Building a Better Financial Management System
Most agencies have failed at building financial management systems, but HHS may have found a better way.
Financial management system. The words are enough to strike fear into the hearts of even the most experienced federal manager.
Comment on this article in The Forum.And for good reason. Agencies have had a spotty record of tracking their spending and keeping public accounts clean. The Bureau of Indian Affairs, for example, has been unable to keep tabs on the revenue owed Native Americans from leases for farming, mining, and oil and gas drilling on their land. Patients and veterans report billing errors when dealing with Medicare and the Veterans Health Administration.
Many agencies' attempts to build computer systems to track spending accurately and to manage financial records have been disastrous. NASA wasted more than $180 million on two failed attempts to modernize its financial management systems, according to a March 2006 Government Accountability Office report. The agency hopes the third time will be the charm, with NASA spending almost $1 billion to modernize its financial systems. The GAO report also points to the Navy, which invested about $1 billion "on four pilot enterprise resource planning program efforts, without marked improvement in its day-to-day operations." The Navy now is working on a new project to consolidate all four systems at an additional cost of $800 million.
It's no wonder then that the term government financial management system is associated with waste, delay and disaster.
That's unfortunate. Few things are more fundamental to the efficient operation of government than financial management. Whether collecting money owed, paying contractors, tracking accounts or managing payroll, agencies rely on financial management systems to run their business.
"A modernized financial management system can help an agency provide reliable, useful and timely information for day-to-day government management," says Kay Daly, acting director of financial management at GAO. "One of the key areas is helping identify what the programs really cost. Because the government does so many things, each [system] is unique and set up to accommodate the unique needs of the program manager."
What makes implementing financial management systems so difficult? Daly says failures often are caused by three factors: problems with software engineering, poor investment management and insufficient employee training.
The common misunderstanding is that failures in developing financial management systems are caused by software problems, Daly says, "but actually it's the people who run the system, the people who use the system and the process of entering data into the system. So it's a combination of people, process and technology."
The Health and Human Services Department understood that when it began a massive effort in 2001 to develop and install a departmentwide financial management system.
Earlier this year, it turned the switch on its new $219 million unified financial management system, and from most accounts the department seems to have succeeded where others have failed. Using a disciplined approach, HHS hit its mark, finishing the project on time and just $8 million over its original budget estimate.
The unified financial management system, built by prime contractor BearingPoint Inc., sounds exactly like what it aims to do: provide a standard computer network for all HHS agencies to use, from the National Institutes of Health to the Centers for Medicare and Medicaid Services to the Centers for Disease Control and Prevention. With the system, department officials expected to better track spending and manage accounts.
One of the keys to keeping the project within budget and schedule parameters was an obsessive focus on adhering to requirements and allowing few new ones to be added later in the development cycle, says Terry Hurst, HHS program manager for the project for the past three years. The IT shop delivered 100 percent of the original requirements, "plus a fairly significant number of defined requirements that came up as we got to know the software," he says.
HHS kept new requirements to a minimum by requiring its agencies to pay for any additional features they wanted to include. That suppressed adding on new features after the system was under development, a common practice that doomed other financial management systems. The project was "schedule driven, not requirements driven," says Kerry Weems, acting administrator of the Centers for Medicare and Medicaid Services and executive sponsor in charge of the program as chief financial officer and deputy chief of staff to HHS Secretary Michael Leavitt.
Developers also kept requirements to a minimum by sticking to the schedule for launching portions of the system. If HHS could not have a component available by deadline, the system launch still went on as scheduled.
HHS also knew that a common mistake agencies made when launching financial management systems - or any new computer system, for that matter - was to devalue the need for training. Daly says training employees on how to use the new system was the linchpin for successful implementation.
"There's an old adage that you need to train early and train often," she says. "What we saw is that there would be training occurring, but it might be six months before the system was implemented and [the training was] forgotten in that time frame.
People must understand early what their role is, how they fit and how the system works on a macro level."
That's what Barbara Harris, chief financial officer for CDC, tried to do at her agency. She consistently repeated to her colleagues and other managers that rigorous training was essential to convincing employees to buy into the new system. The agency set up a learning lab in one of its conference rooms, where instructors gave presentations and entered live data into the system, while staff watched to learn the process.
"One training package does not meet all needs," Harris says. "Here at CDC, we took a hard look at training staff to prepare for using this new state-of-the-art software."
The Food and Drug Administration designed hands-on training that incorporated real data and scenarios that employees had encountered. "We realized that online training is good and oral training is good, but hands-on training with real live scenarios is best and really helped with the staff here at CDC," says John Gentile, deputy CFO at the Food and Drug Administration. CDC's training process became the model for the rest of the agency.
CDC and FDA focused on spreading the word about the new financial system. The agencies created signs and posters, sent out e-mail updates, and sponsored celebrations when they met major benchmarks. "No stone was left unturned with regard to communicating," Gentile says.
Harris adds that HHS generated more support for the system by involving more than 1,500 volunteer employees in the development stage rather than appointing a team or hiring outside contractors. That input went a long way in helping the program office launch the financial management system, Weems says, since it had only a handful of employees working on the project full time.