The AGA Weblog

Successful Large Scale Federal Financial Systems Modernization Using the Big Bang Approach and Enterprise Architecture

By: Anna Dixon

Anna Dixon, a member of AGA’s Northern Virginia Chapter and the Emerging Issues Committee, is a Senior Managing Consultant for IBM. She also is a retired federal executive where she held federal financial management positions at OMB, DoD, DHS, Treasury and HHS.

In today’s environment many federal financial managers are working diligently to consolidate and modernize disparate systems that often contain data redundancy and inaccuracies. This state of play compromises an agency’s ability to provide reliable, useful and timely financial data that is needed to manage day-to-day operations efficiently and effectively. In turn, achieving the “clean” unqualified financial statement often becomes increasingly elusive.

This is frequently due to:
• non-integrated financial management systems;
• inadequate reconciliation procedures;
• lack of accurate and timely reporting; and /or
• non-compliance with the standard general ledger.

Over the past five years, several agencies boldly moved forward to modernize their financial management systems. These modernization efforts range from large undertakings like the eclectic and complex establishment of the Department of Homeland Security (DHS) or the Department of Defense (DoD) to homogenous consolidations like the Department of Transportation. Regardless of the size or complexity of an agency, the consolidation into a single integrated application software involves core financials (i.e., budgetary resources, receivables, payables, general ledger, cost and funds balance with Treasury) and the host of feeder systems. Also, in the current federal enterprise architecture environment, federal agencies must develop “as-is” and “to be” architecture, business processes, and detail transition strategies.

According to the former Secretary of Education, Richard Riley the top 10 jobs that will be in demand in 2010 did not exist in 2004. Moreover, the amount of new technical information is doubling every two years. A close colleague, Glenn Davis, having worked in the IT industry for over 17 years, just started his second master’s in the management of IT through the University of Virginia within four years of achieving his first master’s in business administration. He appreciates the rapid changes in technology and the close tie that must exist to enterprise business processes for those technology implementations to be successful. His staff ranges from a brilliant chief architect who speaks in parables to new hires who established and maintained their own websites when they were pre-teens.

Similarly, federal financial managers must understand how employing robust technology will help enable transformation to succeed in today’s rapidly changing and dynamic environment. It not just the chief information officer’s (CIO) job. The federal financial manager must understand the key aspects of technology and the benefits it will provide. The financial manager can leave the understanding of the technical architecture (hardware and the network) to the CIO, but financial managers must understand the key capabilities of application software and the role it plays in solving agencies many financial challenges. Application software is critical to transforming existing business processes, data structures, the organization, and ultimately the ability of the chief financial officer to manage the agency’s finances. GAO recently reported OMB and federal agencies have identified approximately 227 IT projects—totaling at least $10.4 billion in expenditures for fiscal year 2008—as being poorly planned (on the Management Watch List), poorly performing (on the High Risk List with performance shortfalls), or both.

Long-term phased implementation strategies involve module-by-module implementation of financial management modernization and they tend to be costly and vulnerable to becoming obsolete prior to full implementation. The fact some agencies encountered financial modernization mishaps when they chose the “big bang” approach to implementing a financial management modernization project should not immobilize, or unduly hamper, others from proceeding similarly when planning financial modernization transformation. Loosely speaking, the “big bang” implementation encompasses virtually all functionality for virtually all users at the same time. (Phased implementation could be a “mini-bang,” functional, or process form of enterprise resource planning solution.) In all instances, the cost and risk associated with financial management modernization are enormous. Today’s federal financial managers, however, have the benefits of lessons learned, proven best practices, templates for developing business processes, and most important, a sea change of new technological capabilities. The “big bang” implementation strategy is comprehensive and complex and it generates significant returns on investment earlier. In this context, the “big bang” involves corporate or enterprise-wide development of business processes that will become the basis for the enterprise architecture and the resultant IT solution. The development would be incremental (spiral) and the financial mangers would be involved through out the development phase—perhaps even “teamed” with the developer to ensure close integration of IT and business.

Successful enterprise-wide solutions generally drive down the total cost of ownership while gaining the ability to have one source of real time online data that is available when needed. Cost avoidances range from elimination of software licenses and maintenance for a single user to access multiple applications to elimination of data redundancy and inaccuracy or the avoidance of building and maintaining the integration between multiple applications.
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Federal financial managers must keep pace with the accelerating rate of technological change and harness the capabilities. It is not easy…but it is doable. The traditional challenges of enterprise vs. mission organizational orientation, program aligned funding processes, constraining and/or inflexible budgetary cycles and process, will continue but the full use and application of enterprise architecture will help agencies rapidly reconfigure their business and more easily position IT resources to serve it. An enterprise architecture, or modernization blueprint, provides a clear and comprehensive picture of an entity, whether it is an organization (federal department or agency) or a functional or mission area that cuts across more than one organization (financial management). This picture consists of snapshots of the enterprise’s current “as is” operational and technological environment and its target or “to be” environment, and contains a capital investment road map for transitioning from the current to the target environment. The architecture also includes a transition or sequencing plan, which is based on an analysis of the gaps between the “as is” and “to be” environments. This plan provides a road map for moving between the two environments, and it incorporates such considerations as technology opportunities, marketplace trends, fiscal and budgetary constraints, institutional system development and acquisition capabilities, legacy and new system dependencies and life expectancies. The failure comes when we build solutions for business processes that are not well understood.

So, let’s move forward smartly but boldly applying the big bang approach when implementing enterprise-wide financial management software solutions.

TOMORROW: Jeff Steinhoff, CGFM, CPA, CFE, on "If You Think $4 a Gallon is Bad, You Haven't Seen Anything Yet"

Blogging for Government Dollars: Can Internal Blogs (or Wikis) Add Value to Traditional Financial Indicators and Improve Competition?

By: John Sacco

John Sacco, associate professor of Public and International Affairs at George Mason University, integrates substance, philosophy and information technology in his teaching and research.

He is assisted in this AGA blog by Professor Gerald Bushee, also of George Mason, and Professor Odd Stalebrink of Penn State, Harrisburg, PA.

This short essay discusses the role that blogs (or Wikis) internal to the organization may play in adding value to government information. Particular emphasis is placed on the traditional financial indicators, given that ratio and trend analyses such as the current ratio for a four- to six-year period have become more widely used with GASB 34 and the online placement of CAFRs. Nonetheless, without a context for the jurisdiction, for example, any set of ratios and trends can lead to problems of interpretation.

Consider these current ratios for a city over a four-year period produced from CAFR analysis. Assuming it is best to have more current assets than liabilities, this city had a current ratio of .96 in 2003, down to around .65 in both 2004 and 2005, a nice jump to 1.16 in 2006.

Does this indicator tell whether the city is doing well or poorly financially? On a rule of thumb basis, the current ratio is above 1 in 2006, that is, they presumably can pay bills that come due. Not the case in prior years. But is the current ratio or its trends all that informative without context? Adding other financial indicators can provide greater insight, but which ones? And when might information overload enter the equation?

While blogs are often associated with virtual social networks, often populated by friends with light-hearted and not-so-light-hearted comments, blogs offer a potentially productive tool when combined with organizational data such as CAFRs, spreadsheet templates for ratio and trend analysis and information that those who were responsible for the financial report might not have considered. This philosophy suggests that the untapped power for information is the tacit knowledge of employees. For example, an employee, using Lexus-Nexus, might have come upon articles about other cities and how they dealt with liquidity problems. Another employee may have never heard of Lexus-Nexus and thus this further expands the information horizon beyond the organization. When employees are placed into the equation with some tools, such as a blog, information collection becomes more robust and extensive. Wikis are of potential value since they are often more structured than blogs. An employee might define millage for calculating property taxes and provide historical data on it. Since a wiki can be edited, the accuracy can be improved. Studies of Wikipedia show it is not really less accurate than encyclopedias and Wikipedia is more up to date.

Broad or visionary ideas about the direction of governments might result from blogs and wikis.

As an example of a city financial blog and the logic behind it, see
http://allentownblog.wordpress.com/
Students in an MPA finance class were provided with the CAFR information and a template for calculating ratios and trends. While doing the paper on financial conditions, they also injected their own information often material of extreme interest but not provided in the course. My reaction to 60 to 80 comments made by the students was: I found the “facebook” generation. These solid and voluminous contributions appeared in all the blogs, including a Peace Corps blog on village financing.

These are some questions to consider in assessing the value of the blog-wiki idea in the context of government organizations.

1) Are blogs and wikis part of the flatting of government hierarchies as is the case of contracting out, public private partnerships and privatization?
2) Will members of a hierarchical organization feel that openness begets more punishment than reward?
3) Will time spend on blogs and wikis actually take time away from assigned work?
4) What security problems are posed if an employee posts classified information?
5) Is democracy enhanced by increased competition of ideas?
6) Is government primarily about the dilemma of equity and efficiency with organizational reforms and IT innovations playing a secondary role?
7) Might blogs and wikis produce too much poorly organized information?

TOMORROW: Sam Mok, CGFM, CIA, CEO, Condor International Advisors, LLC, and AGA National President-Elect, on "The 21st Century CFO"

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