit today about the financial management and reporting
systems. That is a material weakness. It is not likely to go
away without upgrading and getting a modern system online. We
are likely years away from that. Other material weaknesses
revolve around information technology security, and over at
VBA, the need to work on the estimates for future liabilities.
Those are the ones that the auditors are most concerned with,
the material weaknesses. You are right, we find the same or
almost the same thing year after year.
Mr. Self. I think that is my point. How can you assure us
that this time it is going to be different? The Chicago Cubs
did that for 50 years.
Mr. Dahl. Yes, my Red Sox did it for longer, unfortunately.
You know, I wish I had a crystal ball and could say that this
is going to solve all of VA's problems, but it is not. This is
just one piece. It is a significant piece. It is one piece of
VA's solution toward having an easier time of getting a clean
audit opinion.
Mr. Self. Thank you. Mr. Chairman, I yield back.
Mr. Rosendale. Thank you, representative. I have just one
more question, Ms. Riffel. According to your schedule, the
iFAMS system will not be implemented in the majority of the
Veterans Health Administration for another 4 years. It will not
be implemented in the Veterans Benefits Administration
Disability Compensation Service, which spends more than half of
the Department's entire budget, until 2029. When do you
consider the project to have reached critical mass and
demonstrated success?
Ms. Riffel. Yes, thanks for that question. One of the
things I would like to point out about Veterans Benefits
Administration is that although we still have loan guaranty,
Compensation and Pension (C&P), and education, and insurance
left to do, we do have approximately 70 percent of their
expected users in the system right now. Most of the work with
these mission critical programs is surrounding interface work.
They have about 100 users for each one of those programs that
will come on to support those programs. I just want to point
out for VBA, we do have a large percentage of those users in
the system.
For VHA, as I mentioned earlier, we are in the process now
of laying out what their schedule will actually look like given
the direction with supply chain. I do believe that, you know,
once we get a couple of pilots, get lessons learned, make any
modifications we need to, we will look for opportunities in the
future to accelerate that. I would say, and I do not want to
speak for Charles, but I think for VBA, as we rebaseline the
VBA schedule, we will certainly look to work with VBA to try to
accelerate the remainder of that work.
Mr. Rosendale. Okay. Any more questions?
Ms. Cherfilus-McCormick. No.
Mr. Self. No.
Mr. Rosendale. Representative Self. Okay. I would like to
thank all the witnesses for their testimony today, and the
panel is excused from the witness table. With that, I will
yield to Ranking Member Cherfilus-McCormick for your closing
statement.
Ms. Cherfilus-McCormick. Thank you, Chairman Rosendale. I
appreciate the testimony and answers from our witnesses this
afternoon. I feel there is consensus on what we need to do to
move forward and be successful. I truly do not want to see this
program suffer the same fate as other modernization programs. I
feel that the management in charge is very capable of
succeeding, but I want to ensure she is not burdened by the
lack of success of other failed programs. Employees, veterans,
and Members of Congress have had enough with the current lack
of success, and I look forward to working together to ensure we
have more positive outcomes in the future. Thank you, Mr.
Chairman. I yield back.
Mr. Rosendale. Thank you, Ranking Member Cherfilus-
McCormick. I want to thank the witnesses for joining us this
afternoon. Congress has always prioritized veterans' healthcare
and benefits, and the size of the VA budget, $325 billion,
reflects that. It is inexcusable and downright irresponsible
for the Department to be managing that much money with an
accounting system that is barely functioning.
The FMBT program has to succeed, and despite some
significant bumps in the road, I do believe that it can. We
need to see the iFAMS system rolled out to the key offices that
handle the majority of the VA budget. This committee will be
watching if the improvements that have been promised are
actually delivered. We will be monitoring whether this project
is able to hit its timelines and recover its delays. I am
committed to keeping it moving forward, not stumbling
repeatedly like the EHRM system. No more projects can be
permitted to fail again and again yet continue to receive
funding from the taxpayers. That is unacceptable.
With that, I ask unanimous consent that all members have
five legislative days to revise and extend their remarks and
include extraneous material. With no objection, so ordered.
This hearing is adjourned.
[Whereupon, at 4:18 p.m., the subcommittee was adjourned.]
?
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A P P E N D I X
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Prepared Statement of Witnesses
----------
Prepared Statement of Teresa Riffel
Good afternoon, Chairman Rosendale, Ranking Member Cherfilus-
McCormick, and Members of the Subcommittee. Thank you for the
opportunity to testify today in support of the Department of Veterans
Affairs' Financial Management Business Transformation (FMBT) program
and its implementation of the Integrated Financial and Acquisition
Management System (iFAMS). I am accompanied by Daniel McCune, Deputy
Chief Information Officer for Software Product Management and Charles
Tapp, Chief Financial Officer of the Veterans Benefits Administration.
VA cannot continue to rely on its legacy financial management
system due to the enormous risk it presents to VA operations. It is
becoming increasingly difficult to support the antiquated application
from a technical and functional ability standpoint, and VA cannot
correct new audit findings. In addition, our legacy financial system is
not compliant with today's internal control standards. As a real-world
example of the frailty of our current financial system, while it was
down for year-end annual processing last October, unforeseen problems
arose that very nearly kept us from bringing the system back up, which
would have been catastrophic. VA has overcome cultural, technical, and
operational challenges that have been building for over 30 years, and
our embedded Change Management efforts have helped ease the transition
to the iFAMS solution.
I am proud to report that iFAMS is no longer a proof of concept,
and it is successfully replacing VA's antiquated, 1980's-era financial
management system. It has been successfully up and running at VA for
almost three years. VA completed six successful deployments of iFAMS,
encompassing 20 offices and 4,700 users across the enterprise. That
includes the entirety of the National Cemetery Administration (NCA), a
portion of the Veterans Benefits Administration (VBA), and several
major staff offices, including Office of Information and Technology and
Office of Inspector General. iFAMS users have collectively processed
over 3.5 million transactions, representing almost $10 billion in
Treasury disbursements. iFAMS is stable and achieving over 99.9 percent
uptime. On June 12, 2023, VA went live with its largest deployment to
date, increasing the current user base by 60 percent. It was also the
first time VA went live simultaneously with both the finance and
acquisition components of iFAMS--which demonstrates iFAMS is a viable
solution capable of becoming the next generation financial and
acquisition solution for VA.
It's important to understand that iFAMS is not just a new core
accounting and acquisitions system. It is crucial to transforming VA's
business processes and capabilities both so we can meet our goals and
objectives in compliance with financial management legislation and
continue to successfully execute our mission to provide Veterans with
the health care and benefits they have earned and deserve. With so much
at stake, both in terms of taxpayer dollars and the Department's
ability to serve Veterans, it is vital that VA accurately track and
report how funds are used. Fortunately, iFAMS significantly improves
funds tracking capabilities, which--among many other benefits--will
help ensure proper tracking of PACT Act expenditures.
Through the use of iFAMS, VA is increasing the transparency,
accuracy, timeliness, and reliability of financial information. VA is
gaining enhanced planning, analysis, and decision-making capabilities
because of improved data integrity, reporting functionality, and
business intelligence. VA is demonstrating these achievements through a
range of metrics and associated targets based on industry best
practices.
iFAMS and process changes are part of VA's strategy to resolve
long-standing financial material weaknesses and strengthen internal
controls. For example, and in contrast to our current system which
cannot capture transaction approvals, iFAMS routes documents to
approving officials and allows supporting documentation to be attached
directly to the transaction. Additionally, and unlike our current
system, iFAMS requires additional levels of approvals for high-dollar
transactions. iFAMS also eliminates the need for an external tool to
adjust entries for financial reporting. Perhaps most importantly, iFAMS
complies with reporting requirements from the Office of Management and
Budget and the Department of the Treasury to capture various account
attributes and conform to the U.S. Standard General Ledger. VA's
current system is unable to meet those requirements, which has led to
extensive and inefficient manual workarounds, and iFAMS will remediate
all of these. Achieving these improvements is well within our grasp,
and we've proven iFAMS is a viable solution.
iFAMS does not operate in a vacuum. In fact, its connectivity to
other key systems across the enterprise is what will make it powerful
in remediating our long-standing financial weaknesses. We have numerous
interdependencies with key feeder systems, many of which are also
outdated. Establishing connectivity to these systems and verifying the
accuracy of the data is both necessary and time-consuming. Accordingly,
FMBT has a support contract specifically dedicated to developing iFAMS
interfaces and converting data from legacy systems.
Our success has been and continues to be built on partnerships,
mutual respect, and two-way collaboration with our users. Accordingly,
iFAMS established a dedicated Chief Experience Officer to coordinate
user interactions and change management activities. Through End User
Validation and User Acceptance Testing sessions, we work with users to
identify requirement gaps, test common scenarios, and execute end-to-
end process flows. This due diligence establishes a layer of confidence
that the system is configured to meet our end users' business needs.
To keep the users informed, we have a dedicated, experienced
communications team who produces a wide range of frequent newsletters,
email blasts, informational summaries, training reminders, and websites
targeted and tailored to each organization and type of end user. This
communications engagement starts as soon as an implementation wave
begins and lasts through go-live and beyond. We also produce live and
pre-recorded webinars, process reviews, and system reviews to give
future end users a foundation for subsequent training activities.
In addition to the system training before go-live and the
sustainment training after go-live, users must complete a financial
core competency curriculum which assigns specific courses based on
their role in iFAMS. Prior to go-live, authorized users have access to
sandbox environments for risk-free practice and experimentation in the
system. Once user preparation leading up to go-live is complete, the
iFAMS Service Desk provides support immediately following each go-live.
This support continues uninterrupted until the customer agrees that the
system is functioning properly, and users are proficient in the system.
FMBT's change management practices place a heavy emphasis on
continuous improvement. Using customer feedback, our own observations,
audit findings, and industry best practices, we establish lessons
learned during each wave and incorporate those lessons into subsequent
wave deployments. We incorporate user feedback into the periodic system
enhancements we deliver to improve the end user experience. For
example, following our first go-live, we heard from the customer that
certain forms and screens in iFAMS had unnecessary fields for some of
their users, which caused a frustrating amount of effort to accomplish
their tasks. We took that feedback to heart and developed a simplified
interface for those users, which we call iFAMS EZ. This simplified
interface was so well received that we developed two additional iFAMS
EZ interfaces for other user groups. This exercise gave our team
valuable experience with a human-centered design approach, which we are
applying to future deployments.
Since the program's inception in 2016, iFAMS has implemented an
Independent Verification and Validation capability into our operating
framework to provide an objective assessment that the system is
delivering on defined requirements and performance standards. We are
looking forward to a major upgrade of the iFAMS software in December
2023, which will bring a range of technical improvements and usability
enhancements to the system.
We are also well into the VBA Loan Guaranty implementation, which
handles a particularly high volume of financial transactions. In 2021,
VBA guaranteed over 1.4 million loans, and the estimated loan amounts
for 2023 total to over $314 million.
Last month, VA held a three-day in-person working session with VBA
leadership and subject matter experts to revalidate system requirements
and review the schedule. We are currently evaluating the outcomes of
that session and will deliver an updated schedule next month for the
VBA Loan Guaranty implementation.
Our implementation strategy for VA's largest administration, the
Veterans Health Administration (VHA), is evolving. As the Department
works to modernize its Supply Chain Program, FMBT will initially
integrate with legacy supply chain systems, then once it is available,
the future enterprise supply chain solution.
While FMBT works hard to meet defined milestones in our project
schedule, we recognize the need to be flexible. Adapting to new
information and circumstances is critical to our success, and we have
demonstrated this flexibility by continuing to move forward while
making improvements. This is made possible through our Scaled Agile
approach that supports multiple concurrent implementations and an
iterative delivery of system functionality. Because Agile requires
constant customer engagement and frequent testing, we can identify
issues much earlier than in traditional program management approaches.
This process of continuous improvement helps reduces the amount of
future rework and allows the program to pivot as needed.
FMBT continues to stay on budget despite changes. Our successes
would not be possible without the ongoing support of Congress, and we
appreciate the opportunity today to discuss this important initiative.
We will continue to work judiciously, with Veterans foremost in mind,
to modernize VA's financial and acquisition management system, and
provide you with updates as we make further progress. FMBT FY 2022
program costs were 7.8 percent under projections while costs from
inception through FY 2022 are 8.75 percent over projections. The
general industry standard for project management considers variances
over 10 percent to be significant--and we are well within that range.
Separate from our operating budget is FMBT's program life cycle
cost estimate. Per the FY 2022 life cycle cost estimate, the total
program cost estimate is now $7.46 billion compared to the previous
year's estimate of $3.24 billion. This difference is due to expanding
the cost estimate to encompass all 37 years of the projected useful
life of iFAMS, which was done in accordance with the latest GAO Cost
Estimating and Assessment Guide. The life cycle cost estimate now
extends through the end of FY 2047.
In addition to providing their helpful cost estimating and
scheduling guides, GAO has conducted two audits of the FMBT program,
each lasting about 8 months in duration and involving dozens of
document requests, briefings, and personnel interviews. Of the eight
recommendations in those two reports, only one remains open, and it
will be closed this December following completion of the Independent
Cost Estimate.
FMBT also completed a 21-month Inspector General (IG) audit of our
NCA deployment. Of the five recommendations in that report, we have
submitted three for closure and are addressing the remainder. Two
additional IG audits of iFAMS acquisition functionality and iFAMS
training are in progress. We are in compliance with the initial
reporting requirements established by the Department of Veterans
Affairs Information Technology Reform Act of 2022, which was part of
the Cleland-Dole Act in the recent appropriations act. As variances
arise, we will provide notification as the Act requires. Although we
are encouraged by our success to date, we are keenly focused on the
difficult work that lies ahead and are steadfast in our commitment to
see this initiative through its successful conclusion.
Chairman Rosendale, Ranking Member Cherfilus-McCormick, and
subcommittee members, this concludes my opening statement. I would be
happy to answer any questions.
______
Prepared Statement of Sidney Getz
INTRODUCTION
Chairman Rosendale, Ranking Member Cherfilus-McCormick, and other
distinguished members of the Subcommittee on Technology Modernization,
my name is Sidney L. Getz. I am a Senior Vice President at CGI Federal
Inc. (``CGI Federal''). CGI Federal, a wholly owned U.S. operating
subsidiary of CGI Inc. (``CGI''),\1\ is dedicated to partnering with
federal agencies to provide solutions for defense, civilian,
healthcare, justice, intelligence, and international affairs missions.
For the last 5 years, I have served as the Project Manager on CGI
Federal's contract with the Department of Veterans' Affairs (the
``VA'') for the Financial Management Business Transformation (``FMBT'')
Program. On behalf of CGI Federal's 7,100 dedicated employees providing
services to over 100 departments and agencies across the federal
government, I am pleased to submit this written testimony to the
Subcommittee on the status of the VA's FMBT Program.
---------------------------------------------------------------------------
\1\ Founded in 1976, CGI is among the largest independent
information technology (``IT'') and business consulting services firms
in the world. With 90,250 consultants and professionals across the
globe, CGI delivers an end-to-end portfolio of capabilities from
strategic IT and business consulting to systems integration, managed IT
and business process services, and intellectual property solutions. CGI
works with clients through a local relationship model complemented by a
global delivery network that helps clients digitally transform their
organizations and accelerate results.
---------------------------------------------------------------------------
FMBT PROGRAM OVERVIEW
In 2016, the VA established the FMBT Program to modernize its
legacy core Financial Management System (``FMS'') in accordance with
the Office of Management and Budget (``OMB'') Memorandum M-13-08,
``Improving Financial Systems through Shared Services,''dated March 25,
2013. This modernization initiative seeks to enable the VA to, among
other things: (1) produce enhanced performance information to improve
strategic and daily decision-making; (2) provide improved data
analysis, data management, automated data reconciliation, and automated
consolidated financial statements; (3) meet applicable federal
accounting regulations; (4) maintain clean audit opinions; and (5)
accommodate new regulatory requirements to avoid material audit
weaknesses and/or significant deficiencies.
Since 2016, CGI Federal has been under contract to support the VA's
FMS modernization effort. The primary objective of CGI Federal's 10-
year FMBT contract with the VA is to deploy a new, OMB-approved
financial management system at the VA using CGI Federal's Enterprise
Resource Planning (``ERP'') system. CGI Federal's ERP system, known as
Momentum Financials and Acquisitions (``Momentum''), already is
operational at many federal government agencies, including four cabinet
agencies.
To accomplish this complex modernization effort, the VA is
executing the FMBT Program through an incremental deployment approach
by migrating its current financial management and acquisition
environment to the new Integrated Financial and Acquisition Management
System (``iFAMS'') using CGI Federal's Momentum cloud-based solution
and an Agile implementation methodology. Each deployment, referred to
as a ``wave,'' delivers capabilities to a subset of the VA
organization. The work in each wave includes: defining the VA
organization(s) covered; clarifying the Treasury symbols involved;
reviewing the business processes and appropriately configuring iFAMS;
testing; business intelligence; conversion of data from legacy systems;
interfaces; organizational change management, communications, and
training; and cutover planning.
To date, the FMBT team has completed six waves, going-live with:
(1) finance users at the National Cemetery Administration (``NCA'') in
November 2020; (2) finance users at the Veterans Benefits
Administration (``VBA'') for General Operating Expense in February 2021
(Phase 1); (3) finance users at the VBA for General Operating Expense
in May 2021 (Phase 2); (4) acquisition users at the NCA in April 2022;
(5) finance users at the Office of Revolving Funds, the Office of
Enterprise Asset Management, the Board of Veterans Appeals, and the
General Administration in October 2022; and (6) finance users at the
Office of Information and Technology (``OIT'') and finance and
acquisition users at the Office of Construction and Facilities
Management (``CFM'') and the Office of Inspector General (``OIG''), all
in June 2023. In addition, the FMBT team currently has two additional
waves in progress at the VBA Loan Guaranty Service and the Veterans'
Health Administration (``VHA'').
KEY BENEFITS REALIZED
While there are still milestones and challenges ahead, the FMBT
Program is delivering on its promise to modernize the VA's FMS. For
example, there are currently 4,700 live users in 20 different VA
offices in iFAMS. These users have processed over 3.5 million iFAMS
transactions, use iFAMS to view approximately 8,500 business
intelligence reports every week, and have disbursed over 8.5 billion
dollars through the U.S. Treasury.
To date, the iFAMS implementation has delivered the following
benefits to the VA:
Improved strategic and daily decision-making:
o iFAMS data is more timely and accurate. By eliminating legacy
systems, more transactions are processed in iFAMS to update
budgets in real time. Unlike FMS, the iFAMS general ledger is
updated in real time as opposed to on a nightly batch basis.
Finally, iFAMS also interacts directly with federal-wide
solutions such as Treasury's G-invoicing and Collections
Information Repository (``CIR''), HHS' Payments Management
System for Grants, and the U.S. Bank's purchase and fleet
cards.
o New Account Code Structure (ACS). The new ACS provides
standardization across the VA and complies with federal
policies and guidance, including the Treasury's U.S. Standard
Standard General Ledger (``USSGL'') and OMB Circular A-11,
Preparation, Submission, and Execution of the Budget, at
Section 83, Object Classification (Max Schedule O), which
classifies IT obligations among various object classes. As a
result, iFAMS has a federally compliant, enterprise-wide
accounting classification structure that includes a uniform
chart of accounts, object classes, fund codes, programs, and
projects that will drive standardization across the VA, improve
data integrity and the accuracy of financial reporting, and
greatly improve auditability, while simultaneously being
flexible enough to accommodate the unique business needs of the
VA's various lines of business.
o Accessing the data is easier. iFAMS reports provide quick
access to data refreshed on an hourly basis, replacing legacy
reports refreshed on a daily basis. For example the iFAMS NCA
``blotter'' report, which helps NCA cemeteries review their
budgets and spending, is refreshed every hour. The legacy
process for developing the same report was a time-consuming,
resource intensive MS Excel spreadsheet-based process.
o iFAMS data analysis tools are flexible. iFAMS allows users to
quickly filter, slice, and dice report data, reducing the need
for ad hoc report requests and data calls. In the legacy
reporting solution, users must either re-run the report with
different parameters or download large amounts of data into MS
Excel spreadsheets and create their own reports.
o iFAMS data can be consolidated to all hierarchical levels of
the enterprise. Users with appropriate permissions can run the
same reports to view data at the enterprise level, the
administration level, or at lower levels of an administration.
Because data is standardized across the enterprise, iFAMS
provides VA management with enterprise-wide visibility into
financial and acquisitions data and the ability to ``roll up''
or ``drill down'' into specific data as needed.
Process Automation:
o iFAMS produces the Government-wide Treasury Account Symbol
Adjusted Trial Balance System (``GTAS'') reports directly out
of the core financial system rather than an external system,
speeding up the process and making it less prone to manual
error.
o Contract writing is more integrated with financials. With
commitment accounting now available in iFAMS, funds are set-
aside (committed against the budget) for future awards and
those committed funds are then promptly and accurately
obligated in iFAMS in real time upon contract award. With
iFAMS, Contract Officers now have visibility into the contract
award itself, as well as all financial transactions against the
awarded contract. This capability also supports acquisition
planning for contract extensions and renewals as well as
contract closeout by reducing outstanding undelivered orders
(``UDOs'').
o Payments from the Invoice Payment Processing System
(``IPPS'') are processed in near real time in iFAMS,
identifying errors more quickly than batch processes and
resulting in faster payments to vendors.
o New, non-contract vendors are updated automatically in iFAMS
from the vendor portal.
o iFAMS has a more robust and auditable workflow process. For
example, iFAMS: permits users to attach supporting
documentation; allows for multiple levels of approval depending
on dollar amount; and notifies users via email and dashboards
if they need to take action such as transaction approvals.
Meeting applicable federal accounting regulations:
o Critically, iFAMS brings the VA into compliance with the
following federal accounting standards and best practices:
OMB Circular A-11, Section 83 to Level 3 for
Object Classes;
USSGL-compliant General Ledger (``GL'')
Accounts and posting models aligned to Treasury Account
Transactions and capture of required reporting
attributes for federal reporting;
Internal Controls and VA policies are
integrated into iFAMS businesses processes;
iFAMS captures data at the transaction level
to support internal and federal reporting standards;
Reduced use of Journal Vouchers due to
compliance with the USSGL GL Accounts and associated
attributes (e.g., federal and non-federal, trading
partner, etc.); and
Compliance with Reimbursable Authority
regulations.
Maintaining clean audits:
o The VA has maintained a clean audit opinion since the first
iFAMS go-live in November 2020.
Accommodating new regulatory requirements:
o CGI Federal releases periodic Momentum software updates to
allow federal agencies to keep current with new regulatory
requirements. The VA deploys regular iFAMS upgrades and plans
to implement the next upgrade in December 2023. A recent
example is the March 26, 2022 iFAMS upgrade to version 7.9 of
Momentum, which included new functionality to comply with the
Treasury Department's October 2022 G-Invoicing implementation
deadline for new orders.
KEY PERFORMANCE FACTORS
On complex programs like FMBT, success often depends on diligent
stakeholder focus on key performance factors to keep things on track.
Several key factors have contributed to the progress achieved by the
FMBT Program to date, including:
Collaboration and Transparency:
The FMBT team, led by Deputy Assistant Secretary (``DAS'') Terry
Riffel, and CGI Federal have, from the very beginning, operated with a
high degree of collaboration, transparency, and sound governance. This
same collaborative approach extends to other key FMBT ``partners'' such
as: the Office of Acquisitions and Logistics (``OAL''); the Financial
Services Center (``FSC''); the Office of Management (``OM''); the
Office of Information and Technology (``OIT''); program advisors and
subject matter experts from across VA Administrations and Staff
Offices; and other FMBT contractors responsible for program support,
conversion and interface development, and independent verification and
validation (``IV&V''). This culture of collaboration and transparency
lowers program risk by encouraging an environment where all partners
speak freely with each other, collectively identify and share risks and
issues early, and then work as an integrated team to resolve issues and
mitigate risks. As DAS Terry Riffel often says, ``We are one team.''
Enterprise-Wide Standardization:
One of the first activities conducted by the FMBT Program, in
collaboration with the VA Administrations and Staff Offices, was to
identify the financial and acquisition business processes and financial
and acquisition data that could be standardized throughout the VA
enterprise. These processes and data were then configured in iFAMS (the
``Enterprise Configuration'') and now act as a starting point for the
configuration of the system for each wave of users and functionality.
Standardized processes encourage the creation of a reliable and
accurate set of process descriptions, streamline training, reduce
errors, and simplify customer support. Data standardization facilitates
the ability to view consistently defined and edited data at various
levels of the VA organization, including Staff Office and Division-
level, Administration-level, and Enterprise-wide reporting. Data
standardization also supports compliance with federal financial and
acquisition reporting. While business process and data standardization
are important program goals, the FMBT team recognizes that the many
different lines of business at the VA require unique iFAMS
configurations to meet their specific business needs. The iFAMS
configuration model anticipates this requirement. In fact, an early
step in each wave is to identify and incorporate these unique business
processes, while still maintaining the iFAMS data standards.
Incremental Approach:
Implementing iFAMS across the VA enterprise is a complex
endeavor. To reduce program risk, the VA has wisely chosen a
SAFe Agile-based implementation philosophy to execute the FMBT
Program. At a macro level, the enterprise user base is divided
into logical groups and then each user group is added to iFAMS
incrementally in a ``wave.'' As mentioned earlier, the FMBT
team has completed six waves successfully. At a micro-level
within each wave, the FMBT team also proceeds iteratively in 3-
week ``sprints,'' consulting with user representatives
throughout each sprint. This incremental approach reduces
program risk by allowing future users to review work in
progress and provide early feedback that allows the FMBT team
to adapt quickly. The net effect of this incremental approach
is to mitigate and reduce costs by identifying and resolving
issues early while associated impacts are manageable.
Continuous Improvement:
Another benefit of the Program's incremental delivery approach
is that it allows the FMBT team to capture lessons-learned and
implement those lessons in the next sprint. The FMBT team uses
this approach in the areas of change management, training,
iFAMS user configuration, Operations & Maintenance, and even
wave management. While there are always improvements and
enhancements borne from user experience in the production
environment on complex programs like FMBT, CGI Federal believes
that the FMBT team is well equipped to address those challenges
as they arise. An example of such an improvement is the
creation of the so-called ``EZ'' web pages for occasional
users, which used a human-centered design approach to reduce
the number of required data elements to improve the user
experience.
The FMBT team also recently launched a continuous improvement
initiative. The focus of this initiative is to work with
already-live iFAMS users to identify, prioritize, and resolve
any areas of concern using a variety of approaches including
business process reengineering, additional training, iFAMS
configuration changes, automation, Artificial Intelligence and
Machine Learning, as well as potential changes to CGI Federal's
baseline Momentum software.
Finally, CGI Federal routinely seeks input from the Momentum
user community for planning improvements and future software
releases. A VA working group already is working with CGI
Federal's Momentum product development team to define new
contract-writing features that will be included in future
Momentum software releases.
Change Management:
iFAMS represents a significant change for users who are
accustomed to using legacy systems and processes that have been
in place at the VA for over 30 years. The FMBT team employs
industry best practices for change management to engage and
train users and promote user adoption. The FMBT team
understands the need to capture lessons-learned from each wave
deployment and incorporate those lessons into the change
management and training approaches for the next wave
deployment. By following this process, the FMBT team expects to
continuously improve user adoption and minimize the stress of
change on the VA user community. For example, a lesson learned
from prior waves is not to wait until the latter part of the
wave to match users with their iFAMS roles. In the VHA wave now
under way, the FMBT team plans to identify user roles early in
the process, which is expected to facilitate improved user
communications throughout the wave.
CONCLUSION
CGI Federal appreciates the urgency of fully implementing iFAMS as
quickly as is feasible and stands ready to work with its FMBT partners
to do just that. CGI Federal is extremely proud to support the FMBT
Program in helping the VA improve its financial and acquisition
processes. While the work is challenging, every CGI Federal member on
the FMBT team is dedicated to the mission and takes great pride in
serving our Nation's Veterans.
______
Prepared Statement of Nick Dahl
Chairman Rosendale, Ranking Member Cherfilus-McCormick, and
Subcommittee Members, thank you for the opportunity to discuss the
Office of Inspector General's (OIG) oversight of VA's work to modernize
its finance and accounting systems, and to address longstanding
financial management challenges.
VA has faced significant challenges with improving its financial
processes and systems--some of which result from deficiencies in
information technology and lack of controls, while others are due to
weaknesses in governance or the clarity of roles and responsibilities.
More effective financial management is key to VA's ability to better
plan, direct, monitor, and control its resources. Advances could also
enhance efforts to safeguard its assets and the timely payment of its
obligations. Reliable and accurate financial information would help VA
and Congress identify links between resources and results, and to
understand and improve the value gained from appropriated funds.
As detailed below, since 2015, the audit of VA's financial
statements has reported a material weakness due to problematic
financial management systems.\1\ VA's legacy core financial management
and general ledger system, the Financial Management System (FMS), has
limited functionality to meet VA's current needs. After failed attempts
to replace FMS in 2004 and 2010, VA established the Financial
Management Business Transformation (FMBT) program. FMBT's mission has
been to increase the transparency, accuracy, timeliness, and
reliability of financial information across VA, ultimately resulting in
improved care and services for veterans and greater accountability to
taxpayers.\2\ Central to the FMBT program is the multiyear deployment
of the Integrated Financial and Acquisition Management System (iFAMS)
that began with the National Cemetery Administration (NCA) and
continued with the Veterans Benefits Administration's (VBA) General
Operating Expense Fund.
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\1\ The audit reports of VA's annual financial statements can be
found on the OIG's reports webpage at www.va.gov/oig/apps/info/
OversightReports.aspx.
\2\ This modernization effort also affects in various ways VA's
work to modernize its supply chain infrastructure and information
technology systems, including the electronic health record
modernization program. The OIG has issued numerous reports and
testified at congressional hearings on these endeavors (see the OIG
website at www.va.gov/oig/).
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Prior modernization efforts failed, in part, because of poor
planning and deficient execution of new information technology (IT)
systems and challenges with transitioning from legacy systems.
Decentralized oversight, unrealistic timelines, inadequate engagement
of all stakeholders and end users, and minimal testing for some systems
have plagued IT projects. The resulting delays, changes in direction
and vendors, and user resistance all carry steep costs.
This testimony highlights (1) relevant financial management
findings from the OIG's audit of VA's financial statements for fiscal
years 2021 and 2022, (2) recent examples of how the lack of controls
affected VA's ability to track COVID-19 supplemental appropriated
funds, and (3) initial findings and recommendations from OIG's
oversight of the iFAMS deployment. Taken together, these issues
underscore the need for VA to address previously identified problems to
successfully modernize its financial management system during this most
recent effort.
FINANCIAL SYSTEMS AND REPORTING REMAIN A MATERIAL WEAKNESS IN THE AUDIT
OF VA'S FINANCIAL STATEMENTS
The Chief Financial Officers Act of 1990, as amended, requires the
OIG to conduct an audit of VA's consolidated financial statements. This
work helps ensure accountability for taxpayer-funded resources. Since
2000, the OIG has contracted with an independent public accounting firm
to conduct the detailed and time-intensive audit.
VA's consolidated financial statements are published in its
mandated annual agency financial report.\3\ These statements summarize
VA's financial results, financial condition, and the status of
budgetary resources. While VA has received an unmodified or ``clean''
opinion on its consolidated financial statements from the contract
auditor, VA has continuously faced challenges in achieving those
results. The contract auditor has regularly identified and reported on
these ``material weaknesses'' and ``significant deficiencies.'' \4\
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\3\ VA's consolidated financial statements can be found on their
website at Agency Financial Report - U.S. Department of Veterans
Affairs.
\4\ A ``material weakness'' is a deficiency, or a combination of
deficiencies, in internal controls related to a reasonable possibility
that a material misstatement of VA's financial statements will not be
prevented, or detected and corrected, on a timely basis. A
``significant deficiency'' is a deficiency, or combination of
deficiencies, in internal controls that is less severe than a material
weakness, yet important enough to merit attention by individuals
charged with governance.
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In the audit for fiscal years 2021 and 2022, the auditor found
three material weaknesses, all repeated in some manner since 2016, and
two significant deficiencies.\5\ The first material weakness
highlighted the need for further improvement in VBA's processes for
producing critical accounting estimates for veteran benefit liabilities
that are reported in the financial statements. The second material
weakness, most pertinent to this testimony, focuses on the limited
functionality of FMS to meet VA's financial management and reporting
needs. The third material weakness identifies IT security control
weaknesses in configuration management, access controls, security
management, and contingency planning.
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\5\ VA OIG, Audit of VA's Financial Statements for Fiscal Years
2022 and 2021, December 7, 2022.
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The second material weakness addressing the limited functionality
of FMS is manifested in several ways that affect VA's ability to be
strong stewards of taxpayer dollars. VA has several legacy subsidiary
IT systems that no longer meet financial management system requirements
and do not have a two-way interface with FMS. VA does not perform
comprehensive reconciliations between these legacy systems and FMS. In
addition, VA continues to record a large number of journal entries,
which are manual adjustments to the accounting records, to produce a
set of auditable financial statements. Manual adjustments carry an
inherent risk of introducing errors into financial reports. VA also
does not have a complete, centralized repository for all active
agreements that it has with other federal agencies to support and
facilitate reconciliation of account balances with those agencies.
Overall, VA's financial management systems do not substantially
comply with the requirements of the Federal Financial Management
Improvement Act of 1996. Additionally, over time, VA's complex,
disjointed, and antiquated financial management system architecture has
continued to deteriorate and no longer meets increasingly stringent and
demanding financial management and reporting requirements mandated by
the U.S. Department of the Treasury and the Office of Management and
Budget (OMB). VA continues to struggle with consistently and
proactively enforcing its policies and procedures for all legacy
applications and systems. The most recent financial statement audit
report made 25 recommendations pertaining to the three material
weaknesses ranging from targeted actions to broad improvements in
policies, processes, and systems--many repeated from prior years.
FINANCIAL MANAGEMENT SYSTEM INADEQUACIES HINDERED CONTROLS OVER COVID-
19 SUPPLEMENTAL FUNDS
The deficiencies in VA's financial management system are
illustrated in a series of OIG reports finding that VA has lacked
assurance that funds allocated specifically for COVID-19-related
purposes had been spent as intended.\6\
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\6\ Congress provided VA with $60 million in pandemic-related
supplemental funding in the Families First Coronavirus Response Act and
then another $19.6 billion through the Coronavirus Aid, Relief, and
Economic Security Act. About $17.2 billion of these funds was
appropriated to the Veterans Health Administration (VHA), including
$14.4 billion allocated to the VHA medical services fund, which is the
fund for direct patient care. Families First Coronavirus Response Act,
Pub. L. No. 116-127, 134. Stat. 178 (March 2020); Coronavirus Aid,
Relief, and Economic Security Act, Pub. L. 116-136, 134 Stat. 281
(March 2020). Later, in March 2021, VA received another $17.1 billion
in supplemental funding from the America Rescue Plan Act of 2021 (ARP).
ARP, Pub. L. No. 117-2, tit. VIII, 135 Stat. 4, 112-17 (March 2021).
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Following the issuance of OMB guidance for tracking and reporting
supplemental funding, the OIG initiated a June 2021 review of VHA's
efforts to establish financial oversight mechanisms.\7\ The OIG found
that VA did meet the Families First Coronavirus Response Act and the
Coronavirus Aid, Relief, and Economic Security (CARES) Act requirements
to submit reports to OMB and Congress. VA supplemented policies
providing accounting structures to use during declared emergencies.
However, the OIG identified concerns with the completeness and accuracy
of VA's reports. VHA's reliance on several accounting subsystems for
payroll and purchase card transactions required staff to manually
identify and adjust COVID-19 obligations and expenditures to the proper
accounts. VHA and VA's Office of Management implemented the OIG's
recommendations to develop procedures to validate data to ensure that
information in reports accurately represents the underlying source
transactions.
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\7\ VA OIG, Review of VHA's Financial Oversight of COVID-19
Supplemental Funds, June 10, 2021.
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To provide for greater oversight of VA's spending of these
supplemental funds, the VA Transparency & Trust Act of 2021
(Transparency Act) requires the OIG to report semiannually on VA's
actual obligations and expenditures of the supplemental funds compared
to its plans.\8\ To date, the OIG has published three reports. The
inaugural report concluded that VA only partially complied with the
Transparency Act. The OIG found it was unclear whether all of the
planned uses of America Rescue Plan (ARP) Act of 2021 funds were
captured in the plan VA submitted to Congress, as the plan did not
include a projected cost to support maintaining IT projects originally
started with CARES Act funds.\9\ The OIG made two recommendations to
the assistant secretary for management/chief financial officer, and
both were closed after VA provided sufficient evidence of
implementation progress.
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\8\ VA Transparency & Trust Act of 2021, Pub. L. No. 117-63, Sec.
2(c), 135 Stat. 1484, 1485 (November 2021).
\9\ VA OIG, VA's Compliance with the VA Transparency & Trust Act of
2021, March 22, 2022.
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In the second Transparency Act report, the OIG found VA generally
complied with the act because justification was provided for spend plan
programs, which were generally aligned with expenditures.\10\ However,
VA relied on expenditure transfers (a manual adjustment process to
transfer funds from one account to another) for nearly half of its ARP
Act obligations and expenditures. The OIG found that VA's manual
process resulted in at least 53 potential reporting errors, which the
department corrected.
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\10\ VA OIG, VA's Compliance with the VA Transparency & Trust Act
of 2021 Semiannual Report: September 2022, September 22, 2022.
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While VA was again found to have generally complied in the OIG's
third Transparency Act review, it did not provide sufficient supporting
documentation requested by the review team to assess line-level details
needed to make a full assessment.\11\ Additionally, VA's Office of
Management acknowledged that ``manual processes for expenditure
transfers can lead to potential reporting errors and data reliability
issues'' and that replacing its ``antiquated legacy financial
management system by implementing a modern solution'' will reduce these
potential errors.
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\11\ VA OIG, VA's Compliance with the VA Transparency & Trust Act
of 2021 Semiannual Report: March 2023, March 21, 2023.
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The use of manual expenditure transfers contributed to a lack of
transparency and accountability for VHA's purchases using CARES Act
funds as well. In May 2023, the OIG published a proactive audit on the
controls over VHA's use of supplemental funds. The audit identified
weaknesses involving the two methods used by VHA medical facility staff
to process COVID-19-related transactions: (1) manual expenditure
transfers and (2) the direct obligation of funds from the CARES Act
medical services funds.\12\ First, manual expenditure transfers require
staff to use journal vouchers to document the transfers in VA's FMS.
Staff were not always properly preparing the journal vouchers,
providing supporting documentation, or having an authorizing official
sign them. This happened, in part, because VHA's Office of Finance did
not ensure VA medical facilities were following VA financial policies.
Essentially, VHA medical facility staff were left to determine what
documentation would be sufficient to ensure the vouchers were supported
without the benefit of proper guidance or internal controls.
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\12\ VA OIG, VHA Can Improve Controls Over Its Use of Supplemental
Funds, May 9, 2023.
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Second, medical facility staff did not comply with key controls
when they made pandemic-related purchases directly from CARES Act
supplemental funds. In an estimated more than 10,000 transactions,
medical facility staff did not always
have documented purchase authority;
segregate duties so the same employee making the request
was not also approving the purchase;
certify and pay invoices properly; and/or
track the receipt of goods to ensure the quantities
ordered were received.
These issues occurred because VHA did not develop accounting
processes that outlined clear roles and expectations related to the
oversight of purchases made with supplemental funds. As a result, the
OIG reported an estimated $187 million in questioned costs related to
VA's use of CARES Act funds, and the OIG made nine recommendations to
the Office of Management and VHA to resolve these problems.\13\
Notably, the OIG recommended that VA assess iFAMS to determine whether
integration with payroll subsystems can be accomplished to resolve some
of the payroll-related expenditure transfers. VA concurred, stating it
would develop interfaces for an end-to-end automated solution by
September 2030.
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\13\ The OIG considers all recommendations currently open pending
the submission of sufficient documentation that would support that
adequate progress has been made on implementation to close them. The
OIG requests updates on the status of all open recommendations every 90
days. This is reflected on the recommendations dashboard found on the
OIG website. For this report, the OIG will request the first update on
or about August 9, 2023.
THE OIG FINDINGS ON IFAMS DEPLOYMENT HAS IDENTIFIED SEVERAL WAYS FOR
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FMBTS TO IMPROVE ITS WORK
The fully successful deployment of iFAMS could help resolve a
persistent material weakness and increase the system's potential to
increase the transparency, accuracy, timeliness, and reliability of
financial information across VA. The OIG, therefore, began overseeing
iFAMS implementation shortly after it went live at NCA in November
2020. VA's Office of Management is administering the iFAMs deployment
through its Financial Management Business Transformation Service
(FMBTS). Resolving or mitigating deployment issues at NCA, which is
VA's smallest administration with less than 1 percent of VBA's and
VHA's budget, could help prevent those issues from compounding at the
larger administrations and staff offices. To that end, the OIG alerted
VA leaders to early implementation concerns by publishing two
memoranda.
OIG Memoranda Detailed iFAMS Reporting Issues Needing Early Resolution
In September 2021, the OIG issued a management advisory memorandum
on inadequate business intelligence (BI) reporting capabilities in
iFAMS that hindered NCA's ability to easily monitor its budget and
operations.\14\ The findings were part of a broader audit to determine
if the program office identified and addressed deficiencies from
iFAMS's first deployment. The reporting capabilities are critical to
strengthening planning, analysis, and decision-making capabilities;
however, the program office had not ensured NCA had the comprehensive
BI reports needed to monitor budget and operations. Although FMBTS was
aware of these issues and attempted some corrective actions, as of July
2021, NCA was still experiencing significant challenges, such as not
having a comprehensive report showing the total amount of funds
available to the administration. Other high-priority reports used to
track and forecast payroll and full-time equivalent employees were also
not available for widespread NCA use. NCA staff spent considerable time
trying to understand and validate reports by extracting data from other
reports and queries and manipulating that data in spreadsheets. FMBTS
confirmed it knew of these issues, and the OIG recognized that FMBTS
was attempting to take positive steps toward resolution, and they
deployed the needed capabilities to NCA during the broader audit.
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\14\ VA OIG, Inadequate Business Intelligence Reporting
Capabilities in the Integrated Financial and Acquisition Management
System, September 8, 2021.
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In June 2022, the OIG published the results of a consult by its
contracted independent public accounting firm related to iFAMS
financial reporting controls at NCA.\15\ This consulting engagement
provided the OIG with information about iFAMS to assist in planning for
future financial statement audits. The consulting letter identified
potential risks to accurate financial reporting and provided
management's comments on actions taken or planned to address those
risks.
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\15\ VA OIG, Results of Consulting Engagement Related to Selected
Financial Reporting Controls for the Integrated Financial and
Acquisition Management System at the National Cemetery Administration,
June 15, 2022.
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While the OIG used both memoranda to raise concerns and identify
risks for FMBTS, the OIG did not make specific recommendations for
follow-up in either document. The memoranda provide information to help
VA decision-makers identify what additional corrective actions, if any,
are needed.
Improved Risk Management, System Testing, and Communication with Users
Could Advance Implementation
In March 2023, the OIG published its first audit on NCA's
deployment issues.\16\ Building on the September 2021 memorandum, the
audit identified issues that should be addressed as VA moves forward
with further deployments. While iFAMS provided much of the core
financial functionality NCA needed, FMBTS did not fully address some
barriers related to the program's objectives of streamlining processes
and improving information reliability. The OIG made the following
findings:
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\16\ VA OIG, Improvements Needed in Integrated Financial and
Acquisition Management System Deployment to Help Ensure Program
Objectives Can Be Met, March 28, 2023.
The iFAMS user interface initially increased the
complexity of purchase card orders and contracting requests, which are
high-volume transactions. To address the complexity of purchase card
orders and contracting requests, FMBTS began rolling out a simplified
user interface in late 2021, with generally positive user feedback.
Even so, staff experienced inefficient processing for a significant
portion of NCA's transactions for over one year after going live. The
key principle that should be considered going forward is that FMBTS
will need to prioritize user feedback in its risk management process to
identify and develop other potential system enhancements. Specifically,
ensuring iFAMS improves efficiency will become even more critical as
implementation continues to VHA, which is expected to have about
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115,000 users compared to fewer than 1,200 users at NCA.
FMBTS did not establish comprehensive controls to reduce
data reliability risks posed by a manual contracting process. NCA staff
must still manually adjust the obligation amounts when reducing amounts
available in iFAMS and eCMS, VA's contract management system, on
contracts that existed before iFAMS went live. These contracts are
known as ``converted contracts.'' Obligation amounts need to be
reduced, for example, when the needed quantity of goods or services has
been received with funds remaining on the obligation or a contract is
canceled. Manual processes in legacy systems have been a long-standing
risk to the accuracy and completeness of financial reporting, and these
risks continue in iFAMS because FMBTS felt automating an interface
between iFAMS and eCMS to automatically update these types of changes
to converted contracts was not worth the costs. There are some process
controls on these manual contracting processes, and the program office
was working toward developing a reconciliation report, but as of
February 2023, this risk remained active.
Compliance with the FMBTS risk management process could
enable the program office to better respond to all identified risks. A
central repository called a risk register is part of the FMBTS risk
management process enabling the documentation, categorization, and
tracking of risks. FMBTS did not prioritize user feedback and did not
use the risk register to document and assess manual obligation risks.
Before NCA's deployment, FMBTS acknowledged the risk of staff finding
the iFAMS user interface to be difficult but categorized the
probability and impact as low. Low user adoption was a recognized risk,
and user feedback before going live should have led FMBTS to assess a
higher probability and impact rating. While FMBTS has been taking steps
to deal with issues such as the complex user interface, FMBTS must
continually assess and prioritize user feedback in the future. The OIG
also found that FMBTS did not formally identify and document the risk
associated with a manual deobligation process, despite prior OIG audit
findings that identified significant control deficiencies with manual
processes in the legacy system. FMBTS felt the risk would decrease over
time as the converted contracts ended. While FMBTS limited the number
of users with manual adjustment permissions, this particular risk-
mitigation strategy will be difficult to scale across the rest of VA.
If FMBTS does not formally identify obvious risks in the register, the
program cannot properly assess, prioritize, redress, and monitor them.
iFAMS implementation initially complicated the process of
paying some invoices, with a mitigation taking several months.
Modifications to the converted contracts required NCA staff to review
unnecessary information when paying invoices, which could lead to human
error and unreliable data that inaccurately displays available funding
amounts, the nature of the expense, or the correct fiscal year. In FY
2021, the NCA chief financial officer (CFO) expressed a lack of
confidence in the accuracy of recorded amounts.
FMBTS did not comprehensively test converted contracts
and so was unaware of the above payment issue. Robust testing,
including converted contracts and payments, could have prompted FMBTS
to mitigate the impact before going live and is critical moving forward
because converted contracts will be an issue for years while iFAMS is
implemented.
All of NCA's priority BI reporting functionality was not
available at go-live. This issue was addressed in the OIG's September
2021 management advisory memorandum.
NCA did not receive the BI reporting functions as
expected because FMBTS did not communicate well regarding NCA's high-
priority requirements. During the development period, NCA worked with
FMBTS to develop requirements and explanations of the reports'
functions. As the process went on, NCA staff, leaders, and product
owners communicated requirements and prioritization goals. The OIG's
review made clear that NCA and FMBTS did not share the same
understanding of the requirements. FMBTS could mitigate this by
formally acknowledging whether requests have been accepted as
requirements. This step can help other VA administrations and offices
determine whether requirements need to be revised so that critical BI
reporting functionality is available at go-live.
The OIG made five recommendations to the deputy assistant secretary
for FMBTS: (1) implement controls to mitigate the risk that data are
unreliable and inconsistently recorded between the legacy system and
iFAMS when staff deobligate funds for converted contracts; (2)
implement a methodology to prioritize user feedback in the risk
management process; (3) use the risk register to document and assess
the risks associated with the manual deobligation process; (4) ensure
that converted contracts are included in integrated system and user
acceptance testing; and (5) implement a process to formally acknowledge
whether high-priority business intelligence reports requests have been
accepted as requirements. At the end of June 2023, the OIG will begin
to follow up on VA's implementation efforts.
STRONG GOVERNANCE AND CLARITY OF ROLES AND RESPONSIBILITIES
Finally, the decentralized nature of governance for VA's financial
management structure can contribute to problem identification and
correction. Under the Chief Financial Officers Act, the VA CFO has the
responsibility for establishing financial policy, systems, and
operating procedures for all VA financial entities. VA administrations
and other offices are responsible for implementing those policies and
producing financial information, but they are not under the supervision
of the VA CFO. This fragmented structure has been a consistent concern
and finding in the audit of VA's consolidated financial statements.\17\
Without active involvement from VA's senior leaders to overcome
organizational silos and ensure collaboration, problems at the
administration level may not be elevated for resolution.
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\17\ VA OIG, Audit of VA's Financial Statements for Fiscal Years
2022 and 2021, December 7, 2022.
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CONCLUSION
The OIG has repeatedly found that VA's failure to effectively
modernize its financial management systems leads to significant
challenges in assuring accountability and transparency in how it
obligates and expends funds; makes it difficult for VA staff to plan,
order, and track expenditures for supplies and services; and hampers
transparency and oversight of VA's use of these funds. The transition
to iFAMS has the potential to mitigate major issues in producing VA
financial statements and improving VA operations. However, the
transition is exceptionally complicated--requiring intensive and
continuous attention from VA--and demands strong organizational
leadership and coordination. The OIG urges VA to dedicate the time and
resources to resolving the early opportunities for improvement in the
iFAMS transition, being vigilant in identifying challenges that will
arise in the forthcoming deployments, and developing processes for
timely and effective responses. Chairman Rosendale, Ranking Member
Cherfilus-McCormick, and members of the Subcommittee, this concludes my
statement. I would be happy to answer any questions you may have.