Veterans Affairs: Continued Focus on Critical Success Factors Is 
Essential to Achieving Information Technology Realignment	 
(15-JUN-07, GAO-07-844).					 
                                                                 
The Department of Veterans Affairs (VA) spends nearly $1 billion 
yearly to support its information technology (IT) needs; yet it  
has encountered persistent challenges in managing IT projects. In
October 2005, VA initiated a realignment to centralize its IT	 
management program that it plans to complete by July 2008. GAO	 
was requested to determine (1) whether the department's 	 
realignment plan includes critical factors for successful	 
implementation and (2) how the centralized management approach is
to ensure that the chief information officer (CIO) is accountable
for the department's entire IT budget. To do so, GAO identified  
critical success factors, analyzed realignment and budget	 
documents, and held discussions with VA officials.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-844 					        
    ACCNO:   A70867						        
  TITLE:     Veterans Affairs: Continued Focus on Critical Success    
Factors Is Essential to Achieving Information Technology	 
Realignment							 
     DATE:   06/15/2007 
  SUBJECT:   Budget authority					 
	     Chief information officers 			 
	     Federal agency reorganization			 
	     Information resources management			 
	     Information technology				 
	     Internal controls					 
	     Policy evaluation					 
	     Program management 				 
	     Strategic planning 				 
	     Systems design					 
	     Veterans benefits					 
	     Program implementation				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-07-844

   

     * [1]Results in Brief
     * [2]Background

          * [3]Centralized IT Organization

               * [4]IT Management Processes

          * [5]Successful Organization Transformations Are Based on Critica

     * [6]VA Realignment Plans Include Critical Success Factors

          * [7]Top Leadership Has Committed to the Realignment
          * [8]Governance Structure to Manage Resources Not Yet Complete
          * [9]IT Strategic Plan Is to Be Updated to Reflect New Organizati
          * [10]IT Workforce Aligned under CIO, but Staff Roles Have Yet to
          * [11]Certain Actions Have Been Taken to Address Communication
          * [12]VA Has Not Dedicated an Implementation Team to Manage the Re

     * [13]Centralized Control of IT Budget Has Not Yet Been Clearly Es

          * [14]Deputy Assistant Secretaries to Control Aspects of IT Budget

               * [15]IT Governance Plan Identifies Boards to Assist in
                 Management
               * [16]Two New Management Processes Are to Address IT Budget

     * [17]Conclusions
     * [18]Recommendations for Executive Action
     * [19]Agency Commentsand Our Evaluation
     * [20]GAO Contact
     * [21]Staff Acknowledgments
     * [22]GAO's Mission
     * [23]Obtaining Copies of GAO Reports and Testimony

          * [24]Order by Mail or Phone

     * [25]To Report Fraud, Waste, and Abuse in Federal Programs
     * [26]Congressional Relations
     * [27]Public Affairs

Report to Congressional Requesters

United States Government Accountability Office

GAO

June 2007

VETERANS AFFAIRS

Continued Focus on Critical Success Factors Is Essential to Achieving
Information Technology Realignment

GAO-07-844

Contents

Letter 1

Results in Brief 2
Background 4
VA Realignment Plans Include Critical Success Factors 9
Centralized Control of IT Budget Has Not Yet Been Clearly Established 16
Conclusions 19
Recommendations for Executive Action 20
Agency Comments and Our Evaluation 21
Appendix I Scope and Methodology 23
Appendix II Comments from the Department of Veterans Affairs 25
Appendix III GAO Contact and Staff Acknowledgments 30

Table

Table 1: Summary of VA's Actions Addressing Critical Success Factors 9

Figures

Figure 1: Office of Information and Technology Organizational Chart 6
Figure 2: Timeline of Key Events for VA IT Realignment 7

Abbreviations

CIO chief information officer
DAS deputy assistant secretary
IT information technology
IV&V independent verification and validation
VA Department of Veterans Affairs
VBA Veterans Benefits Administration
VHA Veterans Health Administration

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

United States Government Accountability Office
Washington, DC 20548

June 15, 2007

The Honorable Bob Filner Chairman The Honorable Steve Buyer Ranking Member
Committee on Veterans' Affairs House of Representatives The use of
information technology (IT) is crucial to helping the Department of
Veterans Affairs (VA) effectively serve our nation's veterans--the
department expends about $1 billion annually in support of its IT program.
Nonetheless, VA has encountered persistent challenges in managing its IT
projects. For example, in 2004, after spending almost $250 million over 5
years, the department experienced a highly publicized failure on an
initiative to replace its financial management system. According to VA's
Inspector General, this failure was the result of issues related to
managing and monitoring the implementation of the system. We previously
reported^1 that a contributing factor to VA's challenges in managing
projects was the department's decentralized management structure, in which
its administrations^2 and headquarters offices^3 controlled a majority of
the department's IT budget.

To provide greater authority and accountability over its resources, in
October 2005, the department initiated a realignment of its IT program.
The goals were to centralize IT management under the department-level
Chief Information Officer (CIO) and standardize operations and the
development of systems across the department using new management
processes based on industry best practices. Completion of the realignment
is scheduled for July 2008.

^1GAO, Veterans Affairs: The Role of the Chief Information Officer in
Effectively Managing Information Technology,  [28]GAO-06-201T 
(Washington, D.C.: Oct. 20, 2005); and Veterans Affairs: The Critical Role
of the Chief Information Officer Position in Effective Information
Technology Management,  [29]GAO-05-1017T  (Washington, D.C.: Sept. 14,
2005).

^2The VA comprises three administrations: the Veterans Benefits
Administration (VBA), the Veterans Health Administration (VHA), and the
National Cemetery Administration (NCA).

^3The headquarters offices include the Office of the Secretary, six
Assistant Secretaries, and three VA-level staff offices.

Given the importance of information technology for supporting VA's
mission, you requested that we review the department's effort to realign
its IT program. Specifically, our objectives were to determine (1) whether
the department's realignment plan includes critical factors for successful
implementation of a centralized management approach and (2) how the
centralized management approach is to ensure that the CIO is accountable
for the department's entire IT budget, including those funds that
previously had been controlled by its administrations.

In conducting this review, we obtained and analyzed relevant documents
from VA, its realignment contractor, and the independent verification and
validation contractor supporting the initiative. To assess the
realignment, we identified critical success factors by reviewing relevant
GAO products and researching industry best practices on organizational
transformations. In addition, we conferred with a leading provider of
research and analysis on the IT industry to obtain its input on the
relevance and soundness of factors we identified for consideration in our
assessment of the realignment effort. We then assessed whether the
department's realignment documentation identified actions that reflected
these factors and held periodic meetings with realignment team members,
including contractors, to discuss whether and how these factors were being
considered in the department's realignment plans and actions. To determine
how the centralized management approach will ensure that the CIO is
accountable for the entire IT budget, we reviewed documentation and plans
that addressed budget oversight and execution under the new organization.
To supplement our analysis, we met with officials in VA's Office of
Information and Technology who are responsible for managing and executing
the budget. We conducted our study from June 2006 through May 2007 in
accordance with generally accepted government auditing standards. For more
details on our scope and methodology, see appendix I.

Results in Brief

VA's plans for realigning the management of its IT program include
elements of several of the six factors we identified as critical for the
department's implementation of a centralized management structure;
additional departmental actions could increase assurance that the
realignment will be completed successfully. Since undertaking the
realignment in October 2005, VA has concentrated its efforts on
transferring approximately 6,000 staff to the CIO's office and on creating
a new centralized organizational structure. The department has also
approved its IT governance plan to address how the Office of Information
and Technology will manage resources; however, it has not yet established
the boards that are to provide governance over the centralized structure.
In addition, the department has identified the responsibilities for
managing its workforce within its new structure but has not yet
established a knowledge and skills inventory to help determine the proper
roles for all employees in the new organization. Further, while VA has
highlighted the importance of managing change in its realignment
documentation, it has not dedicated an implementation team to manage the
realignment and track its progress through the use of performance metrics.
As a result, the department may jeopardize the success of its efforts and
may not realize the long-term benefits of the realignment.

Within the realigned structure, VA plans to ensure that the CIO will be
accountable for the entire IT budget through three primary measures.
First, the new centralized organization includes positions for two new
deputy assistant secretaries who are to be responsible for the development
of VA's annual IT budget and for tracking actual expenditures against the
budget. Second, the new governance plan calls for the establishment of
CIO-level governance boards, which are to oversee both the development and
approval of the budget and monitor its execution. Third, implementation of
two new IT management processes--portfolio management and financial
management--are to be used to establish control over the budget. While
these measures show the potential for establishing the CIO's control of
the budget, VA has neither fully implemented them nor committed to a time
frame for doing so. Thus, their effectiveness in ensuring accountability
for the budget has not yet been established.

To address the critical success factors for implementing a centralized
management structure and to ensure that the CIO has control of the IT
budget, we are recommending that the Secretary of Veterans Affairs take
actions in several areas, including dedicating an implementation team to
manage change, expediting development of performance metrics to track the
progress of the realignment, and establishing governance boards to provide
oversight of the centralized structure.

In providing written comments on a draft of this report, the Deputy
Secretary of Veterans Affairs generally concurred with the report's
findings and recommendations. (The department's comments are reproduced in
app. II.) The comments described actions that begin to address our
recommendations. Among its actions, the department proposed to manage its
change to a centralized structure without a separate dedicated
implementation team; however, we continue to believe that a dedicated
implementation team is crucial to the department's ability to ensure that
the realignment is successfully completed. Establishing such a team, as
well as properly implementing our other recommendations, should help
ensure that the IT realignment is successfully accomplished.

Background

VA's mission is to promote the health, welfare, and dignity of all
veterans in recognition of their service to the nation by ensuring they
receive medical care, benefits, social support, and lasting memorials. Its
three major components, the Veterans Benefits Administration (VBA), the
Veterans Health Administration (VHA), and the National Cemetery
Administration are primarily responsible for carrying out this mission.
Over time, the use of information technology has become crucial to the
department's effort to provide benefits and services, with its budget for
IT exceeding $1 billion annually.

In reporting on VA's IT management over the past several years, we have
highlighted^4 challenges the department has faced in achieving its "One
VA" vision,^5 including that information systems and services were highly
decentralized and that its administrations controlled a majority of the IT
budget. For example, according to an October 2005 memorandum from the
former CIO to the Secretary of Veterans Affairs, the CIO had direct
control over only 3 percent of the department's IT budget and 6 percent of
the department's IT personnel. In addition, in the department's fiscal
year 2006 IT budget request, the Veterans Health Administration was
identified to receive 88 percent of the requested funding, while the
department was identified to receive only 4 percent. We have previously
pointed out that, given the department's large IT funding and
decentralized management structure, it was crucial for the department CIO
to ensure that well-established and integrated processes for leading,
managing, and controlling investments were followed throughout the
department.

Further, a contractor's assessment of VA's IT organizational alignment,
issued in February 2005, noted the lack of control for how and when money
is spent.^6 The assessment found that project managers within the
administrations had the ability to shift money to support individual
projects. Also, according to the assessment, the focus of department-level
management was only on reporting expenditures to the Office of Management
and Budget and Congress, rather than on managing these expenditures within
the department.

^4 [30]GAO-06-201T and [31]GAO-05-1017T .

^5The One VA vision is to create versatile new ways for veterans to obtain
services and information by streamlining interactions with customers and
integrating IT resources to enable VA employees to help customers more
quickly and effectively.

  Centralized IT Organization

In response to the challenges that we and others noted, the department
officially began its effort to provide the CIO with greater authority over
IT in October 2005. At that time, the Secretary issued an executive
decision memorandum granting approval for the development of a new IT
management structure for the department. According to VA, its goals in
moving to centralized management are to provide the department better
oversight over the standardization, compatibility, and interoperability of
IT systems, as well as better overall fiscal discipline for the budget.

By July 2006, the department's realignment contractor began work to assist
with the realignment effort. The Secretary approved the department's new
organization structure in February 2007. As noted in figure 1, the new
structure includes the Assistant Secretary for Information and Technology
(who serves as VA's CIO), the CIO's Principle Deputy Assistant Secretary
(DAS), and five Deputy Assistant Secretaries. The five Deputy Assistant
Secretaries are new senior leadership positions within the Office of
Information and Technology created to assist the CIO in overseeing
functions such as cyber security, IT portfolio management, systems
development, and IT operations.

^6Gartner Consulting, OneVA IT Organizational Alignment Assessment Project
"As-Is" Baseline (McLean, Virginia; Feb. 18, 2005).

Figure 1: Office of Information and Technology Organizational Chart

The department has also identified the offices that will report to the
Deputy Assistant Secretaries. For example, the Asset Management Office
will report to the Deputy Assistant Secretary for Information Technology
Resource Management and is charged with providing staff with the software
and hardware needed to do their jobs in the most cost-effective manner.

In addition, the Secretary approved an IT governance plan in April 2007
that is intended to enable the Office of Information and Technology to
centralize its decision making. The plan describes the relationship
between IT governance and departmental governance and the approach the
department intends to take to enhance governance. Figure 2 shows a
timeline of the realignment effort.

Figure 2: Timeline of Key Events for VA IT Realignment

  IT Management Processes

As the foundation for its realignment, VA plans to implement improved
management processes in five key areas: enterprise management, business
management, business application management, infrastructure, and service
support. These processes^7 were recommended by the department's
realignment contractor and were based on industry best practices.^8
According to the contractor, they are a key component of the realignment
effort as the Office of Information and Technology moves to a
process-based organization. By implementing these improved processes, VA
expects to correct deficiencies it has encountered as a result of its
decentralized management approach. Proper implementation should result in
institutionalizing best management practices that will be sustained
regardless of future leadership changes at the department. According to
the contractor, with a system of defined processes, the Office of
Information and Technology could quickly and accurately change the way IT
supports the department. The contractor also noted that failure to include
such processes in the realignment would introduce the risk that any
progress in completing the realignment would be the result of trial and
error.

^7For example, some of the processes are risk management, IT architecture
management, workforce management, and change management.

^8Specifically, these processes are derived from the IT Governance
Institute's Control Objectives for Information and related Technology
(CobiT(R)) and Information Technology Infrastructure Library (ITIL) as
configured by the Process Reference Model for IT (PRM-IT) from a VA
contractor.

Successful Organization Transformations Are Based on Critical Success Factors

We have reported in the past^9 on key factors that are needed in order to
successfully transform an organization to be more results oriented,
customer focused, and collaborative in nature. We reported that conducting
large-scale change management initiatives are not simple endeavors and
require the concentrated efforts of both leadership and employees to
realize intended synergies and to accomplish new organizational goals. We
also noted that there are a number of key practices that can serve as the
basis for federal agencies to transform their cultures in response to
governance challenges, such as those that an organization like VA might
face when transforming to a centralized IT management structure.

Among the significant factors we identified as critical for ensuring the
success of VA's move to centralized management are

           o ensuring commitment from top leadership,
           o establishing a governance structure to manage resources,
           o linking the IT strategic plan to the organization strategic
           plan,
           o using workforce strategic management to identify proper roles
           for all employees,
           o communicating change to all stakeholders, and
           o dedicating an implementation team to manage change.

^9GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers
and Organizational Transformations, [39]GAO-03-669  (Washington, D.C.:
July 2, 2003); and Highlights of a GAO Forum: Mergers and Transformation:
Lessons Learned for a Department of Homeland Security and Other Federal
Agencies, [40]GAO-03-293SP  (Washington, D.C.: Nov. 14, 2002).

           VA Realignment Plans Include Critical Success Factors
			  
           VA's plans for realigning the management of its IT program include
           elements of several of the six factors that we identified as
           critical to the department's implementation of a centralized
           management structure (see table 1). Additional departmental
           actions could increase assurance that the realignment will be
           completed successfully. Without further action to fully address
           the factors we have identified, the risk to successfully
           centralizing the IT operations increases and the long-term
           benefits of the realignment may not be realized.

           Table 1: Summary of VA's Actions Addressing Critical Success
           Factors

           Source: GAO.
			  
			  Top Leadership Has Committed to the Realignment

           It is important that an organization's top leadership supports and
           sustains major change initiatives through to completion. We have
           testified that top leadership involvement for making management
           improvements is critical to overcoming an organization's natural
           resistance to change, marshaling the resources needed to improve
           management, and building and maintaining organizationwide
           commitment to new ways of doing business.^10 In addition, in
           reporting on the results of a forum to identify useful practices
           and lessons learned from major private- and public-sector
           organizational transformations, we noted that a key factor for
           successful organizational transformation was ensuring that top
           leadership drives the effort.

           The department has addressed this critical success factor through
           multiple actions. For example, in February 2007, the Secretary
           approved a new organization structure for centralized IT
           management. This structure was recommended by the realignment
           contractor following its review of the department's strategic
           business objectives, existing organization structure, and business
           processes and will serve as the framework for organizing the IT
           workforce under the centralized model. The structure assigns roles
           and responsibilities for IT management that VA expects will
           provide the Office of Information and Technology leadership the
           organizational stature and credibility to deal effectively with
           the administrations on IT matters.

           Another example of the Secretary's commitment to the realignment
           came through approval of the transfer of IT personnel to the
           Office of Information and Technology. Previously these personnel
           had been assigned to the administrations (e.g., VHA and VBA) and
           staff offices. The movement of these personnel should enable the
           CIO to improve control over IT development and operations in the
           department.
			  
			  Governance Structure to Manage Resources Not Yet Complete

           A governance structure should ensure suitable stakeholder
           participation in the change initiative and reflect clearly defined
           stakeholder roles, responsibilities, and decision-making
           authority. When an organization is considering a major change
           initiative, it must ensure there is an established governance
           structure in place that provides for the effective use and
           oversight of resources during and after the change. According to
           VA's independent verification and validation contractor, two
           critical aspects of governance are (1) the inclusion of relevant
           stakeholders in the development of any new processes resulting
           from the initiative and (2) holding these parties accountable for
           execution of their responsibilities throughout the entire life
           cycle of the initiative. We have reported that organizations need
           to establish a governance structure that represents the entire
           stakeholder community and reflects clearly defined roles,
           responsibilities, and decision-making authority among the
           different levels of leadership.^11
			  
^10 [41]GAO-05-1017T .

           VA has partially addressed this critical success factor. In
           particular, while the governance plan for centralized management
           has been approved by the Secretary, the department has not yet
           established boards necessary to provide governance over the
           centralized structure and processes that are being developed. One
           of these boards--the Business Needs and Investment Board--is to
           provide investment control for the department's IT projects.
           According to VA officials, this board had not been established
           because some of the positions on the board had not yet been filled
           by permanent staff.

           In addition, the documentation that the department provided to us
           lacks detailed descriptions of how the new organization would
           support a completed, centralized IT governance process. Until the
           department establishes the elements needed to provide governance
           over its new IT structure and processes, the department cannot
           provide assurance that implementation of centralized management
           will be successful.
			  
			  IT Strategic Plan Is to Be Updated to Reflect New Organization

           Our November 2002 report noted that organizations attempting a
           transformation needed to establish a coherent mission with
           integrated strategic goals and align the transformed organization
           to support those goals.^12 For example, if an organization's
           strategic goal is top-quality medical care, IT strategic goals and
           the related transformation should be aligned to support that goal.

           An IT strategic plan should define, in cooperation with the
           relevant stakeholders, how IT will contribute to the enterprise's
           strategic objectives and related costs and risks. Industry
           documentation further notes that planning helps ensure that
           leadership understands the link between an organization's
           direction and how IT is aligned to meet the organization's goals.
           According to this documentation, an organization and its
           strategies should be integrated, clearly linking enterprise goals
           and IT goals, and recognize opportunities as well as current
           limitations. Further, integration of enterprise and goals should
           be broadly communicated throughout the organization to ensure that
           all users and stakeholders have a clear sense of what the
           organization is attempting to accomplish.
			  
^11GAO, Health Information Technology: HHS Is Taking Steps to Develop a
National Strategy, [42]GAO-05-628  (Washington, D.C.: May 27, 2005).

^12 [43]GAO-03-293SP .

           However, VA has not addressed this critical success factor because
           it has not yet updated an IT strategic plan to reflect the goals
           of the new centralized structure. According to department
           officials, a draft version of an updated IT strategic plan is
           expected to be completed by June 30, 2007. Additionally, this plan
           is expected to support the department's strategic plan, which
           includes the goals of each of the department's administrations.
           Until the IT strategic plan is updated, the department will have
           neither a clear link between the department's strategic plan and
           the IT strategic plan nor assurance that the realignment will meet
           the goals in these plans.
			  
           IT Workforce Aligned under CIO, but Staff Roles Have Yet to Be
			  Defined

           Workforce strategic management is necessary to ensure that an
           organization has the personnel resources capable of developing and
           delivering the services required of the organization. We have
           previously reported that success in major change initiatives is
           more likely when the best individuals are selected for each
           position based on their competencies rather than on where they
           work.^13 That is, the new organization needs to avoid a situation
           where key personnel are selected on the basis of an understanding
           that each of the originating components gets its "turn" in the
           selection process. Such an approach not only undermines the
           quality of the selections but also raises questions about top
           leadership's ability and commitment to creating a new, integrated
           organization.

           We have also reported that it is important to establish an
           organizationwide knowledge and skills inventory to exchange
           knowledge among transforming organizations. Valuable information
           resides in the organizational components of transformations, and
           when these components are combined, these intellectual assets are
           extremely powerful and beneficial to employees and stakeholders.
           Knowledge and skills inventories not only capture the intellectual
           assets of the new organization but also signal to employees that
           their particular expertise is valued by the organization.^14 In
           addition, industry documentation notes that workforce strategic
           management should be supported by well-defined personnel
           competencies, staffing of appropriate roles, training, and related
           factors necessary for high performance.
			  
^13 [44]GAO-03-293SP .

^14 [45]GAO-03-669 .			  

           The department has taken steps to partially address this critical
           success factor. As stated previously, the department has aligned
           almost all of its IT workforce under the CIO, having transferred
           approximately 6,000 personnel from the administrations to the
           CIO's office. In addition, the department has identified the
           responsibilities for workforce strategic management within its new
           organizational structure--the Assistant Secretary for Information
           Technology has responsibility for workforce planning; the Deputy
           Assistant Secretary for Information Technology Resource Management
           has responsibility for ensuring the alignment of IT workforce
           skills with IT goals and objectives; and the Human Resources and
           Training Management Office has responsibility for developing and
           executing the human capital plan that supports the IT strategy.

           Nonetheless, key tasks remain to be completed in order for this
           critical factor to be fully addressed. For example, department
           officials indicate that VA is currently assessing the roles and
           responsibilities of the approximately 6,000 staff that have been
           permanently assigned to the Office of Information and Technology,
           but the department has not yet established a knowledge and skills
           inventory to determine what skills are available in order to
           decide the proper roles for all employees within the new
           organization. Also, the department has not yet developed policies
           and procedures to centrally manage the IT personnel, assessed
           personnel requirements, defined training requirements, or created
           career and training paths and requirements for the personnel.
           Until the department completes these important tasks, the success
           of the realignment is at risk because IT personnel may be situated
           in inappropriate positions within the department or they may lack
           adequate training to fulfill their job requirements.
			  
			  Certain Actions Have Been Taken to Address Communication

           Any major change initiative should be supported by an effective
           communication strategy that shares expectations, reports on
           progress, and articulates the mission, service objectives, and
           policies and procedures. Our 2002 report on transformations noted
           that such communication should reach out to employees, customers,
           and stakeholders, engaging them in a two-way exchange.^15
           Furthermore, communication should provide for feedback about
           progress and concerns from stakeholders that will result in
           meaningful improvement in the transformation.
			  
			  ^15 [46]GAO-03-293SP .

           The department has partially addressed this critical factor for
           successful implementation of its new structure. In particular, VA
           has taken actions to improve communication for the realignment by
           addressing staff concerns. During our site visits to two VA
           medical centers, communication of realignment goals and activities
           had been a concern for IT staff. The staff at these locations
           reported they had difficulty communicating directly with VA
           headquarters staff responsible for the realignment to obtain
           responses to issues. In addition, the department's realignment
           contractor reported in its survey of 167 VA facilities that 47
           percent of VA facility staff wanted to see more information about
           the realignment and 23 percent of VA facility CIOs reported little
           opportunity for feedback from the VA field sites.

           In response to these concerns, the department distributed policy
           memoranda on changes resulting from the realignment and requested
           employee input on the realignment through a forum on the VA Web
           site. In addition, the department held conferences for Office of
           Information and Technology management and staff (which included
           sessions with the VA CIO) to communicate the goals and activities
           of the realignment. Nonetheless, further action could help ensure
           sustained communication throughout the realignment effort.
           Specifically, while the department has identified the Business
           Relationship Management Office as the single point of contact
           between the Office of Information and Technology and the
           administrations, it has not yet staffed this office. According to
           the department, it has concentrated its efforts to date on
           transferring staff to the CIO's office and on creating a new
           organizational structure. However, the performance of the Business
           Relationship Management Office in communicating the needs of the
           administrations to the Office of Information and Technology will
           be critical to the success of the realignment. Until this office
           is fully staffed, VA increases the risk that communication across
           the department will be inadequate, jeopardizing user and
           stakeholder support for the initiative.
			  
			  VA Has Not Dedicated an Implementation Team to Manage the Realignment

           We reported in 2003 that a dedicated implementation team that is
           responsible for the day-to-day management of a major change
           initiative is critical to ensure that the project receives the
           focused, full-time attention needed to be sustained and
           successful.^16 Specifically, the implementation team is important
           to ensuring that various change initiatives are implemented in a
           coherent and integrated way. The team must have the necessary
           authority and resources to set priorities, make timely decisions,
           and move quickly to implement the transformation. In addition, the
           implementation team can assist in tracking implementation goals
           for a change initiative and identifying performance shortfalls or
           schedule slippages. It is important for the team to use
           performance metrics to provide a succinct and concrete statement
           of expected performance versus actual performance. Because of its
           close involvement with the change initiative, the implementation
           team can also suggest corrections to remedy any problems.
			  
^16 [47]GAO-03-669 .			  

           The department has not addressed this critical success factor
           because it has not dedicated an implementation team to manage the
           realignment effort and track its progress. At the conclusion of
           our review, staff from the IT realignment office, which was
           responsible for overseeing the realignment, had been reassigned to
           other areas of responsibility within the department's new
           structure. In addition, the Director of the Realignment Office
           told us that multiple offices will assume responsibility for
           managing the realignment through July 2008. For example, the
           Office of Quality and Performance Management will oversee process
           implementation across the Office of Information and Technology,
           and the Office of Oversight and Compliance Management will assess
           whether the department is complying with the new processes.
           However, there is no one entity currently responsible for managing
           the realignment.

           In addition, according to the Director of the Realignment Office,
           the department has developed performance metrics to measure
           progress on the implementation of the new management processes.
           However, metrics have not yet been developed to assess progress in
           implementing key milestones of the realignment. He noted that the
           department planned to develop performance metrics for tracking the
           progress of the realignment and that these metrics would be
           finalized by mid-June 2007.

           Also, the department expects to implement the new IT management
           processes incrementally by July 2008, but it has missed key
           implementation dates for these processes. Implementation of the
           first 9 of 36 processes was to begin in March 2007; however, as of
           early May 2007, the department had only begun pilot testing two of
           the new processes.^17 With the dissolution of the IT Realignment
           Office in June, and the absence of any one entity currently
           dedicated for managing the realignment, it is less likely that VA
           will be able to ensure that the realignment is managed effectively
           throughout its implementation.
			  
^17The two processes are (1) risk management and (2) solution test and
acceptance.

           Centralized Control of IT Budget Has Not Yet Been Clearly Established

           Within VA's new centralized management structure, the CIO is
           expected to be responsible for ensuring that there are fiscal
           controls over the department's IT appropriation and for overseeing
           capital planning and execution. These responsibilities are
           consistent with the Clinger-Cohen Act of 1996,^18 which requires
           federal agencies to develop processes for the selection, control,
           and evaluation of major systems initiatives. According to the
           department, it plans to establish the CIO's control over the IT
           budget by (1) designating organizations with specific roles and
           responsibilities for controlling the budget to report directly to
           the CIO, (2) implementing an IT governance structure that assigns
           budget oversight responsibilities to specific governance boards,
           and (3) developing and implementing IT portfolio management and
           financial management processes in the new organization. While
           these measures show the potential for establishing the CIO's
           control of the budget, the department has not yet fully
           implemented them; thus, their effectiveness in ensuring
           accountability for the budget has not yet been established.
			  
			    Deputy Assistant Secretaries to Control Aspects of IT Budget
				 
           As one measure to establish CIO control within the new
           organization, two deputy assistant secretaries under the CIO are
           expected to have responsibility for managing and controlling
           different aspects of the IT budget. Specifically, the Deputy
           Assistant Secretary for IT Enterprise Strategy, Policy, and
           Programs is to have responsibility for the creation,
           implementation, and control of an integrated IT portfolio, and for
           the design, development, and implementation of a portfolio
           management process. In addition, the Deputy Assistant Secretary
           for Information Technology Resource Management is to have
           responsibility for managing budget execution and compliance,
           including tracking actual expenditures against the budget.

           However, as of May 2007, the deputy assistant secretary positions
           had been filled with acting officials,^19 and department officials
           could not provide a date for when permanent appointees would be
           named to these positions. In addition, while these offices had
           been identified in the new organization structure, VA had not
           determined when personnel would be staffed to the offices and
           would assume their budget oversight responsibilities. Until these
           positions are filled with permanent appointees, the department
           cannot ensure their effectiveness in managing and controlling the
           IT budget.

^1840 U.S.C. SS 11311-11313.

^19Currently, the titles for these positions are deputy CIO for IT
Resource Management and deputy CIO for IT Enterprise Strategy, Policy,
Plans, and Programs, pending congressional approval of the Senior
Executive Service deputy assistant secretary positions.

             IT Governance Plan Identifies Boards to Assist in Management of 
				 T Budget

           As a second measure, the IT governance plan, which was approved by
           the Secretary in April 2007, describes VA's approach to enhancing
           governance, including management of the IT budget. The plan states
           that the decision to undertake IT investments requires adherence
           to the governance process to assure that investments align with
           the department's strategic plan. In addition, it states that
           investment governance decisions should address how the department
           will program and budget resources against the IT business plan,
           meet customer demands, and allocate funding according to the needs
           and requirements of the administrations and staff offices.
           According to the plan, two governance boards are to have
           responsibility for overseeing the development and approval of the
           budget and monitoring budget execution:

           o The Business Needs and Investment Board is to provide
           departmentwide investment control for the IT programs. Its
           responsibilities are to include reviewing investments, formulating
           and approving budgets, determining the source and amount of
           funding for IT projects, and monitoring budget execution. This
           board is to be chaired by the Principle Deputy Assistant Secretary
           of the Office of Information and Technology, and its membership is
           to include senior representatives of the administrations and staff
           offices, resource management offices, and selected IT service
           managers.
           o The IT Leadership Board is to develop and approve the
           departmentwide IT budget based on information submitted to it by
           the Business Needs and Investment Board. This board is to be
           chaired by the CIO, and membership is to include key executive
           leaders in the Office of Information and Technology,
           administrations, and staff offices. In addition to these two
           governance boards, the Strategic Management Council is to be
           responsible for making decisions on the overall level of IT
           spending and priorities for the department and for approving
           budgets. The Strategic Management Council was in place prior to
           the realignment effort and the governance plan noted that it would
           be included as part of the governance structure. It is chaired by
           the Deputy Secretary, and its membership includes senior
           department leadership. As an example of the planned interaction
           between the boards, the Business Needs and Investment Board is to
           ensure that the administrations and staff offices' requirements
           have been identified, documented, justified, scoped, planned, and
           prioritized and that funds have been allocated. This information
           is to be forwarded with all other prioritized requirements to the
           IT Leadership Board for review and endorsement and then sent on to
           the Strategic Management Council for departmentwide approval.

           As of early May 2007, however, VA officials stated that neither
           the Business Needs and Investment Board nor the IT Leadership
           Board had been established. VA officials also could not provide a
           date for when they would be set up. Until the governance boards
           are in place with the Strategic Management Council, the department
           will lack a complete governance model for the new organization.
			  
			    Two New Management Processes Are to Address IT Budget

           As a third measure to establish the CIO's control over the IT
           budget, VA plans to implement processes that specifically address
           portfolio management and financial management. As noted earlier in
           this report, it is crucial for the CIO to ensure that
           well-established and integrated processes are in place for
           leading, managing, and controlling VA's IT resources. These two
           processes represent how the CIO organization intends to carry out
           its responsibilities for the development and control of the
           budget. Specifically, the IT portfolio management process is to
           address how the CIO will manage the department's investment
           portfolio to achieve strategic objectives and allocate funding.
           The process is to include steps VA will take to identify, select,
           initiate, manage, and control its projects. According to the
           realignment assistance contractor, implementation of this process
           should help VA make better investment decisions and gain better
           control over its projects.

           The financial management process, according to its charter, will
           address how the CIO organization plans to manage IT investment
           programs,^20 address costs and benefits of investments, and
           provide a formal budgeting process for managing the IT portfolio
           against the budget. According to the realignment assistance
           contractor, implementation of this process should provide the CIO
           with accurate cost information to support IT investment decisions
           and justify expenditures, and enable this official to ensure that
           the Office of Information and Technology operates in a
           cost-effective manner by providing a sound basis for cost-benefit
           analyses.
			  
^20According to the process charter, these programs encompass cost,
benefits, prioritization within budget, a formal budgeting process and
management against the budget.

           While the department had identified individuals who would be
           responsible for implementing these two processes, an official in
           the realignment office told us that the schedule for implementing
           the processes had not been established. The official stated that
           VA nonetheless expected to complete implementation of all
           management processes and meet the July 2008 target date for full
           implementation of the realignment. However, the absence of a
           schedule to implement these two processes increases the risk that
           they will not be implemented in a timely manner, thus reducing
           their effectiveness in contributing to improved IT budget
           accountability and oversight.
			  
           Conclusions

           The department has taken various actions that address several of
           the factors we identified as critical to its realignment,
           including establishing a new organizational structure, approving
           its governance plan, and transferring IT staff to the CIO's
           authority. While these are positive steps, the department has much
           work to complete in order to ensure the success of its efforts.
           For example, the department has not yet developed detailed IT
           governance process descriptions to address the management of IT
           resources, established a knowledge and skills inventory to
           determine the proper roles for employees transferred to the new
           organization, or identified the personnel requirements, career
           paths, and training requirements for these employees. Further, the
           department has not fully staffed offices necessary for supporting
           the new structure, identified an implementation team that will be
           responsible for managing the change to the new management
           structure, or developed performance metrics to assess progress in
           implementing key milestones of the realignment. The department's
           continued focus on ensuring that these important actions are taken
           is essential to successfully achieving and realizing the benefits
           of the realignment.

           While department officials and realignment documents identified
           three measures of the realignment that are to provide the CIO with
           control over the IT budget, VA has yet to identify how and when
           this control will be achieved. Specifically, the department has
           not yet staffed with permanent appointees the two deputy assistant
           secretary positions that will have responsibility for IT budget
           management and control, established the two governance boards that
           are to have IT budget oversight responsibility, or developed a
           schedule for implementation of the IT portfolio management and
           financial management processes. Without showing how and when such
           controls will be in place, it remains unclear if VA's actions will
           result in optimizing its IT investment management process to
           provide the CIO with full control over the budget.
			  
			  Recommendations for Executive Action

           To ensure that VA's IT realignment is successfully accomplished,
           we recommend that the Secretary of Veterans Affairs direct the
           Chief Information Officer to take the following six actions:

           o Develop detailed IT governance process descriptions that address
           how the department will manage IT resources within the centralized
           organization.

           o Establish a knowledge and skills inventory to determine what
           skills are available in order to decide the proper roles for all
           employees transferred to the new organization.

           o Assess personnel requirements under the centralized management
           model, including career paths and appropriate training
           requirements.

           o Fully staff all offices necessary for supporting the new
           organizational structure.

           o Dedicate an implementation team responsible for change
           management processes throughout the transformation to a
           centralized IT structure.

           o Expedite the development of performance metrics to track the
           progress of the realignment.

           In addition, to ensure that centralized control of the IT budget
           is established, we recommend that the Secretary of Veterans
           Affairs direct the Chief Information Officer to take the following
           three actions:

           o Establish milestones to permanently staff the deputy assistant
           secretary position for IT Enterprise Strategy, Policy, and
           Programs and the deputy assistant secretary position for IT
           Resource Management.

           o Commit to a date for establishing the Business Needs and
           Investment Board and the IT Leadership Board.

           o Establish a schedule for the implementation of the IT portfolio
           management and financial management processes.
			  
			  Agency Comments and Our Evaluation

           In providing written comments on a draft of this report, the
           Deputy Secretary of Veterans Affairs agreed with our findings and
           generally concurred with our recommendations. (The department's
           comments are reproduced in app. II.) The comments described
           actions planned that respond to our recommendations: for example,
           developing and implementing an IT career management program that
           includes a knowledge and skills inventory for Office of
           Information and Technology employees, and fully implementing the
           IT governance plan by October 2007. In addition, the comments
           provided further information on the department's actions taken
           since receiving our draft report, such as the establishment of the
           Business Needs and Investment Board that is a key component of the
           IT governance process; establishment of offices responsible for
           ensuring compliance with IT policies, directives and core IT
           processes; and filling a senior executive position in the Office
           of Information and Technology. If the actions that the department
           has planned to undertake are properly implemented, they should
           help ensure that the IT realignment is successfully accomplished.

           Although the department concurred with all our recommendations, it
           provided an alternative approach to dedicating an implementation
           team responsible for change management processes throughout the
           transformation to a centralized IT structure. Its written comments
           indicated that change management would be the responsibility of
           two organizations in the new structure. However, in our view,
           having a dedicated implementation team, responsible for day-to-day
           management of major change initiatives, is crucial to VA's ability
           to ensure that the IT realignment is fully and successfully
           implemented in a coherent, integrated, and coordinated manner. The
           approach articulated in the department's comments does not make
           clear how progress will be monitored, schedule slippages or
           shortfalls identified, and solutions to problems developed and
           implemented. Without having a dedicated implementation team, as we
           recommend, the department may increase the risk to the success of
           the realignment.

           We are sending copies of this report to the Chairman and Ranking
           Member of the Committee on Veterans' Affairs, House of
           Representatives. We are also sending copies to the Secretary of
           Veterans Affairs and appropriate congressional committees. We will
           also make copies available to others on request. In addition, the
           report is available at no charge on GAO's Web site at
           http://www.gao.gov.

           If you and your staff have any questions about this report, please
           contact me at (202) 512-6304 or [email protected]. Contact points
           for our Offices of Congressional Relations and Public Affairs may
           be found on the last page of this report. Major contributors to
           this report are listed in appendix III.

           Valerie C. Melvin
			  Director, Human Capital and Management
           Information Systems Issues

			  Appendix I: Scope and Methodology

           To determine whether the Department of Veterans Affairs (VA)
           realignment plan includes critical factors for successful
           implementation of a centralized management approach, we obtained
           and analyzed realignment documents from VA, its realignment
           contractor, and the independent verification and validation (IV&V)
           contractor. These documents included the realignment contract
           request for quotes and memorandums signed by the Secretary and
           Deputy Secretary relating to approval of the permanent assignment
           of operations and maintenance and development staff to the Office
           of Information and Technology. The documents also included the
           establishment of the VA single information technology (IT)
           leadership authority. We also obtained and analyzed the
           realignment contractor's performance work statement, which
           detailed the work the contractor was to perform. In addition, we
           reviewed other contractor deliverables, such as process charters
           for the new IT management processes, the "to be" organization
           structure transition plan, and the transition management plan. VA
           also provided IV&V contractor documents that assessed each of the
           realignment contract deliverables. We reviewed these documents to
           identify problems and concerns raised by the IV&V contractor.

           To identify factors critical to the success of the centralization
           effort, we reviewed GAO products relevant to organizational
           transformation. We also reviewed industry best practices
           documentation, such as the IT Governance Institute's Control
           Objectives for Information and related Technology 4.0, to identify
           industry standard success factors for IT organizations. To
           validate the success factors, we met with IV&V contractor
           officials to elicit their input on the relevance and soundness of
           factors we identified for consideration in our assessment of the
           realignment effort. IV&V contractor officials concurred that the
           factors we developed are critical to VA's successful IT
           realignment. In addition, we compared documents obtained from VA
           and realignment contractor officials against these factors to
           determine the level to which the critical success factors were
           included. We also conducted monthly meetings with the VA
           realignment team and the realignment contractor to determine
           whether these critical success factors were being considered in
           the implementation of the realignment.

           We visited the VA medical center and a benefits administration
           office in Baltimore and a VA medical center in Philadelphia to
           become familiar with the methodology that the realignment
           contractor was using to assess VA's readiness for the realignment.
           We observed teams from the realignment contractor as they gathered
           information that would be used to create a baseline of IT
           activities and a transition plan for the department. We selected
           these locations due to the schedule availability of the department
           and the contractor and because they are representative of VA
           facilities.

           To determine how the centralized management approach will ensure
           that the CIO is accountable for VA's entire IT budget, including
           those funds that previously had been administered by its
           administrations, we reviewed VA and realignment contractor
           documentation and plans that specifically address IT budget
           oversight and execution under the realignment. These documents
           included roles and responsibilities for those VA organizations
           listed in the single IT leadership organization structure that are
           to have responsibility for IT portfolio and financial management,
           the IT Governance Plan, and the IT Portfolio Management and
           Financial Management Process Design and Implementation Plans. To
           supplement our analysis, we met with officials in VA's Office of
           Information and Technology who are responsible for managing and
           executing the IT budget. We conducted our work in VA offices in
           Washington, D.C., and at VA facilities in Baltimore and
           Philadelphia from June 2006 through May 2007 in accordance with
           generally accepted government auditing standards.
			  
			  Appendix II: Comments from the Department of Veterans Affairs

           Appendix III: GAO Contact and Staff Acknowledgments

           GAO Contact

           Valerie C. Melvin, (202) 512-6304 or [32][email protected]
			  
			  Staff Acknowledgments

           In addition to the contact named above, major contributors to this
           report were Barbara Oliver, Assistant Director; Nabajyoti
           Barkakati; Jacki Bauer; Neil Doherty; Nancy Glover; B. Scott
           Pettis; J. Michael Resser; and Eric Trout.
			  
			  GAO's Mission

           The Government Accountability Office, the audit, evaluation and
           investigative arm of Congress, exists to support Congress in
           meeting its constitutional responsibilities and to help improve
           the performance and accountability of the federal government for
           the American people. GAO examines the use of public funds;
           evaluates federal programs and policies; and provides analyses,
           recommendations, and other assistance to help Congress make
           informed oversight, policy, and funding decisions. GAO's
           commitment to good government is reflected in its core values of
           accountability, integrity, and reliability.
			  
			  Obtaining Copies of GAO Reports and Testimony

           The fastest and easiest way to obtain copies of GAO documents at
           no cost is through GAO's Web site ( [33]www.gao.gov ). Each
           weekday, GAO posts newly released reports, testimony, and
           correspondence on its Web site. To have GAO e-mail you a list of
           newly posted products every afternoon, go to [34]www.gao.gov and
           select "Subscribe to Updates."

           The first copy of each printed report is free. Additional copies
           are $2 each. A check or money order should be made out to the
           Superintendent of Documents. GAO also accepts VISA and Mastercard.
           Orders for 100 or more copies mailed to a single address are
           discounted 25 percent. Orders should be sent to:

           U.S. Government Accountability Office 441 G Street NW, Room LM
           Washington, D.C. 20548
			  
			  Order by Mail or Phone

           To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax:
           (202) 512-6061
			  
			  To Report Fraud, Waste, and Abuse in Federal Programs

           Contact:

           Web site: [35]www.gao.gov/fraudnet/fraudnet.htm  E-mail:
           [36][email protected] Automated answering system: (800) 424-5454 or
           (202) 512-7470
			  
			  Congressional Relations

           Gloria Jarmon, Managing Director, [37][email protected] (202)
           512-4400 U.S. Government Accountability Office, 441 G Street NW,
           Room 7125 Washington, D.C. 20548
			  
			  Public Affairs

           Paul Anderson, Managing Director, [38][email protected] (202)
           512-4800 U.S. Government Accountability Office, 441 G Street NW,
           Room 7149 Washington, D.C. 20548

(310760)

www.gao.gov/cgi-bin/getrpt? [48]GAO-07-844 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Valerie C. Melvin at (202) 512-6304 or
[email protected].

Highlights of [49]GAO-07-844 , a report to congressional requesters.

June 2007

VETERANS AFFAIRS

Continued Focus on Critical Success Factors Is Essential to Achieving
Information Technology Realignment

The Department of Veterans Affairs (VA) spends nearly $1 billion yearly to
support its information technology (IT) needs; yet it has encountered
persistent challenges in managing IT projects. In October 2005, VA
initiated a realignment to centralize its IT management program that it
plans to complete by July 2008. GAO was requested to determine (1) whether
the department's realignment plan includes critical factors for successful
implementation and (2) how the centralized management approach is to
ensure that the chief information officer (CIO) is accountable for the
department's entire IT budget. To do so, GAO identified critical success
factors, analyzed realignment and budget documents, and held discussions
with VA officials.

[50]What GAO Recommends

GAO is making several recommendations to VA, including that it dedicate an
implementation team to manage change, expedite development of performance
metrics, and establish a schedule for implementing management processes.
Commenting on a draft of this report, VA generally concurred with GAO's
recommendations and described actions to address them.

VA's plans for realigning the management of its IT program include
elements of several factors that GAO identified as critical to the
department's implementation of a centralized structure; additional
departmental actions could increase assurance that the realignment will be
completed successfully (see table). Since undertaking the realignment, VA
has concentrated its efforts on transferring approximately 6,000 staff to
the CIO's authority and on creating a new organizational structure. It has
also taken certain actions to establish an IT governance plan, identify
workforce management responsibilities, and increase communication about
the realignment with staff. However, it has not yet created a knowledge
and skills inventory to help determine proper roles for all employees in
the new organization, established governance boards to manage resources,
or dedicated an implementation team to manage change and track the
progress of the realignment with performance metrics. As a result, the
department risks jeopardizing the success of its efforts and may not
realize the long-term benefits of the realignment.

Summary of VA's Actions Addressing Critical Success Factors

Source: GAO.

Within the new structure, the CIO is to have responsibility for ensuring
that there are fiscal controls over the IT appropriation and for
overseeing capital planning processes, budget execution, and financial
management programs. According to the department, it plans to establish
the CIO's control by (1) designating organizations with specific roles and
responsibilities for controlling the budget to report directly to the CIO;
(2) implementing a governance structure that assigns budget oversight
responsibilities to specific governance boards; and (3) developing and
implementing IT portfolio management and financial management processes.
While these measures show the potential for establishing control of the
budget, VA has not yet fully implemented them or committed to a time frame
for doing so. Thus, their effectiveness in ensuring the CIO's
accountability for the budget has not yet been established.

References

Visible links
  28. http://www.gao.gov/cgi-bin/getrpt?GAO-06-201T
  29. http://www.gao.gov/cgi-bin/getrpt?GAO-05-1017T
  30. http://www.gao.gov/cgi-bin/getrpt?GAO-06-201T
  31. http://www.gao.gov/cgi-bin/getrpt?GAO-05-1017T
  32. mailto:[email protected]
  33. http://www.gao.gov/
  34. http://www.gao.gov/
  35. http://www.gao.gov/fraudnet/fraudnet.htm
  36. mailto:[email protected]
  37. mailto:[email protected]
  38. mailto:[email protected]
  39. http://www.gao.gov/cgi-bin/getrpt?GAO-03-669
  40. http://www.gao.gov/cgi-bin/getrpt?GAO-03-293SP
  41. http://www.gao.gov/cgi-bin/getrpt?GAO-05-1017T
  42. http://www.gao.gov/cgi-bin/getrpt?GAO-05-628
  43. http://www.gao.gov/cgi-bin/getrpt?GAO-03-293SP
  44. http://www.gao.gov/cgi-bin/getrpt?GAO-03-293SP
  45. http://www.gao.gov/cgi-bin/getrpt?GAO-03-669
  46. http://www.gao.gov/cgi-bin/getrpt?GAO-03-293SP
  47. http://www.gao.gov/cgi-bin/getrpt?GAO-03-669
  48. http://www.gao.gov/cgi-bin/getrpt?GAO-07-844
  49. http://www.gao.gov/cgi-bin/getrpt?GAO-07-844
*** End of document. ***