2013 Federal Financial Systems Summit (FSS) - AGA

February 2013

Executive Report

2013 Federal Financial Systems Summit (FSS)SUMMARY | JANUARY 10, 2013 | WASHINGTON, DC

AGA EXECUTIVE REPORT2

Program Committee:Debra Delmar, Managing Partner, Vanguard Advisors LLC

Norman Dong, Deputy Controller, Office of Federal Financial Management, Office of Management and Budget

Vincette Goerl, CGFM, Director, Consulting, CGI Federal

Adam Goldberg, Executive Architect, OFIT, U.S. Department of the Treasury

Ray Kalustyan, Senior Vice President, Fiserv

Alison Murray, Marketing Director, Fiserv

Carlos Otal, CPA, Partner, Grant Thornton LLP

Mark Reger, CPA, Deputy Fiscal Assistant Secretary, Accounting Policy, U.S. Department of the Treasury

Tim Spadafore, Vice President, IBC

Sean Wdowiak, Marketing Manager, Microsoft

Mike Wetklow, CGFM, CPA, Branch Chief, Office of Federal Financial Management, Office of Management and Budget

Technical Paper Contributors:Tristan Brown, Associate, Grant Thornton LLP

Timothy Love, MPA, Manager, Grant Thornton LLP

AGA Professional Staff:Relmond Van Daniker, DBA, CPAExecutive Director

Susan FritzlenDeputy Executive Director/COO

Maryann MalesardiDirector of Communications

Jennifer Curtin, MPADirector of Public Affairs

Joseph DavisMarketing & Communications Manager

Corporate Partner Advisory Group (CPAG) Chair:Hank Steininger, CGFM, CPA, Managing Partner, H.J. Steininger PLLC

AGA’s Corporate Partner Advisory GroupOne of the roles of professional

associations like AGA is to develop new thinking on issues affecting those we represent. This new thinking is developed out of research and draws on the considerable resources and experiences of our members and counterparts in the private sector – our Corporate Partners. These orga-nizations all have long-term com-mitments to supporting the financial management community and choose to partner with and help AGA in its

mission of advancing government accountability.

AGA has been instrumental in assisting with the development of accounting and auditing standards and in generating new concepts for the effective organization and administra-tion of government financial manage-ment functions. The Association conducts independent research and analysis of all aspects of government financial management. These studies

make AGA a leading advocate for improving the quality and effective-ness of government fiscal admin-istration and program performance and accountability.

Our Thought Leadership Library includes more than thirty completed studies. These in-depth studies are made possible with the support of our Corporate Partners. Download compli-mentary reports at www.agacgfm.org/research publications.

AGA is proud to recognize our sponsors for supporting this effort. (See Page 15)

2013 FEDERAL FINANCIAL SYSTEMS SUMMIT 3

Executive Summary

What Did We Find Out?OMB and Treasury communicated a renewed commitment to migrating agencies to federal shared services as a means of improving financial management and reducing financial systems operational costs. This renewed commitment comes in the midst of historic budget deficits in the federal government, but was also heavily impacted by the federal government’s ongoing challenges with modernizing financial systems. OMB Controller, Danny Werfel and Treasury Fiscal Assistant Secretary, Richard Gregg, echoed a common sentiment: the question is not “if” we move to shared services, but “how” to deploy shared services.

A government-wide deployment strategy is under development, with significant attention required to define the governance model, tools and standards needed to map the transition to federal shared services operating models. Some speakers acknowledged a perfect model may not exist. Given the challenges/complexity involved in designing the perfect shared services implementation strategy, this was not considered to be practical, acknowledged Werfel, who challenged the audience by stating, “There is no simple, comprehensive solution. If anyone in the audience has it, we will gladly take it.”

Confidence in a strategy of shared services is grounded in the belief that federal shared service providers can, and will continue to, deliver

results (e.g., cost efficiencies, quality services) in the public sector. The Treasury and Defense departments both successfully adopted shared services for collections, whether disbursements or accounting support. The reasons for the success of shared services was agreed-upon by speakers ranging from shared service providers to their agency customers—agency administrative functions are fundamentally similar, even if specific agency missions and programs differ. James Taylor, Chief Financial Officer (CFO) for the U.S. Department of Labor (DOL) reminded the audience that, “the core accounting is the same, it’s just some of us have more zeros.”

Underlying business systems are now sufficiently advanced to enable—rather than hinder—an agency’s transition to federal shared service models. Recent advances suggest that implementing modular, rather than large, complex, enterprise-wide systems are both affordable and represent a greater chance of success for federal agencies. These are important factors for a successful federal shared service provider deployment.

Steven VanRoekel, Chief Information Officer (CIO) for the United States, stated, “Modularity is the key to 21st century technology. Build on a baseline of requirements that can be replaced and modified over time.”However, the success of a strategy to adopt federal shared service

models is highly dependent on strong leadership and rigorous governance. Speakers overwhelmingly agreed that the success of the strategy can only be achieved with strong, consistent leadership throughout agencies, as well as at OMB and Treasury. Successful modernization efforts, many speakers agreed, are bound by “the 90/10 rule—successful modernization is 90 percent leadership/culture, and 10 percent technology.”

The following report details the issues discussed during the event and summarizes moderator themes, speaker comments and audience questions. Sections are organized by session as follows:

�� Session 1: OMB and Treasury Perspectives�� Session 2: Shared Service

Provider Perspectives�� Session 3: Customer, Vendor and

Oversight Perspectives�� Session 4: Perspectives from the

U.S. Chief Information Officer (CIO)�� Next Steps

Nearly 500 government financial leaders and industry professionals gathered at AGA’s Federal Financial Systems Summit (FSS) in Washington, DC to learn about and discuss the near-term and future prospects of federal financial management and systems in a budget constrained environment. The summit gave federal agency stakeholders, private-sector sponsors and key policymakers from the Office of Management and Budget (OMB) and the U.S. Department of the Treasury (Treasury) an opportunity to engage in open dialogue with participants.

Moving to SSPs does not represent the CFO losing control. Rather, it represents the opportunity for the CFO to shed operational activities and focus on improving the business of government.


Session One: OMB and Treasury PerspectivesSession OverviewDuring Session 1, the tone was set early on at the event when Werfel and Gregg declared a renewed commitment to move federal agencies seeking to modernize their financial management systems to partner with shared services. In response to questions posed by the moderator, Robert Shea, the associate director of OMB’s Administration for Government Performance during the Bush administration, as well as the audience, Werfel and Gregg defined the objectives of the strategy, described next steps and emphasized the need for support from senior officials across the government.

Highlights included:

�� OMB and Treasury announced their plans to institute a new process to evaluate agency financial management system requirements against generic shared service providers, and migrate agencies to federal shared services, where possible.�� OMB and Treasury stressed

that modernization efforts must be managed with restraint; the guiding principal cannot be to address all aspects of agency uniqueness and the tendencies that drive customization.

Speaker PerspectivesWerfel opened the discussion reflecting on progress made since the first FSS. Specifically, he equated financial system modernization initiatives with

“cars speeding past us on the highway.” He reflected that in 2010, because of flaws in agency financial systems implementations, it was necessary for OMB to ask federal agencies to slow down and evaluate lessons learned and identify areas for improvement. Werfel noted that the purpose was “not to inhibit modernization efforts, but to evaluate steps taken and to determine if a course correction was necessary.” In the words of both Werfel and Gregg, this evaluation was an essential step in the learning process and from this step emerged the renewed commitment to shared services.

The shared service effort aligns with the OMB Office of E-Government and Information Technology’s “Shared First” strategy and represents an attempt by the federal financial management community to focus on shared, incremental and interoperable solutions. The intent of this strategy is to realize the cost savings achieved through similar consolidations in both the private and public sectors, and is all the more imperative, given the need for spending restraint. Gregg reminded the audience and urged that the fiscal situation is “not going to get better regardless of where [Congress and the President] come out on sequestration. There is a lot of opportunity to rethink this work and the implementation process. It is no secret that [financial systems modernizations have] not been a success story over the past 10 years. This is the reality, and we

are going to fix it.” Both urged that in light of sequestration, the financial management community must continually communicate with Congress so that they understand the impacts of financial management requirements, such as the DATA Act, on the already full plates of the federal government. Further Gregg urged that the community must also continue to stress shared services success stories that may not receive the attention they deserve, simply because the stories don’t make for dramatic headlines.

Examples included:

�� Centralized, electronic processing of government payments by Treasury totaling approximately 85 percent of payments and nearly 1 billion transactions annually.�� Centralized collections by

Treasury totaling $3.1 trillion, and nearly 400 million transactions per year. �� Consolidation of IT data centers

from nearly 2,000 to just over 200 in 10 years.

While the commitment to shared services as a solution appears to be set, Werfel agreed that all questions regarding this strategy had not been answered. He indicated that “a full roadmap has not been developed,” but it will happen over time. In the meantime, “we will continue to identify good investment decisions” and make progress in smaller chunks. Werfel indicated that a firm component of the strategy is the development


Session One: OMB and Treasury Perspectives

of a “test,” to “grade” agency business requirements against those of a “generic shared service provider.” He stated that agencies will be graded and ultimately “rewarded” for designing their financial system around basic/common structures and moving toward shared services. Werfel noted that the evaluation, which will be designed and conducted by the Treasury Office of Financial Innovation and Transformation (FIT), is a similar approach to the largely successful Joint Financial Management Improvement Program (JFMIP) configuration tests that were discontinued in 2004. Werfel noted that the evaluation of modernization efforts against generic shared service

provider offerings would occur in parallel with efforts to evaluate the capacity and services currently provided by these providers. He noted that the evaluation of shared service providers themselves and the need to invest resources to expand their capabilities and capacity would be critical to the success of the overall strategy.

Regarding customization in financial systems, both Werfel and Gregg stated that, “with accounting and finance, the goal is not creativity and uniqueness.” In fact, uniqueness will be frowned upon because that these functions are fashioned with common and basic structures based on long-standing standards. Both speakers

noted that the results of the FIT reviews would play an instrumental role in capital investment requests, and that OMB budget approval will be more difficult to come by if financial system modernization requirements are tailored to the uniqueness of an agency’s business processes, rather than common government-wide standards.

The session concluded with both leaders identifying key next steps for the financial management community. Werfel noted that OMB would not simply usher agencies to shared service providers without also investing resources in shared service providers themselves. With this in mind, Werfel and Gregg

Overall Theme

Key Policy

Agency Impact

OMB M-10-26“Pause

ModernizationEfforts”

Halt modernization efforts and re-assess

the existing environment

2011 FSS 2012 FSS 2013 FSS

Halt Federal Financial System

Modernization

Innovate within the existing environment

OMB M-12-10“PortfolioStat”

Review investment portfolio and consolidate duplicative functions

Renewed commitment to Shared Services

OMB M-13-XX“Shared Services”

Reduce agency-uniquerequirements and embrace common

solutions

Financial System Modernization: where have we been, where are we going?


Session One: OMB and Treasury Perspectives

listed the following as OMB’s and Treasury’s immediate next steps:

�� Assess existing shared service provider capabilities, offerings, capacity and scalability.�� Craft benchmarks for shared

service provider services and activities.�� Develop a governance and

decision framework for the evaluation of financial management system modernization investments.�� Begin investment reviews with

the select federal agencies.

TakeawaysThe session provided an opportunity for Werfel and Gregg to communicate a renewed commitment to shared services, as well as field questions from the audience about next steps.

Key messages included:

�� Neither OMB nor Treasury has all the answers today, but they are willing to work through

the process and issues with agencies and other stakeholders as they arise.�� Shared and common services

have and will continue to provide efficiencies and cost savings to the government as a whole. �� Future modernization initiatives

will be evaluated based on comparisons to the footprint of “generic shared service providers.”�� The movement to shared

services does not come without cost; significant investments in provider capacity and customer transitions/disruptions will occur.�� Leadership is needed to make

this successful, particularly a new level of cooperation between the CFO and CIO, as well as consistency from OMB and Treasury.

QA

How do we leverage the interest of Capital Hill to push the SSP initiative forward?

Communicate. We must mitigate the risk of overburdening the Financial Management community by communicating the impact of new requirements. Ultimately, if too many requirements are layered on top of one another, we will be stretched too thin and nothing will get done.

— Danny Werfel, OMB


Session OverviewKathleen Turco, the moderator for the FSS’ second session, currently serves as the Associate Administrator, U.S. General Service Administration (GSA), Office of Government-wide Policy, which is charged with the mission of developing and evaluating policies for management of the federal government’s internal operations, including the utilization and operations of shared services. Turco questioned the panelists on a variety of topics including the return-on-investment (ROI) for full versus partial shared service deployments, cyber security and the key points for ‘selling’ shared services to a “gnarly CFO.” Panelists included providers from both the public and private sector who discussed their insights and lessons learned. Discussions included the need for senior leadership engagement, the potential for increased cost efficiencies, and the importance of change management.

The speakers provided many insights into the shared service provider deployment successes, shared service provider-readiness and critical success factors.

Highlights included:

�� Many shared models exist, however the greatest value-add and cost benefits are realized when utilizing the shared service provider for full transaction processing activities. �� Cost savings from migration

to shared service provider are

typically not derived until year three or later and are largely attributable to labor savings.�� Shared service provider security

concerns are being addressed through government requirements including the Federal Information Security Management Act (FISMA) and Federal Risk and Authorization Management Program (FedRAMP).

Speaker PerspectivesDoug Anderson, Bureau of the Fiscal Service (BFS), Assistant Commissioner, Administrative Resource Center (ARC), has provided all manners of shared services, not just financial management, to many federal agencies including, but not limited to, the National Aeronautics and Space Administration (NASA), the U.S. House of Representatives, U. S. Agency for International Development (USAID), and Treasury Bureaus since 1996. ARC services include financial management, investment accounting, travel, human resources, procurement and information technology.

Anderson noted that “just because an agency thinks that they are unique doesn’t mean they can’t fit into the standard offering [of a shared service provider].” If an agency and shared service provider come together during the planning process to discuss functionality, they can identify gaps together and work through them. In fact, Anderson commented that many shared service providers, including ARC, have made investments and efforts

to meet agency processing and volume requirements. He offered that ARC has upgraded to Oracle Release 12, a Common Government-wide Accounting Classification (CGAC) compliant instance, and further stated that ARC was developed to be scaled up based on customer demand and volume. Anderson summarized the keys for successful shared service provider deployment as:

�� Change Management. Once the planning process has started, change management responsibilities are both the responsibility of the shared service provider and their new customer. �� Communication. Stakeholders

must be good listeners. This includes shared service providers who “don’t have all the answers just because we have a standard offering.”

Steve Aube, CGFM, Director of Operational Services, Enterprise Services Center (ESC) for the U.S. Department of Transportation (DOT), echoed Anderson’s comments by saying that when both parties come to the planning table “the shared service provider can design something everyone can use.” DOT dedicated the resources to create the ESC in 1980 and has extensive experience providing a range of cross-servicing solutions, not just financial management, to federal organizations including, but not limited to, the Government Accountability Office (GAO), U.S. Department of Commerce, Social Security Administration

Session Two: Shared Service Provider Perspectives



(SSA), and the U.S. Office of Personnel Management (OPM). ESC services include a full range of offerings including accounting, data center, information security and procurement. Aube addressed concerns about cyber security, noting that ESC’s investigative services are the only federal government services that are FISMA-certified by OMB.

Aube shared insights from the centralization of accounting services at the Federal Aviation Administration (FAA), a large agency of approximately 45,000 employees, spread across 9 regions and 2,000 users, into a single region. This successful effort resulted in cost savings of approximately $5 million annually, but also the added benefit of getting all users on the same Oracle instance. Aube noted that shared service providers have the option to be dynamic and adjust to customer needs, however this can only happen to a certain degree, in order to realize the benefits associated with process and data integrity and standardization. Aube discussed how common data structures across the federal government help everyone and would further enable the push to full service shared service providers—the shared service provider model that provides the greatest ROI to the government as a whole. Aube summarized the keys for successful shared service provider deployment as:

�� Planning. Shared service configuration and the corresponding resourcing for deployment require planning and cannot simply occur overnight. Agencies and shared service providers must work together in the planning stages to identify

gaps and define requirements that meet agency needs. �� Standardized Data. Although

sometimes a luxury, common data structures will ease the transition to shared services and lower the cost of future changes.

According to Brad Gladstone, Senior Executive, Accenture, data standardization is increasing amongst shared service providers and is an important effort for the federal financial management community. Accenture has been a shared services provider for the past 20 years, including shared service deployments and support to the New York City Metropolitan Transit Authority (MTA), numerous local governments (e.g., City of New York), a variety of commercial entities (e.g., Amtrak), and federal government agencies such as the Federal Energy Regulatory Commission (FERC) and OPM. He summarized his view of shared services as taking agency back office functions and transferring these services into the core mission of the shared service provider. Gladstone noted that federal and industry shared service providers share a commitment to operational excellence, as well as to the cyber security of agency data. Related to cyber security, Gladstone noted that standards regarding cyber security have evolved greatly under FISMA and FedRAMP requirements and this evolution has greatly mitigated security risks.

He noted the importance of change management by asserting that, “three challenges are present in nearly all modernizations—adoption to changing processes, building user skills and data cleansing. The first two are clearly about change management.” He argued that doing so does not mean a CFO is giving up control, but rather gaining it in

a different way, as a customer can determine the precise level of service that is required and monitor this service based on performance metrics defined in service agreements. Gladstone summarized the keys for successful shared service provider deployment as:

�� Value of Change Management. Modernization efforts are not strictly about technology and abide by the 90/10 rule—successful modernization efforts are 90 percent leadership, 10 percent technology.

QA

How would you explain to a particularly “tough” CFO that the move to an SSP is a good idea?

I would talk about the cost-basis and show where the cost savings will occur.

— Doug Anderson, ARC

Let them know that they will be able to re-focus on their Agency at a higher level. They will have more time to focus on governance and oversight rather than inputting data.

— Steve Aube, CGFM, ESC

Shared Services bring costs down, this is supported by studies. If it didn’t, the commercial sector wouldn’t do it.

— Brad Gladstone, Accenture



�� Operational Excellence. Shared service providers specialize in the performance of ‘back-office’ functions and are typically governed by accountability mechanisms that dictate performance levels (e.g., service level agreements).

Toni Townes-Whitley, Executive Vice President, CGI Federal, noted that she “could not imagine a better time to bring CFOs to the table,” given the nature of budgets and advances in technology. She noted that CGI Federal has partnered with over 100 federal organizations to deliver shared solutions, including 16 of the 24 CFO Act agencies. CGI services include, but are not limited to, technology management, application management, system integration and business process services.

Townes-Whitley emphasized that leadership is critical and that the community must “paint the roadmap,” so that the financial management community understands what the new roadmap means for them. The questions involved in painting the roadmap may take many forms, but should include an assessment of:

�� What functions are shared: Financial management, information technology, human resources. Considering recent technological innovations, what other types of services can be shared?�� Streamlining before sharing:

Can an agency effectively move to shared services without first re-engineering business processes? Is the move to shared services an appropriate strategy for conducting business process re-engineering?

�� Incremental/phased sharing: Can shared services be broken into more manageable iterations that are less disruptive to organizations and ultimately more successful? Is wholesale deployment a more cost-effective strategy?

Townes-Whitley also discussed change management citing that two critical success factors, “candor and competence,” exist on the emotional quotient (EQ) side rather than the intelligence quotient (IQ) side. Expanding upon her point, she said both providers and customers need the capability and competencies to understand the business processes of the other, and that in parallel, senior leaders must utilize candor and set reasonable goals and expectations. Townes-Whitley summarized keys for successful shared service provider deployment as:

�� Change Management. We must acknowledge the importance of the human element; no one wants their work to be considered routine. �� Communication. Leadership

must define the end-state (e.g., full sharing, partial sharing) and articulate that end-state to their respective communities.

TakeawaysWhile each of the shared service providers experiences differed based on customer base and experiences in various industries, it was clear that certain themes drive the success of all modernization efforts. The themes included:

�� Successful modernization efforts require strong senior leadership to communicate the vision for the change, and the value to be gained through the change.

�� Shared service providers are accountable too—CFOs should be active in the development and monitoring of Service Level Agreements (SLA) and Quality Assurance Surveillance Plans (QASP), each with detailed performance criteria and proper incentives and disincentives.�� CFOs should understand that

the move to shared service providers does not represent losing control; rather it represents the opportunity for the CFO to contract for common, non-core operational activities and focus on improving the business of government.


Session OverviewSession 3 was moderated by Hank Steininger, CGFM, Chair of AGA’s Corporate Partner Advisory Group, who most recently served as the Managing Partner of Grant Thornton’s GPS practice. Steininger asked federal agencies that have enlisted, or are considering enlisting, the help of shared service providers to explain their experiences. Software vendors also made an appearance to answer questions on how the renewed commitment to shared services affected their own business models, and Independent Public Accounting (IPA) firms provided a perspective on the requirements and impacts related to compliance and financial statement audits. Panelists also spoke about the effect of a changing federal IT landscape on day-to-day agency business processes and gave advice on how best to go about a transition.

The speakers provided context for the reservations, challenges, changes and lessons learned by customers, software providers and auditors when agencies migrate to shared services.

Highlights include:

�� The federal government IT landscape has undergone a paradigm shift; gone are the days of large-scale implementations; ‘in’ is the introduction of modularity, incremental development and reuse (i.e., “build-once, use-many”). �� The migration to a shared service

provider shouldn’t affect an audit opinion with the right planning,

focus on change management, and the commitment and cooperation of leadership.

Speaker PerspectivesSpeakers were introduced in a phased format, beginning with current and prospective customers, later followed by shared service provider providers, and concluding with shared service provider auditors.

Lessons from Shared Service Provider CustomersKaren McBride, Senior Financial Analyst, U.S. Department of Housing and Urban Development (HUD), discussed the Department’s less than optimal experiences in recent system modernization efforts. McBride described that although much had gone into the plans for a new financial system implementation, ultimately, the project was failing because “we were just trying to pick up the old systems and build it inside the new one.” Since, HUD has stopped the modernization effort and recently began the process of assessing the alternative of migrating to a shared services environment.

McBride noted that she was initially skeptical about the shared solution, but since has evolved in her thinking. The driver behind this change was the extensive nature and success of the early phases of BFS’ ARC’s three-phased approach—Discovery, Design, Implement. McBride noted that during the discovery phase, the teams thoroughly examined all aspects of HUD’s accounting functions, many of which were previously considered

‘unique’, but found that the ARC was able to fit many of the agency’s needs with their standard offerings. Those needs that were not met (i.e., gaps) were documented and real discussion occurred regarding solutions and work-arounds to meet these needs. McBride noted

that this was such a successful approach because after an extensive discovery period, HUD and the federal shared service provider both “spoke the same language.” Although HUD is still deciding on the final modernization strategy, McBride asserted that “never in my 25-year career have I been in more meaningful conversations.” In closing, McBride’s key lessons for shared service provider deployment included:

�� Do not underestimate the value of communication to modernization efforts.�� Remember that departmental

processes are not as unique as we’d like to think.

Lessons Learned

1. Try it before you buy it2. Start with the end in mind3. Communicate openly and

involve those that speak the language

4. Create deliberate plans to sunset systems

5. Don’t underestimate the human element

6. Build and design incrementally

7. Include key stakeholders including auditors

Session Three: Customer, Vendor and Oversight Perspectives



James Taylor, CFO, U.S. Department of Labor (DOL), utilizes a shared service provider and is the only cabinet-level department “in the cloud.” He finds the idea of shared services as “evolutionary and coming from a fairly logical path.” Taylor summarized the evolution of the CFO function and current modernization efforts as: “In the early days, it was all about getting a clean opinion…then we realized the feeder systems were bad…then we moved to Enterprise Resource Planning (ERP) systems which were slow and costly…,” and at the end of all this time and effort, and with few successes, Taylor stated that it just seems like it is time to stop and re-think the approach. The move to a shared strategy from Taylor’s perspective makes more sense than siloed systems because at the end of the day, “CFOs don’t want to deal with [financial system modernization and maintenance] and department Secretaries don’t want to hear about [financial system modernization and maintenance].” Taylor added that, the shared service provider, while it does not cater to your unique mission needs, does alleviate the need to worry about “upgrades, licensing and competing with the entire government for the best IT resources.” Taylor stated that, “I want to worry about what a CFO should be worrying about,” and by getting out of the business of system implementations, CFOs would be better able to support agency management with decision-making information.

Separately, Taylor noted that the move to a shared service solution was challenging for internal clients and was not an obstacle that DOL identified before the transition. The change management challenges were a major reason for a disclaimer of audit opinion that was quickly overcome through herculean efforts. Yet despite the

challenges, Taylor offered, “I would never want to go back to owning my own systems.” Taylor’s key lessons for shared service provider deployment included:

�� Clearly define modernization requirements. Without clearly-articulated requirements it is hard to ‘sell’ the concept to your organization, but also difficult to understand what you’re getting in return.�� Recognize that purchasing shared

services can be easy, but selling the concept to your team may be difficult since fundamentally changing business processes can bring disruption and uncertainty.

Drew Morgan, Director, U.S. Department of Defense (DoD) Business Integration Office, spoke about the successes and challenges DoD has had with shared services, including the deployment of shared services operations at the Defense Information Systems Agency (DISA), Defense Finance and Accounting Service (DFAS) and Defense Logistics Agency (DLA). In terms of successes, he discussed how DoD successfully decreased the number, and cost of interfaces, through the implementation of a central interface portal known as the Global Exchange Service (GEX). He also identified challenges and described the “80/20” rule, and stated that when moving from an agency’s standalone system, a shared service may only provide 80 percent of the previous systems capabilities. When it comes to addressing the remaining 20 percent, he noted, in jest that some in DoD refer to this exercise as “enabling the manualization of automated processes,” since the 20 percent was often previously automated through customizations to the legacy systems. He signaled to potential customers that they think seriously about the effect a transition to

shared services would have on their existing business processes and to plan accordingly.

To this end, Morgan urged federal agencies to continue to push themselves regarding process improvement and standardization. He noted that in his view there are two forms of BPR; “Survival BPR and “Optimization BPR.” “One focuses on simply saving the organization, the other focuses on improving the organization,” he noted. Morgan summarized his key lessons for shared service provider deployment to include:

�� Before moving to a shared service provider, understand what you want to improve and the problems you’re trying to fix.�� Try it before you buy it (i.e., with

any modernization effort, crawl and walk, before you run).�� Create deliberate plans to sunset

systems and understand which systems need to run in parallel.

Perspectives of Software VendorsStephanie Mango, CGFM, Vice President, CGI Federal and Wayne Bobby, CGFM, Senior Vice President, Oracle Corporation, noted that financial management systems are changing to become more modular, or componentized. The modular systems are easier to upgrade and patch reducing overall costs. When asked about pricing models, both responded that vendor models are flexible and can be built to meet agency-specific needs. Further, vendors are “moving away from capital expense models to operating cost models,” such as subscription pricing which makes piloting a system before full-time commitment, much more feasible. Other examples include the purchase of components of a solution (e.g., budget, contracts module).



Both stressed that they are prepared to work with the financial management community to define practical approaches that meet the needs of the customer. Shared service providers will take advantage of the new technology by implementing and offering smaller, more specialized systems, which can inter-communicate with one another. For example, in the near future, an agency may be able to pilot an invoice processing service without having to transfer other accounting functions to the shared service provider. Both Mango and Bobby agreed that technology is no longer a barrier to financial system success and are prepared to work with the federal financial management community to define practical approaches that meet customer and taxpayer needs. Key lessons for shared service deployment from both included:

�� Deployments do not have to be wholesale from day one and can be performed incrementally over time in manageable iterations that increase success and limit disruption. �� Think creatively about how

technological advances and pricing models can deliver the functionality your agency needs for less than today.

Perspectives of Independent Public Accounting FirmsDavid Zavada, Partner, Kearney & Co., and Tony Hubbard, Principal, KPMG LLP, discussed how the deployment of shared services may impact federal agency audit opinions. The general thought was that the use of a shared service provider should not affect an agency’s audit opinion as long as it is done with the right planning and engagement of the IPAs. A key change to agency audits is the need for shared service providers to provide the results of Statements

on Standards for Attestation Engagements (SSAE) Number 16 audits. The panelists discussed the varying types of SSAE16 reports (e.g., Type 1, Type 2) and the value of each. Both panelists urged departments/agencies to request Type 2 reports because this version reports on the operating effectiveness and results of tests for service provider controls. In comparison, Type 1 tests report on the suitability of the design of the control and do not report on the operating effectiveness.

When questioned whether auditor’s were typically involved in planning and transitioning processes, Zavada joked, “we have to be invited first.” He elaborated that while it is a good strategy to involve auditors, it is a strategy that is not often practiced. When involved in the planning process, the timing of audits can be discussed so efforts are not being duplicated over the course of the year. “Otherwise,” added Hubbard, “a financial controls audit must be done at the same time as an SSAE 16.” Key lessons for shared service deployment included:

�� Recognize that not all SSAEs are not created equal. The most valuable to auditors involves the testing of the operational effectiveness of controls, not simply whether the controls are designed to achieve the related control objectives. �� Involve auditors in the process so

that a timeline can be developed that doesn’t duplicate or overburden the government.

TakeawaysAll panelists recognized that the federal government’s IT landscape is undergoing a paradigm shift from large standalone system implementations to the introduction of modularity and incremental development.

Facing these challenges, the panelists offered the following pieces of advice:

�� Try it, before you buy it—shared services should be evaluated in a pilot test phase before committing to full time use. Vendors are changing the way they do thing to enable this.�� Every agency has unique

missions and programs, however at the end of the day, accounting for the business of government is not fundamentally unique. In fact, agency back office processes are wrought with standard/basic structures dictated by law that create commonality. �� Why bother with licensing,

upgrades, and competing for a limited pool of software experts—the use of a shared service provider can change the major focus of a CFO from managing their transactions to guiding their program managers.


Session OverviewSusie Adams, Chief Technology Officer, Microsoft’s federal civilian business, introduced Steven VanRoekel, the U.S. federal government CIO, during the fourth and final session of the conference. The purpose of this session was to understand the perspective of VanRoekel, on shared services and the direction of federal financial management systems. He offered his take on the direction where we are headed, where we should be headed, and took general questions from the audience. Specific highlights included:

�� Shared services are a ‘top three’ initiative for the CIO Council and community. �� Shared services have falsely

been characterized as agencies subjecting themselves to the least common denominator of services—this is no longer the case, as the scope and quality of shared services has evolved significantly. �� The federal government IT

landscape has undergone a paradigm shift; gone are the days of large-scale implementations; in is the introduction of modularity and incremental development.

Speaker Points“Modularity is the key to the 21st century,” said VanRoekel, also indicating that new legislation is on its way to support the IT evolution. VanRoekel expanded upon the topic of financial system modularity by sharing an example with the audience. The U.S. Department of Health and Human Services (HHS)

and the U.S. Department of Education (ED) have different missions and programs; however they share similar data needs without realizing it. HHS approached VanRoekel earlier in the year with the plans to build a tool that supported compliance with new regulations set forth by the Affordable Care Act by validating income levels. ED approached VanRoekel two weeks later with plans to do the very same thing with respect to validating income for student aid; however, VanRoekel was able to direct ED to the HHS income validation module. Since it was built modularly, it was reusable by ED, and provided cost savings and efficiency for the federal government.

VanRoekel urged that to pave the way forward, shared services should not be built from the “least common denominator” model. They should not be limited to basic and common services to the government. Shared service providers should be challenged to be more dynamic and to better serve their customers.

What is the hold up to implementing shared services? Part of the cause relates to what VanRoekel refers to as, “Blinking Light Syndrome.” He describes the syndrome as the desire to own and store your own servers and equipment even though technology has evolved so that this is no longer necessary. VanRoekel suggests that we do this not because we are fundamentally “behind the times,” but simply because we gain a sense of comfort and security from being able to see and touch the physical hardware upon which applications

are running, and thus, the sense that our data is out of danger.

Making large changes in technology and agency IT systems is not simple without having the right leadership. VanRoekel encouraged the audience to build tighter relationships between the CFO and CIO functions, and added that he thought departments whose agencies are diverse in mission, such as the U.S. Department of Commerce, would see even greater benefits from such a partnership. He also recommended that every agency institute Investment Review Boards (IRB) and to use IRBs as strategic drivers, not simply as a “budget scrubbers.”

Session Four: Perspectives from the U.S. Chief Information Officer (CIO)

QA

We didn’t hear much about the cloud today, can you talk about the federal government’s view on the cloud?

“Cloud “is a word that means different things to different people. I think it will define itself overtime. My definition: A private or public shared computing infrastructure that is hosted outside of your organization.

— Steven VanRoekel, U.S. CIO


The summit provided an opportunity for financial management leaders to provide perspectives on the shared services solution. While feedback on the solutions was well-received, all acknowledged that much more work needed to be done in both the design of the strategy and deployment of the shared service provider solution. Moving forward, agencies should be on the lookout for the following:

�� OMB/Treasury will define the governance framework, tools and requirements. At minimum, agencies should expect:

�� Evaluation Criteria to compare agency requirements to the footprint of a “generic shared service provider.”

�� Assessment of shared service providers to determine shared service provider capabilities, offerings, capacity and scalability.

�� Benchmarks for shared services standards/goals (e.g., cost to process an invoice).�� Governance processes to

determine how investment reviews will occur, how decisions will be made, timing, etc.

�� Department/agencies should review the coming OMB memo and consider alternatives in alignment with the proposed shared services strategy.�� Agency priorities should be

to deliver mission services within and under budget.�� If any agency can deliver in

a legacy environment, and achieve the cost reductions necessary to meet current budget constraints, do it. If you can’t, consider a shared environment that limits your footprint and allows the CFO to be a CFO.

Next Steps

TakeawaysThe CFO and CIO partnership is a critical success factor for federal IT modernization. As agencies start to move to the cloud and utilize multi-tenant resources to carry out IT functions, having modular and open systems will be important. Mr. VanRoekel left the audience with a final thought, which was to prevent entropy, a feeling common when dealing with IT modernization, from holding an agency back and encouraged everyone to run their ideas “up the food chain.”

Key takeaways included:

�� Institute and utilize IRBs throughout the organization as strategic drivers, not simply budget scrubbers.�� Shared Services providers

and customers should not be regulated to the “least common denominator” model. Shared service providers must evolve the menu of services to provide high-quality functionality that meets customer needs.

�� “Art of the Possible” – the most successful modernization efforts occur when the CFO and CIO are in lock-step and Senior Executives are communicating openly.

Moving to SSPs does not represent the CFO losing control, rather it represents the opportunity for the CFO to shed operational activities and focus on improving the business of government.

We must work together to implement an end state that is characterized by common solutions, delivered modularly, designed to maintain or improve the quality of services.

continued from Session Four: Perspectives from the U.S. CIO


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Documents

2013 Federal Financial Systems Summit (FSS) - AGA