	Lessons Learned in Recurring Failures of Federal Agency Financial Management System Implementations

In our recent report, we summarize many of the agencies’ financial  management system implementation failures that have been previously  reported by us and inspectors general (IG). Our work and that of the IGs  over the years has shown that agencies have failed to employ accepted  best practices in systems development and implementation (commonly  referred to as disciplined processes) that can collectively reduce the risk  associated with implementing financial management systems. In our  report, we identified key causes of failures within several recurring  themes, including disciplined processes and human capital management. Requirements management. Testing. Project management. Strategic workforce planning. Human resources. Change management. The following examples illustrate some of the recurring problems related  to human capital management in implementing financial management  systems. DHS Faces Serious Financial Management Challenges

DHS faces unique challenges in attempting to develop integrated financial  management systems across the breadth of such a large and diverse  department. DHS inherited a myriad of redundant financial management  systems from 22 diverse agencies along with 180,000 employees, about 100  resource management systems, and 30 reportable conditions identified in  prior component financial audits. Among these  weaknesses were insufficient internal controls or processes to reliably  report financial information such as revenue, accounts receivable, and  accounts payable; significant system security deficiencies; financial  systems that required extensive manual processes to prepare financial  statements; and incomplete policies and procedures necessary to  complete basic financial management activities. 2350 (Nov. 26, 2002); the Department of Homeland Security Financial Accountability Act of  2004, Pub. According to DHS officials, because the project was not meeting its  performance goals and timeline, DHS officials began considering whether  to continue the project and in Spring 2005 started looking at another  strategy. Based on industry best practices, we identified four key concepts that will  be critical to DHS’s ability to successfully complete its planned migration  to shared service providers. Careful consideration of these four concepts,  each one building upon the next, will be integral to the success of DHS’s  strategy. The four concepts are (1) developing a concept of operations,   (2) defining standard business processes, (3) developing a migration  strategy for DHS components, and (4) defining and effectively  implementing disciplined processes necessary to properly manage the  specific projects. How can DHS obtain reliable information on the costs of its financial management  systems investments? Strategy for Implementing the Financial Management Shared Services Approach Will Be Key

Although DHS has a goal of migrating agencies to a limited number of  shared service providers, it has not yet articulated a clear and measurable  strategy for achieving this goal. Based on industry best  practices, the following four concepts would help ensure a sound  foundation for developing and implementing a DHS-wide solution for the  complex financial management problems it currently faces: (1) developing  a concept of operations that expresses DHS’s view of financial  management and how that vision will be realized, (2) defining standard  business processes, (3) developing an implementation strategy, and   (4) defining and effectively implementing applicable disciplined processes. With DHS  at an important crossroads in the implementation of the eMergefoundation on which to base its efforts and avoid the problems that have  plagued so many other federal agencies faced with the same challenge.
Why GAO Did This Study

Over the years, GAO has reported on various agencies' financial management system implementation failures. GAO's recent report (GAO-06-184) discusses some of the most significant problems previously identified with agencies' financial management system modernization efforts. For today's hearing, GAO was asked to provide its perspectives on the importance of the Department of Homeland Security (DHS) following best practices in developing and implementing its new financial management systems and avoiding the mistakes of the past. GAO's testimony (1) discusses the recurring problems identified in agencies' financial management systems development and implementation efforts, (2) points out key financial management system modernization challenges at DHS, and (3) highlights the building blocks that form the foundation for successful financial management system implementation efforts.

What GAO Found

GAO's work and that of agency inspectors general over the years has shown that agencies have failed to employ accepted best practices in systems development and implementation (commonly referred to as disciplined processes) that can collectively reduce the risk associated with implementing financial management systems. GAO's recent report identified key causes of failures within several recurring themes including (1) disciplined processes, such as requirements management, testing, and project management; and (2) human capital management, such as workforce planning, human resources, and change management. Prior reports have identified costly systems implementation failures attributable to problems in these areas at agencies across the federal government. DHS faces unique challenges in attempting to develop integrated financial management systems across the breadth of such a large and diverse department. DHS inherited a myriad of redundant financial management systems from 22 diverse agencies and about 100 resource management systems. Among the weaknesses identified in prior component financial audits were insufficient internal controls or processes to reliably report financial information such as revenue, accounts receivable, and accounts payable; significant system security deficiencies; financial systems that required extensive manual processes to prepare financial statements; and incomplete policies and procedures necessary for conducting basic financial management activities. In August 2003, DHS began a program to consolidate and integrate DHS financial accounting and reporting systems. DHS officials said they recently decided to develop a new strategy for the planned financial management systems integration program, referred to as eMerge2, because the prior strategy was not meeting its performance goals and timeline. DHS's revised strategy will allow DHS components to choose from an array of existing financial management shared service providers. Based on industry best practices, GAO identified four key concepts that will be critical to DHS's ability to successfully complete its planned migration to shared service providers. Careful consideration of these four concepts, each one building upon the next, will be integral to the success of DHS's strategy. The four concepts are developing a concept of operations, defining standard business processes, developing a strategy for implementing DHS's shared services approach across the department, and defining and effectively implementing disciplined processes necessary to properly manage the specific projects. With DHS at an important crossroads in implementing financial management systems, it has an excellent opportunity to use these building blocks to form a solid foundation on which to base its efforts and avoid the problems that have plagued so many other federal agencies.