US Agencies Relying on Antiquated Financial Management Systems

Federal agencies are woefully deficient in using modern information technology tools to manage their financial data. Despite calls from Congress and the White House to improve financial data management, agencies “employ a tangled web of disparate manual processes to generate the data,” states a recent report from the House Oversight and Government Reform Committee.

“Our analysis shows these systems are not serving taxpayers well,” said Rep. Darrell Issa, R-Calif., chairman of the committee. Issa released the results of the committee’s analysis earlier this month.

Last March, the committee submitted a questionnaire to the chief financial officers of 26 federal agencies, asking 23 detailed questions about those agencies’ management IT systems. The letter asked each agency to identify its financial management, accounting, grants management, and contracts management systems, and explain how they interact with one another. The letter also asked agencies to describe their efforts to make spending and financial data public — both on their own websites and on USASpending.gov, a public federal website. Responses to the query yielded 329 pages of detailed description from the agencies.

Significant Findings

Among significant findings in the House report:

• Federal agencies depend heavily on manual processes to transfer information between IT systems. Of the 26 agencies responding to the survey, 21 reported the widespread use of manual processes in reporting systems.
• The agency responses reveal very few agency-level efforts to make financial information — particularly the data tracked by the management IT systems — publicly available. At least 10 of 26 agencies did not provide sufficient answers to committee questions on the public availability of management IT data, even though some of these described their management IT systems in detail. Other agencies responded that they do not make any financial information public. For example, the Department of Transportation does not publicly report any of its grants, loans or contracts. The Small Business Administration reports very limited information on grants and loans, and has no reporting of contracts.
• Manual processes are slow, inefficient, expensive, and conducive to human error. Agencies were asked to describe their modernization efforts, but did not report significant efforts to eliminate manual processes.

Every agency is required to report grants and contracts data to the government-wide databases that feed USASpending.gov. However, the Sunlight Foundation found USASpending.gov’s grants data to be only 35 percent reliable, and the Congressional Research Service has raised serious questions about the accuracy of USASpending.gov’s contracts data, the report says.

In July, then Federal Chief Information Officer Vivek Kundra said at a House hearing that agencies should “automate transfer of data between systems to increase productivity, protect data integrity and speed data dissemination,” the committee noted.

For IT vendors, the committee report presents an opportunity to promote the productivity virtues of IT systems and services, especially in an era of tight federal budgets.

Short on Solutions

The findings track other analyses that come to similar conclusions.

“The Oversight Committee’s statement makes several excellent points about agencies failing to reduce many of their manual processes — despite trying to do so for several years. This is a real shortcoming. Agencies need to rework their business processes, not just their IT systems when they attempt to streamline business flow,” Shawn McCarthy, research director at IDC, told CRM Buyer.

“The report also correctly highlights the lack of standardization for financial information across agencies,” he said.

“On the other hand, I’m a bit surprised that the report makes little mention of the efforts already under way by the federal CIO council to solve these issues,” said McCarthy.

“Those efforts range from standardizing specific lines of business to federal CIO requirements to consolidate systems as a major step toward eliminating underperforming processes,” he noted.

“It’s one thing to point out well-known shortcomings, which this report does, but it’s quite another thing to come up with solid proposals to address these shortcomings, which the report does not,” McCarthy said.

“Our work in this area has not focused on the extent of manual processes that should be automated,” David Powner, director of information technology and management issues at the General Accountability Office, told CRM Buyer. “However, our recommendations associated with USASpending and the federal IT dashboard have pushed for greater transparency and accuracy of the data that is made public.”

GAO has reported on various federal government IT issues, most recently in March.

“I think Rep. Issa is right on track,” John Weiler, vice-chair of the Information Technology Acquisition Advisory Council, told CRM Buyer.

Many of the problems are due to inappropriate tech architecture, he said, especially the misapplication of weapons systems contracting and acquisition processes. Problems in the financial systems at the Defense and Homeland Security departments, as well as at the Federal Aviation Administration, can be traced to faulty systems that lead to un-integrated or “stove pipe” financial management systems.

Congress has encouraged agencies to use “more agile” acquisition systems, noted Weiler.