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Financial Management: Springboard for
Enterprise IT
Federal financial management systems, including
the Financial Management Line of Business (FMLoB),
provide a golden opportunity to launch a long-term approach to
enterprise management of information technology. This is particularly
true if you consider both the core financial system and “feeder
systems.”
Improving Federal financial management has been
a longstanding focus within government. Key legislative underpinnings
include the Chief Financial Officers (CFO) Act of 1990, as well as the
Federal Financial Management Improvement Act (FFMIA) of 1996.
Perhaps less apparent, financial management
systems provide a common leverage point for defining and building an
enterprise-level methodology for IT management. This is a focus where
it seems plausible to sustain bi-partisan support in future years.
Why Financial Systems
What makes this opportunity for transforming IT
management so significant is that financial management requirements cut
across all Federal agencies and programs. No responsible government
exec can say, “this doesn’t involve me, and it’s not my problem.”
The scope of this article is on financial
management systems as a leverage point for building a comprehensive
enterprise-level discipline for IT management that ultimately extends
to all agency missions and lines of business. It can serve as the
blueprint for a higher level of IT performance and accountability.
The potential payoff for the enterprise is huge:
achieving strong financial management and an enterprise-wide approach
to IT management is a dual victory for agencies, personnel, and
taxpayers.
Benefits of Enterprise IT Management
Federal IT management frequently suffers from
its own stovepipe operations, largely because of divergent regulatory
requirements. At the departmental/agency level, there tends to be
separate processes for IT strategic planning, architecture, capital
planning and investment control, acquisition, operations, and security.
Theoretically, all of these functions should be rolled up at the
enterprise level into a unified management discipline, and they should
be integrated strategically with other corporate investment portfolios,
such as human capital, facilities, and overall asset management.
An enterprise approach to IT management has been
further constrained by budget accountability on the basis of Exhibit
300s rather than the agency portfolio as a whole. Departments must
justify their major IT investments to OMB on a piecemeal basis, with as
many as a hundred Exhibit 300s within one civilian agency.
In our September 2007 article, we also pointed out that between 70 – 80
percent of the Federal IT budget is in steady state “Operations &
Maintenance.” This is a huge resource commitment that must be addressed
when considering how to implement an enterprise approach to IT
portfolio management.
Notwithstanding these constraints, agencies are
moving toward portfolio management and other approaches that better
integrate the various disciplines and processes involved in IT
management at the enterprise level. However, the complexity is
daunting. Moreover, integration into a comprehensive plan for business
transformation, involving all resources, is an even greater challenge
because of the magnitude of overall agency outlays: $577.1 billion
(Defense) to $7.8 billion (EPA). (IT budget request from OMB, May 2007, summary spreadsheet. Estimate of
outlays from Mid-Session Review, July 2007, page 34).
The best way to address the challenges of our
Federal IT elephant may be one leg at a time. Federal financial systems
provide the leg up, and it is an excellent way to pursue implementation
of Information Technology Investment Management (ITIM).
Opportunities for CIOs
Neither the CIO nor any other agency executive
can single-handedly achieve all of the intended benefits and Return on
Investment (ROI) for IT investments. After all, IT is one of many
ingredients that must be combined strategically into a long-term recipe
for business transformation.
The big payoff for IT investments—in terms of
both ROI and mission results for the agency—is business transformation,
where IT improvements are implemented strategically in concert with
many other management actions. However, this requires sustained
collaboration over the long term by the entire agency executive team.
Federal financial systems give the entire
executive team (ET) to push the enterprise toward constructive
transformation that yields maximum benefits and ROI. Broad involvement
is crucial because upgrading or replacing systems will not alone result
in first class financial management in the executive branch.
Transformation involves strategy, architectural alignment, business
processes and workflow, human capital, enterprise architecture, and
security.
Modernization of Federal financial systems can
give the CIO an opportunity to engage the entire enterprise and solve
the persistent challenge of using IT to best advantage—by embedding
technology investments into broader, enterprise-class initiatives.
The Payoff for Federal Financial Management
When combined with a strategic transformation
process, IT-enabled improvements to financial systems can yield first
class financial management throughout the executive branch. This will
help resolve current weaknesses which were noted in testimony
by the General Accountability Office in March 2007:
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Financial management systems must be modernized
to provide the complete range of information needed for accountability,
performance reporting, and decision making.
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Full adoption of … best practices is equally
important as OMB moves forward on its initiative to migrate agencies to
shared service providers.
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The federal government continues to face a
myriad of material weaknesses and reportable conditions in internal
control related to property, plant, and equipment; inventories and
related property; liabilities and commitments and contingencies; and
disbursement activities, just to mention a few of the problem areas.
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The federal financial workforce … is not well
positioned to support the needs of tomorrow. The lack of a sufficient
number of staff with the requisite knowledge, skills, and experience
has hampered financial management operations at key agencies
Payoff for IT Professionals
If we in IT management can make financial
management systems work well across the executive branch, we will
strengthen our case that IT should be a core player for 21st
century business transformation in many other venues—including those
that are unique to a particular agency.
The “bang for the buck” can only be achieved by
using IT as one of the enablers of enterprise-level business
transformation. To make good on the value of IT budgets, we must take
IT management and portfolio management to the next level.
Federal financial systems offer IT professionals
a means for realizing the value and promise of IT, when implemented at
the enterprise level in concert with overall transformation. In
addition, first-class financial systems will define best practices that
can be applied to most of the other agency lines of business through:
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Ongoing partnerships among executives and
sub-organizations within the enterprise
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Data standardization and information architecture
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Intragovernmental operability
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Standardized applications and a reduction in the
cost of customization and maintenance of systems
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Integration of IT with corporate portfolio
management
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IT as an embedded asset in broad business
transformation
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Enterprise-driven strategic IT decisions
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A better and broader understanding of how IT
serves the enterprise.
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