USDA Financial Systems: Additional Actions Needed to Resolve Major
Problems (Chapter Report, 09/29/95, GAO/AIMD-95-222).
GAO reviewed whether the Department of Agriculture's (USDA) Financial
Information Systems Vision and Strategy (FISVIS) project will: (1)
resolve major USDA financial system weaknesses; and (2) consolidate the
separate USDA financial and mixed systems that perform similar
functions, as well as reengineer USDA financial processes.
GAO found that: (1) the USDA Chief Financial Officer (CFO) has
demonstrated strong leadership and progress in implementing the initial
phase of the FISVIS project; (2) CFO has issued departmentwide financial
management standards and has signed a contract for the central
Foundation Financial Information System; (3) it is unclear when USDA
financial and mixed systems will be brought into compliance with the new
financial standards, since CFO does not have the authority or a
mechanism to enforce compliance and will have to rely on the voluntary
cooperation of the USDA component agencies; (4) although USDA is
planning to give CFO greater responsibility and authority over its
financial systems, the major component agencies will manage their own
financial systems with limited CFO oversight; (5) CFO lacks a
configuration management policy and version control process for the
Foundation system software to lower costs and prevent duplication; (6)
FISVIS does not address eliminating or consolidating the many USDA
systems that perform similar functions and has not been revised to
consider reengineering financial management processes on a
departmentwide basis in light of the ongoing USDA reorganization; and
(7) although USDA has not addressed all aspects of its financial
management systems, it plans to spend hundreds of millions of dollars to
redesign or replace many of its existing financial and mixed systems.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-95-222
TITLE: USDA Financial Systems: Additional Actions Needed to
Resolve Major Problems
DATE: 09/29/95
SUBJECT: Financial management systems
Agricultural programs
Federal agency reorganization
Internal controls
Chief financial officers
Systems architecture
ADP procurement
Systems compatibility
IDENTIFIER: USDA Financial Information System Vision and Strategy
Initiative
GSA Financial Management Software Systems Multiple Award
Schedule
USDA New Guaranteed Loan System
USDA Dedicated Loan Origination/Servicing System
Joint Financial Management Improvement Program
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Cover
================================================================ COVER
Report to the Secretary of Agriculture
September 1995
USDA FINANCIAL SYSTEMS -
ADDITIONAL ACTIONS NEEDED TO
RESOLVE MAJOR PROBLEMS
GAO/AIMD-95-222
USDA Financial Systems
(511383)
Abbreviations
=============================================================== ABBREV
AMS - American Management Systems, Inc.
CFO - Chief Financial Officer
CFSA - Consolidated Farm Services Agency
FISVIS - Financial Information Systems Vision and Strategy
GAO - General Accounting Office
JFMIP - Joint Financial Management Improvement Program
NFC - National Finance Center
OIG - Office of Inspector General
OMB - Office of Management and Budget
USDA - U.S. Department of Agriculture
Letter
=============================================================== LETTER
B-260076
September 29, 1995
The Honorable Dan Glickman
The Secretary of Agriculture
Dear Mr. Secretary:
This report presents the results of our review of the U.S.
Department of Agriculture's (USDA) financial management systems,
including the Department's major initiative to correct its financial
management system problems--the Financial Information Systems Vision
and Strategy (FISVIS).
This report contains recommendations to you. The head of a federal
agency is required by 31 U.S.C. 720 to submit a written statement on
actions taken on these recommendations to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform and
Oversight within 60 days of the date of the report. A written
statement must also be sent to the House and Senate Committees on
Appropriations with the agency's first request for appropriations
made over 60 days after the date of this report.
We are providing copies of this report to the Senate and House
Committees on Appropriations, the House Committee on Agriculture, the
Senate Committee on Agriculture, Nutrition and Forestry, the House
Committee on Government Reform and Oversight, and the Senate
Committee on Governmental Affairs; the Director, Office of Management
and Budget; and other interested parties. Copies will also be made
available to others upon request.
Please call me at (202) 512-6253 if you have any questions concerning
the report. Other major contributors to this report are listed in
appendix II.
Sincerely yours,
Joel C. Willemssen
Director, Information Resources
Management/Resources, Community,
and Economic Development
EXECUTIVE SUMMARY
============================================================ Chapter 0
PURPOSE
---------------------------------------------------------- Chapter 0:1
To manage its reported $146 billion in assets and to account for $75
billion in fiscal year 1994 expenses, the U.S. Department of
Agriculture (USDA) used 115 separate financial management systems
which performed overlapping and similar functions. These systems are
not integrated, contain inconsistent and inaccurate data, and are
plagued with internal control weaknesses. To address its financial
system problems and carry out its financial management system
responsibilities under the Chief Financial Officers (CFO) Act of
1990, USDA developed and began implementing a project in 1993
referred to as the Financial Information Systems Vision and Strategy
(FISVIS).
The objectives of GAO's review were to assess whether the FISVIS
project will (1) resolve USDA's major financial system weaknesses and
(2) consolidate USDA's separate financial and mixed systems that
perform similar functions, as well as reengineer USDA's financial
processes.
BACKGROUND
---------------------------------------------------------- Chapter 0:2
USDA is a complex organization consisting of seven mission areas
composed of 29 largely independent component agencies and thousands
of field offices. To manage the Department's organization and
programs, USDA maintains and operates 115 financial management
systems--62 financial systems and the financial portion of 53 mixed
systems (i.e., systems that support both financial and non-financial
functions). The majority of these systems are managed by the major
component agencies in USDA's mission areas, who use them to perform
programmatic accounting and budgeting for most of USDA's annual
expenses. The National Finance Center (NFC), which reports to the
Office of the CFO, manages most of the remaining systems and performs
most of USDA's administrative expense accounting and administrative
system functions, such as for payroll and property.
USDA's Federal Managers' Financial Integrity Act reports and many GAO
and Office of Inspector General reports in recent years have reported
that USDA's financial management systems contain numerous weaknesses,
including nonintegrated systems that use incompatible accounting and
data standards. As a result, in 1994 and 1995, the Office of
Management and Budget reported USDA's aged and outmoded financial
systems, inadequate financial system controls, ineffective central
system planning and installation, and inaccurate financial reports as
a high-risk area.
To address USDA's financial management system weaknesses, the Office
of the CFO initiated the FISVIS project in March 1993. FISVIS'
ultimate goal is for USDA to have a single, integrated financial
management system (a unified set of financial systems and the
financial portions of the mixed systems) by 1998. The Office of the
CFO intends to accomplish this goal by using an incremental approach
based on a foundation that would achieve, and build on, early
successes. Under its incremental approach, the Office of the CFO has
developed a set of financial management standards to be implemented
departmentwide and has procured a departmental Foundation Financial
Information System to perform core financial functions, such as the
general ledger and funds management. Under the FISVIS strategy,
USDA's component agencies will continue to have the option of
developing and maintaining their own programmatic financial and mixed
systems, will be required to follow the departmental financial
management standards, and will report summary data to the Foundation
system when it is fully implemented.
RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3
USDA's CFO and Deputy CFO have demonstrated strong leadership and
have begun to make noteworthy progress in attempting to implement the
initial phase of the FISVIS project. To date, the Office of the CFO
has issued departmentwide financial management standards and signed a
contract for a departmental Foundation Financial Information System.
However, many of USDA's financial management system problems will not
be resolved until and unless all of the Department's financial and
mixed systems are brought into compliance with USDA's new financial
standards. Whether and when this will occur is unclear because the
CFO has neither the authority within the Department nor the mechanism
to enforce this compliance. Therefore, the Office of the CFO must
rely on the voluntary cooperation of the owners of the component
agency and NFC financial management systems to bring their systems
into compliance with these standards. This is particularly important
because, according to USDA, most of its financial and mixed systems
are not in compliance with the Department's financial standards.
FISVIS also does not address eliminating and/or consolidating the
Department's many systems that perform similar functions. Moreover,
the FISVIS project was developed prior to the Department's
reorganization in late 1994 and generally has not been revised to
consider possibilities to reengineer the Department's financial
management processes into a more cost-effective structure that
supports the Department and its seven mission areas. Nevertheless,
USDA still plans to move forward and spend hundreds of millions of
dollars to redesign or replace many of its existing financial and
mixed systems.
PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4
USDA ACHIEVED EARLY PROGRESS
BUT FISVIS PROJECT WILL
LIKELY NOT RESOLVE USDA'S
MANY FINANCIAL SYSTEM
WEAKNESSES
-------------------------------------------------------- Chapter 0:4.1
USDA has made progress toward implementing the initial phase of the
FISVIS project. In keeping with the CFO's plan to build on
incremental successes, the FISVIS team developed departmentwide
financial management standards and procured the departmental
Foundation Financial Information System which, when fully
implemented, will receive periodic data from component agency and NFC
feeder systems. Both the departmentwide standards and the Foundation
system's requirements were based on federal financial management
requirements and USDA-specific requirements. Departmentwide
compliance with these standards and the resulting transmission of
consistent component agency and NFC data to the Foundation system
would be a major step towards establishing a single, integrated
financial management system.
While USDA's early progress is commendable, FISVIS will not likely
meet its goals and resolve USDA's financial management system
problems because the Office of the CFO cannot ensure that the
component agencies will comply with the new FISVIS financial
management standards. While USDA plans to assign the CFO the overall
responsibility for financial management systems, USDA's major
component agencies will still manage their own financial and mixed
systems, with limited CFO oversight. The Office of the CFO's
oversight of these systems is mainly as a member of USDA's
Acquisition Review Teams, which review and approve component agency
financial management system acquisition plans. However, not all
system development efforts undergo the Acquisition Review Team
process. In addition, in some cases, the Office of the CFO was not a
member of the team that reviewed component agency financial system
development efforts. Moreover, the Office of the CFO has not
established a mechanism to evaluate component agency financial
management systems to determine whether they comply with the new
departmental financial management standards. According to the CFO
and Deputy CFO, this is due to the limited staff resources of their
Office.
In addition, the Office of the CFO's management of the Foundation
system software is weakened by the lack of a configuration management
policy and version control process. Configuration management and
version control provide discipline in managing and synchronizing
software modifications and system updates. USDA has already procured
commercial off-the-shelf software for its Foundation system, and
component agencies may elect to acquire this software and modify it
to meet their requirements. However, the Office of the CFO has not
directed that multiple Foundation system software copies be placed
under a configuration management policy and version control process.
Effective configuration management policies and version control can
(1) lower USDA's future costs by minimizing changes to the
contractor's original software version and (2) ensure software
development efforts related to this software are not duplicated at
multiple sites.
FISVIS STRATEGY DOES NOT
ADDRESS CONSOLIDATING
FINANCIAL SYSTEMS AND
REENGINEERING PROCESSES
-------------------------------------------------------- Chapter 0:4.2
The FISVIS strategy does not address consolidating existing financial
systems or reengineering financial processes. Although many of
USDA's financial and mixed systems perform similar functions, the
FISVIS strategy does not include a plan to consolidate or streamline
the numerous financial and mixed systems that perform overlapping
functions. These overlapping systems are likely to be perpetuated in
the future since USDA's component agencies and NFC plan to spend
hundreds of millions of dollars replacing or redesigning many of
their financial and mixed systems without a strategy that addresses
how the systems could be consolidated from a departmentwide
perspective. An overall USDA-wide financial management system
architecture could identify those systems that could be consolidated
through cross-servicing arrangements (a business arrangement whereby
one organization provides system support to another) or joint
development projects.
Finally, the FISVIS strategy generally does not address reengineering
USDA's financial processes from a departmentwide perspective. The
Department of Agriculture Reorganization Act of 1994 authorized
substantive organizational changes and mandated staff reductions.
Therefore, this is a very opportune time for USDA to consider how it
could eliminate or simplify its inefficient financial processes.
While USDA's component agencies plan to initiate several financial
process reengineering efforts on their own, these efforts are being
planned independently without the review and approval of the CFO.
Although the CFO Act requires the CFO to direct and oversee an
agency's financial management operations, USDA has not placed the CFO
in the leadership role for reengineering the Department's financial
processes. By not having a departmentwide strategy for reengineering
its financial processes, USDA risks (1) losing the benefits of
reengineering financial processes on a departmentwide basis and (2)
expending large amounts of money to implement financial management
systems that do not effectively support the new financial processes.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5
GAO is making several recommendations to the Secretary of Agriculture
to strengthen the Office of the CFO's oversight of USDA's financial
management systems and financial process reengineering efforts,
including those of the major component agencies. GAO is also
recommending that USDA's CFO develop a plan to minimize overlapping
financial management systems. Chapter 4 provides additional details
on GAO's recommendations.
AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6
In providing written comments on a draft of this report, USDA stated
that it agreed with all but one of GAO's recommendations, noting
that, when implemented, these recommendations will strengthen USDA's
capabilities to modernize and upgrade its financial systems. USDA
emphasized that the modernization of the Department's financial
management systems is one of the Secretary's top priorities and is an
integral part of the Department's overall reorganization, which will
ultimately enable the Department to save billions of dollars.
USDA agreed with our recommendations to (1) expeditiously implement
the proposed CFO's delegation of authority, (2) develop and implement
a Foundation system software configuration management policy and
version control process, and (3) update the FISVIS strategy to
include a financial management systems architecture that identifies
opportunities to streamline and/or consolidate such financial
management systems across agencies and mission areas.
In addition, USDA agreed with the need to address two other
recommendations, to (1) establish review teams to assess component
agency and NFC systems to determine whether they are in compliance
with USDA's financial standards and take corrective actions if
noncompliance is found and (2) review each of the component agencies
on-going and planned financial management system development efforts.
However, USDA was concerned about a lack of financial management
system resources to carry out these recommendations. We believe that
there may be opportunities for USDA to redistribute or temporarily
reassign some of the over 4,000 accounting and budget personnel
within the Office of the CFO and the component agencies to implement
these recommendations.
However, USDA does not intend to implement GAO's recommendation that
the Secretary delegate to the CFO the authority and responsibility
for (1) developing a departmentwide financial management
reengineering strategy and (2) reviewing and approving the
reengineering of all departmental and component agency financial
processes. USDA stated that the Secretary delegated responsibility
to the Assistant Secretary for Administration for reengineering
USDA's administrative systems, which encompasses financial processes.
We agree that reengineering USDA's administrative processes should
remain the primary responsibility of the Assistant Secretary for
Administration. We also agree that administrative and financial
processes and systems are often related. While USDA has assigned the
CFO a role in this reengineering initiative, we continue to believe
that because USDA's financial systems and processes are inextricably
linked, it is imperative that USDA's CFO, who is tasked by the CFO
Act with overseeing all financial management activities relating to
the programs and operations of the agency, be given financial process
reengineering authority. In addition, the Secretary, by providing
the CFO with authority over both financial management systems
development and financial process reengineering, would strengthen
both areas since a single person could be held accountable and
responsible. USDA's comments are reprinted in appendix I, and are
discussed, along with GAO's evaluation, in chapter 4.
INTRODUCTION
============================================================ Chapter 1
The U.S. Department of Agriculture (USDA) manages a wide array of
programs that affect the lives of all Americans and millions of
people around the world. USDA relies on a multitude of financial
management systems\1 to help operate its complex organization which,
in fiscal year 1994, managed $146 billion in assets and accounted for
$75 billion in expenses.\2 To more efficiently manage these programs,
the Department of Agriculture Reorganization Act of 1994 authorized
USDA to regroup complementary programs from 43 component agencies
into 29 agencies under seven overall mission areas. The seven
mission areas are: (1) farm and foreign agricultural services, (2)
rural economic and community development, (3) food, nutrition, and
consumer services, (4) natural resources and environment, (5)
research, education, and economics, (6) food safety, and (7)
marketing and regulatory programs. According to USDA, its
reorganization will also consolidate or eliminate 1,100 of its more
than 14,000 field offices.
--------------------
\1 OMB Circular A-127 defines financial management systems as
financial systems and the financial portions of mixed systems
necessary to support an agency's financial management. Mixed systems
are information systems that support both financial and non-financial
functions of an agency.
\2 U.S. Department of Agriculture Consolidated Financial Statements
for Fiscal Year 1994.
USDA'S FINANCIAL MANAGEMENT
SYSTEM RESPONSIBILITIES
---------------------------------------------------------- Chapter 1:1
The Chief Financial Officers (CFO) Act of 1990 vested agency CFOs
with the responsibility for overseeing all financial management
activities relating to the programs and operations of the agency.
This includes the responsibility for developing and maintaining an
integrated agency accounting and financial management system that
provides for (1) complete, reliable, consistent, and timely
information that is prepared on a uniform basis, (2) the development
and reporting of cost information, (3) the integration of accounting
and budgeting information, and (4) the systematic measurement of
performance.
In March 1993, the former USDA Secretary decided to establish the
Office of the CFO to oversee all financial management activities
relating to the programs and operations of the Department, including
USDA's departmentwide financial management systems. The Office of
the CFO also manages the National Finance Center (NFC). NFC
develops, manages, and operates the financial management systems that
support the budgeting and accounting functions for most of USDA's
salaries and administrative expenses, and performs most of USDA's
administrative systems functions such as payroll and property.
Although the Office of the CFO manages NFC, it shares responsibility
for many of the NFC systems with the Assistant Secretary for
Administration and various user groups. Most of USDA's large
component agencies develop and manage their program accounting and
budgeting systems independently. These component agency systems
account for most of USDA's annual expenses.
USDA'S LONG-STANDING FINANCIAL
MANAGEMENT SYSTEM WEAKNESSES
---------------------------------------------------------- Chapter 1:2
We and USDA's Office of Inspector General (OIG) have previously
reported on USDA's numerous component agency and NFC financial
management system weaknesses.\3 As a result of these audit findings,
USDA, over the past several years, has reported many financial
management system material weaknesses and nonconformances. For
example, in its fiscal year 1994 Federal Managers' Financial
Integrity Act report, USDA cited 22 financial management system
material nonconformances, some dating back to 1988. These
nonconformances were related to both NFC's financial management
systems and those managed by component agencies. As a result of
these weaknesses, in 1994 and 1995, the Office of Management and
Budget (OMB) reported as a high-risk area USDA's aged and outmoded
financial systems, inadequate financial system controls, ineffective
central system planning and installation, and inaccurate financial
reports.
In addition, the vast majority of USDA's financial management systems
do not meet financial management system standards set by OMB, the
Department of the Treasury, and the Joint Financial Management
Improvement Program (JFMIP).\4 Most of USDA's financial management
systems were developed in isolation without common guidelines,
definitions, or oversight and using incompatible accounting and data
standards. In addition, these systems are not integrated; do not
provide policy, program management, and operating staff with
necessary financial data in a timely manner; and do not provide USDA
with a common language for financial management. As a result, USDA
can draw similar information from different systems and obtain
different results. Also, the lack of integration and standardization
makes sharing or merging information across systems and organizations
very difficult. As a result of these weaknesses, many USDA component
agencies also maintain duplicative, costly, and time-consuming
unofficial or "cuff" records and systems. In addition, as we
mentioned in our recent letter to the Secretary of Agriculture, these
weaknesses have also resulted in delayed financial statement
preparation and audits.\5
--------------------
\3 For example, Financial Audit: Department of Agriculture's
Financial Statements For Fiscal Year 1988, (GAO/AFMD-91-65, August
13, 1991) and OIG report U.S. Department of Agriculture Consolidated
Financial Statements For Fiscal Year 1994 (50401-4-FM, August 23,
1995).
\4 The JFMIP is a joint cooperative undertaking of OMB, GAO, the
Department of the Treasury, and the Office of Personnel Management,
working in cooperation with each other and with operating agencies to
improve financial management practices throughout the government.
\5 Agriculture's CFO Act Implementation, (GAO/AIMD-95-238R, September
29, 1995).
FISVIS GOALS AND STRATEGY
---------------------------------------------------------- Chapter 1:3
To address USDA's pervasive financial management system weaknesses
and carry out its financial management system responsibilities under
the CFO Act, in March 1993, the Department initiated the Financial
Information Systems Vision and Strategy (FISVIS) project. The FISVIS
team is composed of officials from the Office of the CFO, component
agencies, and NFC. FISVIS' ultimate goal is to have a single,
integrated, and seamless financial management system implemented by
1998. USDA established several vision statements for the FISVIS
project, including the following:
Policy, management, program, and operating personnel will have
access to timely, accurate, reliable, consistent, and complete
financial information when and in the form they need it.
Agencies will retain the flexibility to develop and maintain
financial and mixed systems to support their mission.
Implementation of the FISVIS effort will result in streamlined
operations and, therefore, in increased efficiency.
Budget, program, and financial data will be integrated.
The Department and agencies will work cooperatively to meet agency
financial information needs and departmental requirements.
The Office of the CFO intends to accomplish its FISVIS vision by
using an incremental approach, based on a foundation that would
achieve, and then build on, early successes.
To achieve its FISVIS vision statements, USDA identified five major
strategies: (1) provide communication, oversight, and project
management, (2) develop and implement departmentwide financial
standards and definitions, (3) develop and implement a foundation
system, (4) assist owners of feeder systems to integrate their
systems into the Foundation system, and (5) support interim
improvement efforts.
OBJECTIVES, SCOPE, AND
METHODOLOGY
---------------------------------------------------------- Chapter 1:4
The objectives of our review were to assess whether the FISVIS
project will (1) resolve USDA's major financial management system
weaknesses and (2) consolidate USDA's separate financial and mixed
systems that perform similar functions, as well as reengineer USDA's
financial processes.
To assess whether FISVIS will resolve USDA's current financial
management system weaknesses, we first identified these weaknesses by
reviewing our and the OIG's consolidated USDA and component agency
financial statement audit reports and other audit reports. We also
reviewed USDA's Federal Managers' Financial Integrity Act report, its
5-year Financial Management Plan prepared pursuant to the CFO Act,
and other pertinent documents. After identifying USDA's financial
management system weaknesses, we assessed the FISVIS October 1993
strategy document and implementation plan and interviewed the former
and current FISVIS project manager, CFO, and Deputy CFO to determine
USDA's strategy to address these weaknesses. We also interviewed OIG
officials to determine whether they believed that the FISVIS strategy
would address their audit findings. In addition, we interviewed an
OMB budget examiner for USDA to discuss USDA's financial management
system problems and FISVIS' strategy for addressing them.
We also reviewed the USDA Financial and Accounting Standards Manual
and the USDA Financial Management Information Architecture Document,
and assessed the Foundation system's procurement by reviewing the
General Service Administration's Financial Management System Software
Multiple Award Schedule contract and other relevant procurement
documents. In addition, we interviewed the General Service
Administration's Contracting Officer, a Department of the Treasury
Financial Management Service official, the Contracting Officer and
Contracting Officer's Technical Representative for the Foundation
system, and USDA Office of Information Resource Management
Acquisition Review Team officials. Because USDA had not completed
acceptance testing of the Foundation system software by the end of
our review, we did not assess the implementation of the Foundation
system.
We also reviewed the June 1995 proposed rule on the Office of the
CFO's delegation of authority. We interviewed the CFO, Deputy CFO,
and other officials about the Office of the CFO's role involving
component agency and NFC financial management systems. We also
interviewed the senior financial officials of USDA's largest
component agencies and reviewed their financial management system
plans. In addition, we assessed the Consolidated Farm Service
Agency's plans to use the Foundation system contract to procure the
same software and interviewed the manager of this project and other
pertinent officials.
To assess whether the FISVIS project will address consolidating
financial and mixed systems that perform similar functions and
reengineering USDA's financial processes, as prescribed by our draft
Federal Financial Management Systems Review Methodology, we developed
an inventory of USDA's component agencies and NFC financial
management systems. We asked the component agencies and NFC to
characterize the functions that these financial management systems
perform by the functions and definitions listed in the JFMIP's
Framework for Federal Financial Management Systems. We also
identified USDA's planned financial management system improvement and
business process reengineering efforts by interviewing component
agency and NFC officials as well as reviewing budgeting, planning,
and other pertinent documents.
We performed our work at the Department of Agriculture in Washington,
D.C.; FISVIS project team headquarters in Alexandria, Virginia; and
the National Finance Center in New Orleans, Louisiana. We also
visited the Consolidated Farm Service Agency in Kansas City,
Missouri; the Rural Economic and Community Development mission area
in Washington, D.C., and St. Louis, Missouri; the Forest Service in
Rosslyn, Virginia; the Natural Resources Conservation Service in
Washington, D.C.; the Animal and Plant Health Inspection Service in
Hyattsville, Maryland; the Agricultural Research Service in
Greenbelt, Maryland; and the Food and Consumer Services in
Alexandria, Virginia.
Our work was performed between September 1994 and July 1995, in
accordance with generally accepted government auditing standards. We
requested written comments from the Secretary of Agriculture on a
draft of this report. In response, we received written comments from
USDA's Chief Financial Officer. These comments are discussed, along
with our evaluation, in chapter 4 and are reprinted in appendix I.
USDA HAS MADE PROGRESS BUT FISVIS
WILL LIKELY NOT RESOLVE USDA'S
CURRENT FINANCIAL SYSTEM PROBLEMS
============================================================ Chapter 2
While USDA has made laudable progress toward implementing the initial
phase of the FISVIS project, its ability to achieve the ultimate goal
of a single, integrated financial management system is doubtful.\1
The Office of the CFO has initiated several actions to begin to
correct USDA's many financial management system problems. However,
because the Office of the CFO has not set up a mechanism to enforce
its financial system standards, FISVIS' ultimate success is highly
dependent on the voluntary compliance of USDA's component agencies
and NFC. In addition, the Office of the CFO has not implemented a
configuration management policy\2 or version control process\3 for
the Foundation system software. Without these policies and
processes, efforts to implement common data and common transaction
processing,\4 a necessary step to achieve a single, integrated
financial management system, will be significantly hampered and
future system maintenance costs increased.
--------------------
\1 OMB Circular A-127 defines a "single, integrated financial
management system" as a unified set of financial systems and the
financial portions of mixed systems that are planned for and managed
together, operated in an integrated fashion, and linked together
electronically in an efficient and effective manner.
\2 Configuration management is a process for maintaining and
controlling changes to hardware and software.
\3 Version control is a method by which a responsible organization
tracks, controls, and coordinates software versions used by multiple
organizations.
\4 Common processes should be used for processing similar kinds of
transactions through the system to enable these transactions to be
reported in a consistent manner, with predictable results.
OFFICE OF THE CFO IS MAKING
PROGRESS IN ACCOMPLISHING
INITIAL PHASE OF FISVIS
---------------------------------------------------------- Chapter 2:1
The Office of the CFO has demonstrated strong leadership by moving
forward with the initial phase of the FISVIS project. This phase
includes developing departmental financial system standards and
purchasing a commercial off-the-shelf Foundation Financial
Information System. Completing this phase will be a major step in
addressing USDA's problem with nonintegrated financial management
systems because it will establish common data definitions and
transaction processing. This is a necessary step towards the
development of a single, integrated financial management
system--FISVIS' major goal.
OMB Circular A-127 requires agencies to establish and maintain a
single, integrated financial management system that includes common
data element definitions and common transaction processing.
Furthermore, the JFMIP's Framework for Federal Financial Management
Systems states that without a single, integrated financial management
system, poor policy decisions are more likely to occur due to
inaccurate or untimely information; managers are less likely to be
able to report accurately to the President, the Congress, and the
public on government operations in a timely manner; scarce resources
are more likely to be directed towards the collection of information,
rather than to the delivery of the intended programs; and
modifications to financial management systems, necessary to keep pace
with rapidly changing user requirements, cannot be coordinated and
managed properly.
USDA's current financial management systems do not contain common
data element definitions and common transaction processing. To
address this problem, in April 1994, the Office of the CFO and the
FISVIS team released USDA's first departmental financial
standards--the USDA Financial and Accounting Standards Manual and the
USDA Financial Management Information Architecture Document (each of
these documents has been subsequently updated). These documents
contain governmentwide and USDA-specific financial accounting
requirements and are intended to establish a structure for satisfying
USDA's financial management business needs. USDA based its standards
documents on federal financial management requirements and
USDA-specific requirements developed at joint requirement planning
meetings attended by representatives from the Office of the CFO, NFC,
and the component agencies.
In December 1994, USDA took another step towards implementing a
single, integrated financial management system by awarding a contract
to American Management Systems, Inc. (AMS) for the Foundation
system. The requirements for the Foundation system were based on
federal financial management and USDA-specific requirements. The
Office of the CFO estimates that it will cost $90 million over 8
years (including the cost of the contract and USDA's internal and
support service costs) to install, implement, and maintain the
Foundation system. The AMS software is a commercial off-the-shelf
system procured through the General Services Administration's
Financial Management System Software Multiple Award Schedule.\5 The
Foundation system will perform general ledger management, cost
management, receipt management, payment management, funds management,
and financial reporting.
USDA is now in the process of implementing the Foundation system. In
January 1995, AMS installed its software at NFC. The Department is
evaluating and testing this software as well as developing individual
component agency implementation strategies. The Office of the CFO
plans a phased-in implementation approach starting with five of its
organizations (four component agencies\6 and the Office of the CFO),
with the rest of the Department to follow. Each of the five
organizations will work with the FISVIS team to tailor an
implementation plan to its unique operation. This includes making
decisions on such items as which system functions the organization
will use and defining its account classification structure. When
fully implemented, the Foundation system will receive data\7 from
USDA's component agency and NFC feeder systems. In July 1995, the
CFO stated that his goal is to implement the Foundation system
departmentwide by the end of fiscal year 1997.
--------------------
\5 The Federal Information Resources Management Regulation and OMB
Circular A-127 require federal agencies replacing core financial
systems to use this schedule, unless the General Services
Administration grants a waiver. To be on the schedule, vendors must
certify that their system meets the financial system requirements
defined by the JFMIP's Core Financial System Requirements.
\6 The four component agencies in the first phase are Forest Service,
Animal and Plant Health Inspection Service, Food and Consumer
Services, and Agricultural Research Service.
\7 According to the Office of the CFO, the Foundation system will
receive detailed data from the NFC feeder systems and summary- level
data from component agency program accounting systems.
THE OFFICE OF THE CFO CANNOT
ENSURE FISVIS' SUCCESS
---------------------------------------------------------- Chapter 2:2
Because the full implementation of FISVIS hinges on the voluntary
compliance of component agencies with the financial management system
standards, the Office of the CFO cannot ensure the project's success.
Historically, USDA's departmental oversight of component agencies'
financial management systems has been weak; however, USDA plans to
increase the CFO's authority and responsibilities over component
agency financial management systems. In June 1995, USDA published a
proposed rule in the Federal Register\8 that gives the CFO overall
responsibility for the Department's financial management systems and
includes new responsibilities consistent with the CFO Act and OMB's
implementing guidance,\9 such as approving component agency financial
management systems design and enhancement projects, as well as
overseeing and recommending approval of component agency financial
management budgets. According to the CFO's July 25, 1995, testimony
before the House Subcommittee on Government Management, Information
and Technology, the new authorities will give the CFO, for the first
time, real responsibility for component agencies financial systems.
While it is too early to evaluate the ultimate effect that the CFO's
proposed new authority and responsibilities may have, the Office of
the CFO currently continues to have a limited role regarding
component agency financial management systems compliance with the new
financial standards. For example, although the CFO instructed the
component agencies in November 1994 to ensure that their financial
management systems conform with USDA Financial and Accounting
Standards Manual requirements, the Office of the CFO has not
established a structure or process to enable it to enforce
compliance. OMB's guidance on implementing the CFO Act states that
the CFO's authority should include ensuring compliance throughout the
Department and its component parts with (1) applicable accounting
standards and principles and (2) financial information and systems
functional standards. In addition, USDA needs a process to ensure
compliance because USDA's component agencies and NFC stated that they
had not reviewed their financial and mixed systems to determine
whether they comply with the USDA Financial and Accounting Standards
Manual. Further, the component agencies and NFC had scheduled only
15 percent of their systems to be reviewed, although many stated that
they would perform such reviews in the future and the Office of the
CFO stated that NFC is now beginning to review its financial systems
as part of the implementation of the Foundation system.
The Office of the CFO also plans to implement a financial and
accounting standards administration function to help component
agencies implement the financial standards. For example, according
to the CFO, one of the tasks of the financial and accounting
standards administration function will be to assist component
agencies and staff offices with incorporating USDA's financial
standards into their new or reengineered financial and mixed system
development projects. The Office of the CFO tasked a contractor with
drafting a financial and accounting standards directive addressing
compliance with USDA's financial standards.
The Office of the CFO also has a limited role over component agency
financial management system development efforts. In November 1994,
the CFO instructed the component agencies to implement the USDA
Financial and Accounting Standards Manual and the USDA Financial
Management Information Architecture Document during any financial
management system development efforts, but the Office of the CFO's
ability to ensure that these standards are built into these system
development efforts is limited. For example, three component
agencies told us that the CFO did not have a role in their system
development efforts.
Four component agencies stated that the Office of the CFO has a role
in their system development efforts through its membership in their
Acquisition Review Teams. Each member of these review teams must
approve a component agency's financial management system acquisition
plan before the acquisition can proceed. However, the CFO and Deputy
CFO stated that the Acquisition Review Team process is not an
effective tool to review component agency financial management system
development efforts because many important decisions are made prior
to the Acquisition Review Team's involvement. For example, the
requesting agency develops an alternatives and benefit/cost analysis,
which is then presented at an Acquisition Review Team meeting.
Moreover, not all system development efforts go through the
Acquisition Review Team process. For example, Forest Service has an
on-going personnel system development effort, with an estimated
5-year cost of about $2.5 million, that did not undergo the
Acquisition Review Team process. According to officials who
administer the review process, the major component agencies and NFC
do not always seek approval through the Acquisition Review Team
process because they often perform their system development efforts
in-house and do not procure systems.
In addition, in some cases, the Office of the CFO did not participate
in a financial management system Acquisition Review Team case. For
example, the Office of the CFO did not participate in the Acquisition
Review Team for the Natural Resources Conservation Service's
Financial Management System, which is estimated to cost $96 million
over 10 years.\10 According to the former USDA official who set up
the team, the Office of the CFO was invited to join the Acquisition
Review Team but chose not to participate. However, USDA's Deputy CFO
stated that he was unaware of the Natural Resources Conservation
Service's effort until we brought it to his attention. As a result
of our bringing this development effort to the Deputy CFO's
attention, the Natural Resources Conservation Service must now obtain
the Office of the CFO's written approval before any system, or part
of a system, is developed under this effort.
According to the Deputy CFO, if provided sufficient resources, the
Office of the CFO would work with component agencies' to evaluate
their current financial management systems and system development
efforts. As of May 24, 1995, the Office of the CFO had designated
five and a half full-time equivalents for departmentwide financial
systems, policy, and procedures coordination, with three full-time
positions vacant (which the CFO is trying to fill). In its fiscal
year 1996 budget request, USDA asked for eight additional staff years
for the Office of the CFO to implement financial systems oversight,
correct deficiencies in the Department's financial management
systems, and provide better stewardship over USDA's resources.
While the Office of the CFO has a limited number of positions
designated for financial management system reviews, NFC and the
component agencies employ several thousand financial management
personnel. The Office of the CFO's fiscal year 1995 authorized
staffing level was 1,425,\11 of which 1,340 were stationed at NFC.\12
However, according to the CFO and Deputy CFO, most of the NFC
personnel are (1) generally computer programmers, operations
accountants, and clerks who do not have the types of skills necessary
to perform financial management system reviews and (2) needed for
on-going NFC work. In addition to the Office of the CFO's staff, as
of March 1995, the component agencies employed about 2,900 accounting
and budget personnel. While the Office of the CFO has not performed
a review of USDA's financial management staffing needs for USDA as a
whole, the CFO and Deputy CFO agreed that there may be opportunities
for USDA to redistribute or use temporary assignments of some of the
Department's financial management personnel to perform financial
management system reviews.
Until the CFO can ensure that USDA's component agencies and NFC have
implemented the departmentwide financial standards, USDA will
continue to have nonintegrated financial management systems that
contain incompatible and inconsistent financial data. As a result,
the new Foundation system will merely summarize unreliable component
agency and NFC financial data and USDA's financial management systems
will continue to be high risk.
--------------------
\8 This proposed rule was issued to reflect revisions to the
Secretary's delegations of authority pursuant to the Department of
Agriculture Reorganization Act of 1994.
\9 Guidance for Preparing Organization Plans Required by the Chief
Financial Officers Act of 1990 (OMB, M-91-07, February 27, 1991).
\10 This estimate includes both in-house and acquisition related
costs.
\11 This does not include staff that are devoted to administering the
federal government's Thrift Savings Plan.
\12 The other Office of the CFO personnel perform functions such as
providing technical assistance during the preparation and audit of
the annual USDA-wide financial statements, travel policy,
controllership of the Department's Working Capital Fund, and budget
and fiscal support of the Office of the Secretary and staff offices.
THE OFFICE OF THE CFO HAS NOT
ESTABLISHED A CONFIGURATION
MANAGEMENT POLICY AND VERSION
CONTROL PROCESS
---------------------------------------------------------- Chapter 2:3
The Office of the CFO has not established a configuration management
policy or version control process to help manage and control the
Foundation system software modifications and version updates.
Configuration management policies and version control can lower
USDA's future costs by minimizing changes to the contractor's
original software version and ensuring software development efforts
are not duplicated at multiple sites. Moreover, the JFMIP Framework
for Federal Financial Management Systems calls for agencies to place
common software under version control.
The Office of the CFO's contract for the Foundation system software
allows component agencies to procure the same AMS software. As of
July 1995, only one component agency, the Consolidated Farm Service
Agency (CFSA), had decided to procure this software through a task
order to the contract. CFSA plans to spend about $174.5 million over
11 years to procure, implement, modify, and operate this software at
the National Computer Center where CFSA's other financial management
systems are housed. Most of the $174 million will be nonacquisition
related, such as accounting and clerical staff operating costs.
Although both the Office of the CFO and CFSA intend to modify their
respective copies of the Foundation system software, the Office of
the CFO does not have a configuration management policy. Such a
policy would address procedures for (1) ensuring that a proposed
software modification is necessary, (2) determining whether a
modification should result in a change to the baseline software or be
implemented in a separate module, and (3) ensuring that software at
multiple locations remain synchronized.
The Office of the CFO also does not have a version control process.
An effective version control process would ensure that either the
same software releases are used or that different releases are
managed effectively. This is particularly important in cases where
more than one organization is managing and operating copies of the
same software.
The Office of the CFO and CFSA have recognized the importance of
configuration management and version controls. In July 1995, they
agreed to prepare a configuration management plan that, according to
the Deputy CFO, will include a version control process.
FISVIS STRATEGY DOES NOT ADDRESS
CONSOLIDATING FINANCIAL SYSTEMS
AND REENGINEERING PROCESSES
============================================================ Chapter 3
The FISVIS strategy does not attempt to consolidate or eliminate
overlapping\1 financial management systems or reengineer existing
financial processes across component agencies. USDA has over 100
financial management systems that perform many similar functions.
This environment will continue to exist even after FISVIS because
USDA is planning to spend hundreds of millions of dollars to replace
or redesign these systems without a financial management systems plan
to consolidate these systems on a departmentwide basis. In addition,
although many component agencies plan to reengineer their own
financial processes, USDA has not placed the CFO in a leadership role
that would help ensure that financial processes are reengineered from
a departmentwide perspective.
--------------------
\1 An overlapping system is one that performs some, but not all,
functions of another system.
USDA SUPPORTS MANY OVERLAPPING
FINANCIAL MANAGEMENT SYSTEMS
---------------------------------------------------------- Chapter 3:1
As table 3.1 illustrates, USDA has 115 financial management
systems--62 financial systems and 53 mixed systems. Most of these
systems are independently managed by USDA's component agencies and
NFC. In fiscal year 1994, USDA spent over $187 million to operate
and maintain these systems.
Table 3.1
USDA Organizations With Financial and
Mixed Systems
Number of
Organization Systems
---------------------------------------------------------- ----------
Forest Service 6
Natural Resources Conservation Service 1
Consolidated Farm Service Agency 41
Foreign Agriculture Service 3
Rural Utilities Service 2
Rural Housing and Community Development Service\\a 9\
Food and Consumer Service 4
Agriculture Research Service 2
Agricultural Marketing Service 1
Animal and Plant Health Inspection Service 11
National Finance Center 34
Office of the CFO 1
======================================================================
Total 115
----------------------------------------------------------------------
\a Some of these systems also support farm loans managed by the
Consolidated Farm Service Agency because, until USDA's recent
reorganization, farm and housing loans were managed by the same
component agency.
As table 3.2 illustrates, these 115 systems perform many similar and
overlapping functions.
Table 3.2
Number of Financial and Mixed Systems
Performing Each Major Financial Function
Number
of
Financia Number of
l Mixed
Function Systems Systems
---------------------------------------------- -------- ------------
Transfer payments 4 1
Grants and subsidies 6 11
Loans 5 11
Insurance 3 0
Personnel 1 6
Acquisition 13 6
Property management 9 7
Inventory management 4 7
Fee and other revenue generation 15 7
Deposit funds 14 7
Intragovernmental collections 15 4
Budget formulation 8 5
Budget execution 23 7
Financial accounting 39 8
Cash management 16 3
Cost accounting 15 4
Receivables/collections 28 15
Payables/disbursements 44 20
Payroll 11 6
Travel 13 5
Property accounting 11 4
Inventory accounting 4 1
----------------------------------------------------------------------
As discussed in chapter 1, because many of these systems are
inadequate, many component agency field offices also maintain
informal or "cuff" systems that perform the same functions as the
"official" systems. For example, Forest Service told us that they
had six "national" financial management systems. However, these six
did not include the more than 100 systems that Forest Service regions
and stations maintain. For example, Forest Service regional offices
use a Project Work Planning System that includes a budget allocation
function. According to Forest Service, this system is not a
"national" system and was developed by an individual regional office
because of the inadequacies of Forest Service's and NFC's financial
management systems. In other cases, regional offices and stations
maintained systems for their specific office.
USDA DOES NOT PLAN TO
CONSOLIDATE OR ELIMINATE
OVERLAPPING SYSTEMS
---------------------------------------------------------- Chapter 3:2
USDA's overlapping systems are likely to continue, even after FISVIS
is fully implemented, because the FISVIS strategy does not address
consolidating or eliminating overlapping systems on a departmentwide
basis. Instead, the FISVIS strategy provides for component agencies
to meet their specific needs by developing and managing their own
financial management systems. However, this decision could be costly
because component agencies plan to spend hundreds of millions of
dollars over the next several years redesigning or replacing the
current financial management systems without the guidance of an
overall departmentwide financial management systems architecture.
The following are examples of on-going or planned financial
management system development efforts by various component agencies:
The Natural Resources Conservation Service estimated that its
Financial Management System effort will cost about $96 million
over its 10-year life cycle.\2
CFSA has several development efforts planned, including the Core
Accounting System, estimated to cost $174.5 million over its
11-year life cycle.
The Rural Housing and Community Development Service has several
on-going development efforts, including (1) the New Guaranteed
Loan System, estimated to cost $62 million over its 17-year life
cycle and (2) the Dedicated Loan Origination/Servicing System,
estimated to cost $285 million over its 15-year life cycle.
Because the FISVIS strategy does not include a financial management
system architecture, once USDA's many financial management system
development efforts are completed, USDA will continue to have a
multitude of financial management systems that perform similar
functions but that may not be integrated or tied together.
In order to implement a single, integrated financial management
system--required by the CFO Act and OMB and a major goal of
FISVIS--OMB specifies that agencies should plan and manage their
financial management systems in a unified manner. A critical step in
accomplishing this is the development of a financial management
systems architecture. According to JFMIP, a financial management
systems architecture serves as a blueprint for the logical
combination of financial and mixed systems to provide the budgetary
and financial management support for program and financial managers.
Through the process of developing this architecture, USDA would
determine where savings could be achieved by consolidating systems
that perform the same or similar functions. As early as December
1993, the Office of the CFO recognized the need for an overall plan
to guide the modernization of USDA's financial information systems.
However, according to the Deputy CFO, such a plan was not developed
because of a lack of resources.
We believe that USDA could find areas where it could reduce costs by
consolidating or eliminating overlapping systems through a mechanism
such as cross-servicing.\3 For example, USDA supports 91 financial
and mixed systems that perform the same functions as the AMS software
packages being installed at NFC (the Foundation system) and the
National Computer Center (CFSA's Core Accounting System). However,
only 16 of these 91 systems will be either fully or partially
replaced by the AMS software. In fiscal year 1994, USDA spent over
$160 million to operate and maintain these 91 systems, of which about
$13 million pertained to the 16 systems that the AMS software will
fully or partially replace. Through cross-servicing, some of the
operating costs of the remaining 75 systems could be eliminated or
reduced.
USDA currently performs successful cross-servicing for some
administrative systems. For example, NFC cross-services payroll,
personnel, and other administrative services for a diverse group of
USDA and non-USDA agencies. Agencies serviced through NFC have
achieved significant savings by avoiding redundant systems
development and design initiatives and by reducing annual maintenance
and processing costs. In one case, the Department of Commerce
estimated that it avoided system development expenditures totaling
$11 million for a payroll/personnel system and a personal property
system, as well as achieving annual processing cost savings of $2
million per year.
USDA could also reduce its systems development costs through joint
development efforts. In this regard, the National Performance Review
report on financial management noted that federal agencies not in
compliance with OMB Circular A-127, such as USDA, should consider
other alternatives including joint agency development efforts before
investing in new systems.
--------------------
\2 USDA Departmental Regulation 3130-1 defines life-cycle costs as
all information resource management and non information resource
management costs that are attributable to the system that may and do
accrue during the life cycle. This includes both in-house and
acquisition related costs.
\3 Cross-servicing is a business arrangement whereby one organization
provides financial management software and processing support to
another organization.
FISVIS GENERALLY DOES NOT
INCLUDE A DEPARTMENTWIDE
STRATEGY FOR REENGINEERING
EXISTING FINANCIAL PROCESSES
---------------------------------------------------------- Chapter 3:3
The CFO Act directs agency CFOs to "oversee all financial management
activities relating to the programs and operations of the agency."
However, USDA's CFO does not have primary responsibility for
reengineering USDA's financial processes, and the FISVIS strategy
generally does not address reengineering USDA's financial processes\4
from a departmentwide perspective. Process reengineering is a
management technique for achieving dramatic improvements in cost,
quality, and/or customer service by rethinking and redesigning major
business processes. The Department of Agriculture Reorganization Act
of 1994 offers USDA an excellent opportunity to eliminate or simplify
inefficient processes and consolidate those that affect multiple
mission areas or component agencies. Under the Reorganization Act,
USDA is authorized to make substantive organizational changes and is
required to reduce staff and consolidate component agencies'
financial organizations. Further, according to USDA's National
Performance Review report, USDA's existing financial processes
discourage efficient use of resources, indicating that savings are
possible through reengineered processes.
Many of USDA's component agencies and mission areas have realized
that their existing financial processes should be reengineered and
have independently initiated financial process reengineering projects
from their own perspective. For example, according to agency
representatives, (1) CFSA is planning to reengineer its financial
processes as part of an overall project to modernize its financial
management systems, (2) the Natural Resources and Conservation
Service is planning a complete reorganization of the agency and
expects to reengineer financial processes as part of the
reorganization, and (3) the Forest Service is considering
reengineering selected financial processes such as outyear budget
planning and small purchasing.
Although the CFO Act requires agency CFOs to direct and oversee
agency financial management operations, USDA did not assign the CFO
the responsibility for developing a departmentwide financial
management reengineering plan nor for reviewing and approving
component agency and mission area reengineering efforts. Instead,
USDA assigned the Assistant Secretary for Administration to be
responsible for overseeing the reengineering of both administrative
and financial processes. In a January 1995 letter to USDA's Deputy
Secretary, we expressed concern about this arrangement and suggested
that the Assistant Secretary for Administration's responsibilities
not include reengineering financial processes. Although USDA
recognized the overlapping responsibilities between the CFO and
Assistant Secretary for Administration, the Deputy Secretary (in the
capacity of Acting Secretary) decided that the Assistant Secretary
should continue to be responsible for reengineering financial
processes in consultation with the CFO. In addition, to date, the
Assistant Secretary for Administration has concentrated on
reengineering some of the Department's administrative functions and
has not developed departmental plans for reengineering financial
processes.
Recent experiences at the Department of the Interior illustrate the
importance of CFO leadership in financial process reengineering.
Interior is comprised of several component agencies with different
missions and programs, much like USDA. According to Interior
officials, when Interior acquired and implemented a foundation
financial management system to integrate its disparate component
agencies' financial management systems, as USDA is currently doing,
it did not reengineer its financial processes at the same time.
However, Interior found that in order to achieve the full benefits of
implementing a foundation financial management system and integrating
its component agency systems, it needed to reengineer its financial
processes from a departmentwide perspective.
To overcome this hurdle, in 1994, Interior's CFO led an effort to
establish a partnership with Interior's component agency senior
financial managers to begin defining existing financial processes in
preparation to reengineer, standardize, and consolidate financial
processes from a departmentwide perspective. Although we have not
evaluated Interior's efforts in this area, an official there stated
that factors important to the success of this effort included (1)
placing the CFO in a leadership role for overseeing the reengineering
of financial processes and (2) requiring component agencies' senior
financial managers to work cooperatively with each other and the CFO
to plan and manage reengineering efforts from a departmentwide
perspective.
By not having a departmentwide strategy for reengineering its
financial processes, USDA risks losing the savings and other benefits
that are available through reengineering those financial processes
that are departmentwide or that cross multiple mission areas or
agencies. An example of the potential benefits that could be derived
from reengineering on a departmentwide basis is the process for
transferring funds among component agencies. The Office of the CFO
sponsored a business process reengineering analysis that estimated
that if USDA reengineers this labor- intensive process on a
departmentwide basis, it could save about half of the $8 million it
costs per year to transfer funds.
There may be other excellent opportunities to reengineer financial
processes departmentwide. USDA's fiscal year 1994 Federal Managers'
Financial Integrity Act report highlights material weaknesses in
financial processes, such as debt collection and funds control, that
cut across component agency and mission area lines. Further,
reengineering financial processes from a departmentwide perspective
could ease the burden created by USDA's planned downsizing of its
financial organizations. Reengineering would also help streamline
and consolidate financial processes across agencies and mission
areas, enabling fewer personnel to perform the processes without
losses in effectiveness. Process reengineering experts caution that
if an organization reorganizes and reduces staff levels without also
rethinking and reengineering the underlying processes or functions
the staff perform, it risks reducing operational efficiency and
service delivery. In addition, in our recent report on downsizing
strategies,\5 officials from a private company stated that, while
downsizing, organizations have to address their work processes.
Another company's official observed that if an organization simply
reduces the number of employees without changing its work processes,
staffing growth will recur eventually.
Additionally, by not planning and managing financial process
reengineering from a departmental perspective, USDA runs the risk
that the new financial processes developed independently by the
component agencies will not be adequately supported by the financial
management systems acquired or developed under FISVIS. JFMIP's
Framework for Federal Financial Management Systems cautions that
financial management systems planning efforts, such as FISVIS, should
consider the implications of reengineering related financial
processes. Significant changes in existing financial processes, such
as those that can be brought about by the component agencies' planned
reengineering efforts, can require commensurate changes in the
supporting financial management systems. It is therefore critical
that the Department's financial process reengineering efforts be
closely coordinated with any financial management systems development
efforts planned under FISVIS, or USDA may find that the newly
deployed software is working at cross purposes with the reengineered
processes. Should this occur, USDA would have to incur additional
costs to modify the new software or develop new systems in order to
support the reengineered processes.
--------------------
\4 A financial process is a collection of activities or worksteps
that a financial management system would support.
\5 Workforce Reductions: Downsizing Strategies Used in Selected
Organizations, (GAO/GGD-95-54, March 13, 1995).
CONCLUSIONS AND RECOMMENDATIONS
============================================================ Chapter 4
CONCLUSIONS
---------------------------------------------------------- Chapter 4:1
USDA's CFO and Deputy CFO have provided strong leadership in
identifying and attempting to correct the multitude of financial
management system problems at the Department. However, many of these
problems are still not likely to be resolved because the CFO's
ability to enforce the new financial system standards is limited in
that the CFO has not yet been given the authority mandated by the CFO
Act and OMB's implementing guidance. In addition, the CFO also has
not developed a configuration management policy and version control
process for the Foundation system software to help manage copies of
this software and reduce future maintenance and development costs.
Until a single USDA organization is given the requisite authority, no
assurance exists that the transition to a fully modernized and
integrated financial management system will be effective,
expeditious, and economical.
The USDA Reorganization Act also provides the Department with an
historic opportunity to evaluate its financial management system
needs departmentwide, revise the FISVIS strategy to consolidate
overlapping financial and mixed systems, and reengineer its financial
processes where it is economical to do so. However, because
component agencies plan to spend hundreds millions of dollars to
replace and redesign their existing financial and mixed systems
without considering such consolidations, USDA will not likely solve
its financial management problems in a cost- effective manner and
could be needlessly spending millions of dollars on new systems. In
addition, USDA has not provided the CFO a leadership role in
reengineering the Department's financial processes. Without such a
role, the CFO's ability to establish partnerships with component
agencies to develop cost-effective departmentwide financial process
reengineering projects will be hampered.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 4:2
We recommend that the Secretary of Agriculture:
Expeditiously implement the proposed delegation of authority to
provide the CFO with the authority to oversee all financial
management activities relating to the programs and operations of
the agency, including approving component agency financial
management system design and enhancement projects.
Require that the CFO (1) establish review teams to determine
whether USDA's current and future component agency and NFC
financial and mixed systems are in compliance with the USDA
Financial and Accounting Standards Manual and the USDA Financial
Management Information Architecture Document and (2) take action
to bring component agencies into compliance with the standards.
One way USDA could undertake this task with existing resources
is to create temporary teams of Office of the CFO, NFC, and
component agency personnel.
Direct the CFO to develop and implement a configuration management
policy and version control process to ensure that the Foundation
system baseline software is effectively managed.
Direct the CFO to update the FISVIS strategy to include a financial
management systems architecture that sets forth the financial
management needs of USDA's new organizational structure, and
establish a detailed strategy to meet these needs. This plan
should also identify opportunities to streamline and/or
consolidate financial management systems across agencies and
mission areas.
Direct the CFO to review each of the component agencies on-going
and planned financial management system development efforts and
report to the Secretary whether each of these efforts are
necessary, consistent with the FISVIS initiative, and
cost-effective from a departmentwide perspective, or whether
they should be consolidated with other financial management
systems or development efforts. This would include, but not be
limited to, determining that the component agencies' needs
cannot be met by the Foundation system. If the CFO determines
that any individual system development effort is not needed, the
Secretary should suspend it.
Delegate to the CFO authority and responsibility for (1) developing
a departmentwide financial management reengineering strategy
that would include identifying the technical assistance and
training necessary to successfully carry out reengineering
activities and (2) reviewing and approving the reengineering of
all departmental and component agency financial processes and
require component agencies' senior financial managers to work
with the CFO to ensure that their reengineering efforts are
planned and managed from a departmentwide perspective.
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 4:3
In providing written comments on a draft of this report, USDA
emphasized that the modernization of its financial management systems
is one of the Secretary's top priorities and is an integral part of
USDA's overall reorganization. USDA further stated that our
recommendations, when implemented, will strengthen USDA's
capabilities to modernize and upgrade its financial systems.
Specifically, USDA agreed to implement all but one of our
recommendations, although the Department was concerned about finding
the resources to implement two of our recommendations. USDA did not
agree to implement our recommendation that the CFO be provided the
authority and responsibility for developing a departmentwide
financial management reengineering strategy and for reviewing and
approving all departmental and component agency financial process
reengineering efforts.
USDA agreed with our recommendations to (1) expeditiously implement
the proposed CFO's delegation of authority, (2) develop and implement
a configuration management policy and version control process, and
(3) update the FISVIS strategy to include a financial management
systems architecture that would identify opportunities to streamline
and/or consolidate financial management systems across agencies and
mission areas.
USDA also agreed with the need to address two other recommendations;
however, USDA expressed concern about the lack of resources available
to implement these recommendations. For example, in discussing the
Department's written comments, the CFO stated that the Office of the
CFO's ability to implement our recommendation on forming review teams
to determine whether USDA's current and future financial and mixed
systems conform with the Department's financial standards would be
contingent on available resources. Similarly, although USDA agreed
with our recommendation to review component agency financial
management system development efforts, it stated that the CFO would
perform such reviews as resources are available.
We believe that the Secretary's designation of financial management
systems as a top departmental priority and recognition that their
modernization is an integral part of the Department's overall
reorganization warrant the resources--either through permanent or
temporary staff reallocations--necessary to review USDA's financial
systems. As we discuss in chapter 2, the Department employs over
4,000 accounting and budget personnel within the Office of the CFO
and the component agencies. We believe USDA may be able to
redistribute or temporarily reassign some of these staff to implement
these recommendations.
In addition, as we discuss in chapter 3, USDA has many overlapping
financial management systems. Therefore, our recommendation to
review each of the component agencies ongoing and planned financial
management system development efforts could result in significant
monetary savings. The time to perform such a review is now, before
USDA spends a significant amount of money implementing financial
management systems that may not be needed. These savings could, in
turn, be used to fund other needed USDA financial management
improvement efforts.
In its written comments, USDA stated that most of its current
financial and mixed systems do not comply with the Department's
financial standards and agreed that USDA needed to bring them into
compliance. Although USDA stated it would consider our
recommendation to establish review teams to determine financial
management system noncompliance, it also planned to evaluate other
options, such as agency self-certifications, to address this issue
because it believed staff resources may not be available. However,
we believe that the breadth of USDA's current noncompliance with
these standards and the lack of specific component agency plans to
evaluate their systems for such compliance attests to the need for
the CFO to establish review teams to independently identify areas of
noncompliance and recommend actions to correct these deficiencies.
USDA did not agree to grant the CFO the authority and responsibility
for developing a departmentwide financial management reengineering
strategy and for reviewing and approving all departmental and
component agency financial process reengineering efforts to ensure
that the efforts are planned and managed from a departmentwide
perspective. USDA stated that the Secretary delegated responsibility
to the Assistant Secretary for Administration for reengineering
USDA's administrative systems--which encompass financial
processes--under the Modernization of Administrative Processes
program. USDA's comments also noted that the Office of the CFO and
the Assistant Secretary for Administration established a Board of
Directors (with the Assistant Secretary for Administration as the
Chairperson and the CFO as the Vice-Chairperson) to provide policy
guidance and direction for the Modernization of Administrative
Processes program.
We agree that reengineering USDA's administrative processes should
remain the primary responsibility of the Assistant Secretary for
Administration. We also agree that administrative and financial
processes and systems are often related. Therefore, we applaud the
Secretary for establishing a Board of Directors for the Modernization
of Administrative Processes program. Nevertheless, we continue to
believe that implementing our recommendation on reengineering is
necessary because, even under the Board of Director's process, the
responsibility for reengineering USDA's financial processes does not
rest with the CFO, who is tasked by the CFO Act with overseeing all
financial management activities relating to the programs and
operations of the agency. We expressed this concern in a January
1995 letter to the Deputy Secretary.
In addition, because USDA's financial processes and financial systems
are inextricably linked, it is imperative that changes to either be
managed and planned in an integrated manner. Therefore, we believe
that the CFO should have the primary departmental leadership role in
reengineering USDA's financial processes. If the CFO is given this
leadership role, USDA will strengthen both its financial management
systems development and financial process reengineering activities
since a single person could be held accountable and responsible for
both areas. In addition, USDA could help ensure that financial
process reengineering efforts are consistently managed and controlled
departmentwide.
(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
AGRICULTURE
============================================================ Chapter 4
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
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MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II
ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C.
Stephen A. Schwartz, Assistant Director
William D. Hadesty, Technical Assistant Director
Linda J. Lambert, Senior Auditor
KANSAS CITY REGIONAL OFFICE
George L. Jones, Evaluator-in-Charge
Leann M. Veit, Staff Evaluator
Dora E. Navarro, Staff Evaluator
Karl G. Neybert, Staff Evaluator
John G. Snavely, Staff Evaluator
Ronda F. Price, Senior Auditor