CONCLUSIONS
Despite the implementation of the core components of the House's new financial management system (American Management System's Federal Financial System (FFS)) on June 4, 1996, a number of key tasks have still not been completed. Without the completion of these tasks, the House may not benefit fully from the use of FFS or correct previously identified financial management weaknesses with the implementation of additional features of the new system. Furthermore, as a result of the delayed completion of these tasks, user confidence in the new system has been negatively impacted. These tasks have not been completed because the Office of Finance (Finance) management did not provide enough resources to perform the day-to-day operational tasks required by the new system and complete the remaining Phase II implementation tasks.
In addition, Finance has experienced problems with the day-to-day operations of the new system. These problems include (1) untimely and incomplete financial reports, (2) backlogs of unprocessed payments, and (3) errors in processing transactions. As a result of these problems, the user community believes that the new system is the source of the problems, when in fact the problems are a result of weaknesses in the management of the new system and not the new system itself.
RECOMMENDATIONS
We recommend that the Chief Administrative Officer: (1) establish
an infrastructure in Finance to support the new tasks associated
with the day-to-day operations of FFS by taking the necessary
steps to ensure that adequate resources with the proper qualifications
are available in Finance to fill the roles and responsibilities
under the new infrastructure; (2) establish a separate infrastructure
in Finance to support the continuous FFS implementation project;
(3) determine the level of effort required to complete Phase II
tasks and establish realistic completion dates based on the amount
of time required to complete tasks and taking into consideration
available resources; (4) fully document requirements for changes
to the Monthly Financial Statement and the Statement of Disbursements;
(5) when planning to make changes to reports, prepare a level
of effort analysis to determine how much time is needed to identify
and document requirements (i.e., the changes), make the changes,
and test the changes, and using information on available resources,
identify realistic completion dates that support issuing reports
by expected issuance dates; (6) devote more resources from Finance
to produce and review the Monthly Financial Statement and the
Statement of Disbursements; (7) identify and plan for additional
support from data entry contractors to maintain the acceptable
productivity rate during peak periods in the payment process by
analyzing past years' workload levels and decreased productivity
rates when changes to policies and operating procedures are implemented;
(8) expeditiously complete policies and operating procedures associated
with the Phase II implementation; (9) modify existing policies
and operating procedures to add steps that will help minimize
the errors experienced to date; (10) identify and use standard
FFS reports, such as the daily FFS transaction report to monitor
accuracy of data entered into FFS; and (11) establish an organization
structure within Finance to review transactions processed in FFS
on a regular basis.
MANAGEMENT RESPONSES
On December 23, 1996, the Acting Chief Administrative Officer (CAO) fully concurred with the findings and recommendations in this report, and indicated that corrective actions are planned (see Appendix).
Specifically, the Acting CAO plans to prepare for review by the
Committee on House Oversight by January 15, 1997 an organization
and staffing plan to optimize the day-to-day operations of FFS.
As part of this organization and staffing plan, a separate group
within Finance will be staffed to support the continuous FFS Implementation
Project. Additionally, by January 15, 1997, the Acting CAO plans
to prepare a schedule of level of effort by task required to complete
the implementation of Phase II of FFS. The Acting CAO also plans
to document, formally review, and present to the FFS Steering
Committee for approval all changes to the Monthly Financial Statement,
as well as the Statement of Obligations, and Statement of Disbursements.
The Acting CAO also indicated that Finance will dedicate personnel
to ensure the timeliness and accuracy of the statements. In addition,
Finance plans to use its records on voucher flow and productivity,
as well as historical data to ensure that forecasted periods of
reduced productivity are properly addressed. The Acting CAO also
plans to include in his plan to complete the implementation of
Phase II the task to complete policies and operating procedures.
Finance is also undertaking a plan to modify existing policies
and procedures to add steps that will help minimize the errors
experienced to date. Finance also plans to review all applicable
standard FFS reports to identify their utility.
OFFICE OF INSPECTOR GENERAL COMMENTS
The Acting CAO's planned actions are responsive to the issues
we identified, and when fully implemented, should satisfy the
intent of our recommendations.
I. INTRODUCTION
Background
The implementation of a new financial system was mandated by the Committee on House Oversight (CHO) resolution--Financial Management System--on August 3, 1995. This new system was to replace the existing Financial Management System (FMS). FMS could be likened to a large personal checkbook, which was limited to keeping a running balance of cash receipts/expenditures as opposed to a fully functional accrual-based financial management system.
As a result, in September 1995, the Chief Administrative Officer (CAO) formally entered into a cross-servicing agreement with the U.S. Geological Survey (USGS), Washington Administrative Service Center (WASC), to implement USGS's Federal Financial System (FFS) for the House. The implementation of FFS would offer the House the ability to follow Federal accounting standards, because FFS complies with financial management requirements for Federal financial management systems. The FFS license that USGS has with American Management Systems (AMS) allows USGS to provide cross-servicing to external Federal government agencies. Full implementation was scheduled for four phases. Phase I involved identifying and setting up the functionality of FFS to support parallel processing of payment transactions and identifying the needs for custom interfaces and reports. This phase was completed on September 30, 1995. Phase II includes establishing the "Core" FFS system, custom interfaces, and custom reports at the House and is not complete. Phase III is currently being planned, and Phase IV is to be determined at a later date.
In September 1995, the CAO formed a Financial Management System Executive Steering Committee to oversee the implementation of the new financial management system. The committee includes various senior officials of the CAO, CHO, the Library of Congress, General Accounting Office, and WASC. The committee also includes the Inspector General and a partner from Price Waterhouse LLP (PW) as advisors.
Additionally, on September 29, 1995, the Office of Inspector General (OIG) engaged PW to review, evaluate, and provide advice on various aspects of the House's implementation of FFS. Since that time the OIG/PW team has worked closely with the FFS Implementation Team performing these tasks throughout Phases I and II. The OIG/PW team performed detailed reviews of and provided advice in the following areas:
· Project management infrastructure and activities.
· Implementation and transaction testing of FFS Subsystems.
· Documentation of user procedures for the FFS Subsystems.
· Development of training for users.
· Implementation and unit testing of custom interface programs.
· Implementation and unit testing of custom reports produced from FFS.
· Review of FFS technical architecture.
· Security setup of FFS.
· Conversion of FMS into FFS and verification of the conversion's accuracy.
· System acceptance testing.
On June 3, 1996, the OIG issued an audit report entitled The House Is Ready To Implement The Core Federal Financial System (Report No. 96-CAO-04, June 3, 1996) to the CAO. This audit verified that the critical Phase II implementation tasks had been completed and indicated that the House could cut-over to the new system on that date. However, the report also recognized that there were additional tasks from Phase II that were not fully completed that required completion expeditiously to maintain user confidence and trust in the new financial management system. Listed below are the tasks that were not fully completed at the time of the implementation of the core FFS on June 4, 1996.
· Resolution of problems with the custom reports identified during unit testing of the custom report programs.
· Enhancements and associated testing of custom reports to provide easier to read reports.
· Development of FFS security policies and procedures.
· Conversion and verification of remaining months of FMS data.
· Modifications and associated testing of custom interface programs.
· Development of operating policies and procedures for interface programs and reports.
· Establishment of a user support process to resolve user questions and problems.
· Development of user procedures for the remaining FFS subsystems: Budget Execution, Planning, Purchasing, Project Cost Accounting, and General Ledger.
· Development of training for the remaining FFS subsystems: Budget Execution, Planning, Purchasing, Accounts Receivable, Automated Disbursements, Project Cost Accounting, and General Ledger.
· Execution of system acceptance testing for the above referenced modifications to custom interface programs and enhancements to custom reports.
Although these remaining tasks did not have direct impact on the system being ready for use on June 4, 1996, the OIG report recommended that the tasks be completed no later than the end of July 1996 to ensure user confidence in the new system.
On June 4, 1996, the CHO approved the CAO's request, dated June 4, 1996, to implement FFS as an interim accrual accounting system for the House. However, the CHO also instructed the CAO to take the necessary steps to ensure that all of the remaining Phase II tasks were completed according to the OIG's report. On June 4, 1996, the House began using FFS to process the House's financial transactions.
Objective, Scope, And Methodology
The objective of this audit was to assess the completion of Phase II tasks of the FFS implementation and adequacy of the day-to-day operations since the implementation of FFS on June 4, 1996. We focused our review on the Phase II tasks that were not completed by the June 4, 1996, implementation and problems that the Office of Finance (Finance) has experienced in managing the day-to-day operations under the new financial management system. We conducted our review during the period of June 4, 1996, through October 31, 1996.
We conducted our review in accordance with Government Auditing Standards, issued by the Comptroller General of the United States. In conducting this review, we attended FFS Implementation Team meetings, reviewed FFS Implementation Project-related documents, reviewed data entered into FFS, and interviewed FFS Implementation Team members. Our review included a comparison of FFS implementation activities to the following:
· System development life cycle methodologies.
- - National Institute of Standards and Technology's (NIST) Special Publication 500-153 - Guide to Auditing for Controls and Security: A System Development Life Cycle Approach.
- - Price Waterhouse LLP - System Management Methodology: Package Software Implementation.
· Standard project management practices.
· Recommendations contained in the OIG audit report issued on June 3, 1996.
· Instructions contained in the June 4, 1996 memorandum from the CHO concerning the implementation of FFS.
Internal Controls
Within the scope of this audit, we evaluated internal controls related to the implementation of FFS. The internal controls weaknesses we identified are described in Findings A and B of this report.
Prior Audit Coverage
The House Is Ready To Implement The Core Federal Financial System (Report No. 96-CAO-04, dated June 3, 1996): This report verified that critical FFS Phase II implementation tasks had been completed. However, the report identified additional actions needed to be taken to fully complete Phase II. In addition, the report identified planning and management recommendations for Phase III implementation of FFS. The CAO agreed with the report's findings and two recommendations and partially implemented one recommendation, but has not taken action on the remaining recommendation. (See Exhibit A for details.)
House Is Experiencing Problems With The Implementation Of The Core Federal Financial System (Report No. 96-CAO-02, dated March 1, 1996): This audit identified System Development Life Cycle (SDLC) methodology deficiencies and included recommendations to improve the SDLC methodology, quality assurance, and project management of the FFS implementation process. The CAO agreed with the report's findings and 16 recommendations and has implemented eight recommendations and partially implemented six recommendations, but has not taken action on the remaining two recommendations. (See Exhibit A for details.)
Proposed New Financial Management System Will Not Meet The House's Needs And Should Be Terminated (Report No. 95-CAO-02, dated May 12, 1995): This review evaluated the functional adequacy of the proposed Financial Management System and the SDLC procedures that were utilized in the development of the system. This report recommended that the system be terminated and also made recommendations to improve the SDLC practices within House Information Resources (HIR) as well as management oversight. The CAO agreed with the report's findings and five recommendations and has implemented three of the recommendations and partially implemented two recommendations. (See Exhibit A for details.)
II. FINDINGS AND RECOMMENDATIONS
Finding A: Slow Completion Of Phase II Tasks Delays Improvements To The House's Financial Management System
Despite the implementation of the core components of the House's new financial management system (American Management System's Federal Financial System (FFS)) on June 4, 1996, a number of key tasks have still not been completed. Without the completion of these tasks, the House may not benefit fully from the use of FFS or correct previously identified financial management weaknesses with the implementation of additional features of the new system. Furthermore, as a result of the delayed completion of these tasks, user confidence in the new system has been negatively impacted. These tasks have not been completed because Finance management did not provide enough resources to perform the day-to-day operational tasks required by the new system and complete the remaining Phase II implementation tasks.
Federal agencies that implement new financial management systems generally plan for a full-time team to perform implementation tasks. In addition, these organizations usually take the necessary steps to ensure that once the new financial system is up and running, the accounting or finance office has the necessary resources available to handle the day-to-day operations of the new system.
The FFS Implementation Team has completed three of the ten tasks that were outstanding at the time of the implementation of the core FFS system on June 4, 1996. Listed below are the tasks that remain uncompleted.
· Conversion and verification of remaining months of FMS data.
· Modification and associated testing of custom interface programs.
· Development of operating policies and procedures for interface programs and reports.
· Establishment of a user support process to resolve user questions and problems.
· Development of user procedures for the remaining FFS subsystems: Budget Execution, Planning, Purchasing, Project Cost Accounting, and General Ledger.
· Development of training for the remaining FFS subsystems: Budget Execution, Planning, Purchasing, Accounts Receivable, Automated Disbursement, Project Cost Accounting, and General Ledger.
· Execution of system acceptance testing for year-end closing processes.
See Exhibit B for more details on the completion status of Phase II tasks.
With the exception of the efforts to implement Procurement Desktop, Phase III of the FFS implementation is on hold until Phase II tasks are completed. Given the current resources dedicated by the House to complete the Phase II tasks, these tasks will probably not be completed until the beginning of 1997. As a result, Phase III will probably not fully start until early 1997, when it should have started beginning in October 1996. This slippage will cause many of the planned improvements in the House's financial management to be delayed until the middle or end of Calendar Year 1997. For example, it is a high priority for Member, Committee, and House offices to have on-line access to FFS data. By having on-line access to FFS data, Member, Committee, and House offices would be able to have timely access to information on their available balances and payments processed by Finance. Thus, allowing these offices to make better planning and spending decisions and avoid overspending allowances.
The workplan that the FFS Implementation Team has been using to manage the completion of these tasks was not developed considering the level of effort required to complete the tasks and the available resources. We made the recommendation in our March 1996 audit report (Report No. 96-CAO-02) to develop a level of effort work plan for the implementation of FFS. The CAO still has not implemented that recommendation (see Exhibit A). Therefore, the FFS Implementation Team could not easily determine that the Phase II tasks would not be completed expeditiously or when the tasks would be completed. In addition, because there has not been enough resources available in Finance to perform the day-to-day operational tasks associated with using a new financial management system, the FFS Implementation Team has been taking responsibility for tasks that Finance should have been performing. For example, the FFS Implementation Team has been focusing a majority of time on producing Finance's monthly and quarterly reports, instead of completing Phase II tasks. Consequently, the FFS Implementation Team could not complete the Phase II tasks that they originally thought could be done by the end of October 1996.
Recommendations
We recommend the Chief Administrative Officer:
1. Establish an infrastructure in the Office of Finance to support the new tasks associated with the day-to-day operations of FFS. Take the necessary steps to ensure that adequate resources with the proper qualifications are available in the Office of Finance to fill the roles and responsibilities under the new infrastructure.
2. Establish a separate infrastructure in the Office of Finance to support the continuous FFS implementation project.
3. Determine the level of effort required to complete Phase II tasks and establish realistic completion dates based on the amount of time required to complete tasks and taking into consideration available resources. Utilize as much as possible the cross-servicing contractor.
Management Response
On December 23, 1996, the Acting CAO fully concurred with the finding and recommendations (see Appendix). As indicated in the response, the Acting CAO intends to implement all aspects of the recommendations.
Specifically, the Acting CAO plans to prepare for review by the Committee on House Oversight by January 15, 1997 an organization and staffing plan to optimize the day-to-day operations of FFS. As part of this organization and staffing plan, a separate group within Finance will be staffed to support the continuous FFS Implementation Project. Additionally, by January 15, 1997, the Acting CAO plans to prepare a schedule of level of effort by task required to complete the implementation of Phase II of FFS.
Office of Inspector General Comments
The Acting CAO's planned actions are responsive to the issues we identified, and when fully implemented, should satisfy the intent of our recommendations.
Finding B: House Experiences Problems With The Day-to-Day
Operations Of the New Financial Management System
Finance has experienced problems with the day-to-day operations of the new system. These problems include (1) untimely and incomplete financial reports, (2) backlogs of unprocessed payments, and (3) errors in processing transactions. As a result of these problems, the user community believes that the new system is the source of the problems, when in fact the problems are a result of weaknesses in the management of the new system and not the new system itself.
It is normal for organizations that have recently implemented a new financial management system to experience problems in the day-to-day operations of the new system. However, these organizations typically respond to the problems by ensuring that adequate resources with the necessary skills are available to resolve the problems.
Untimely and incomplete financial reports
Since the implementation of FFS, the Monthly Financial Statement and Statement of Disbursements have not been completed and distributed in a timely manner by Finance. These reports are the main source of information for Member, Committee and House offices to use in determining what obligations and payments have been processed by Finance, and more importantly their available balances. Therefore, it is essential for these offices to receive this information in a timely manner to manage their finances and make sound business decisions.
In addition to the reports not being issued in a timely manner, the Monthly Financial Statement did not originally include essential information needed to understand the obligation information presented in the budget to actual section of the report. Specifically, the first three Monthly Financial Statements issued using FFS did not contain detailed information on outstanding obligations. Although the Monthly Financial Statement for the fourth month did include an additional section that presented detailed information on outstanding obligations, all of the information presented was not useful to users. This was because the new section did not present all the information needed (i.e., expended amounts) and had columns mislabeled (i.e., column for liquidated amount was labeled expended amount). Consequently, the new section on outstanding obligations requires additional modifications in order to present the expended information.
Since the implementation of FFS, Finance has not completed or distributed the Monthly Financial Statement and Statement of Disbursements on time. Normally, the Monthly Financial Statement is issued by the ninth business day after the end of the month that is presented in the report, while the Statement of Disbursements is typically issued two months after the close of the quarter that is presented in the report. However, for the months of June and September 1996, the Monthly Financial Statement was issued late by at least 11 and 9 days, respectively. Furthermore, the June report was incomplete in that it did not include the budget to actual section of the report. In addition, the Statement of Disbursements was issued approximately a month and half late for the quarter April through June 1996. Because users have not been getting information in a timely manner, spending decisions may have been made without full knowledge of available balances. Furthermore, the users believe that the new system requires more time to produce the reports.
The delays are actually a result of weaknesses in the management of the FFS Implementation Team and Finance. The FFS Implementation Team did not develop thorough requirements for the Monthly Financial Statement or the Statement of Disbursements. Even after the implementation of FFS, these reports were being changed to accommodate requirements that were not identified or documented prior to the development of the complete programs used to produce the reports. In addition, Finance underestimated the amount of resources necessary to produce and review the Monthly Financial Statement and Statement of Disbursements.
Payment backlogs increased
Immediately following the implementation of the core FFS system
on June 4, 1996, the backlog of unprocessed vouchers rose to higher
levels than previously experienced. Figure 1
presents the daily backlog of unprocessed payment transactions
during the period April through August 1996. As indicated in Figure
1, the backlog increased substantially in June and still remained
higher than normal in July. The backlog amounts reflected in Figure
1 were determined based on extensive analysis of the number of
payment transactions submitted on vouchers by the initiating offices
against those actually processed by Finance.
As a result of the backlogs of unprocessed payments, checks to vendors and reimbursements to Members and House employees were not issued in a timely manner. These problems resulted in the user community believing the new system was the cause for the delayed payments.
It is normal for organizations that recently implemented a new financial management system to require more time to process transactions. However, most organizations take the necessary steps to obtain additional resources to handle problems or increased processing time that may result from using a new system. These additional resources are used until users learn the new system, able to resolve problems, and process transactions as quickly as with the old system. Finance underestimated the amount of resources necessary to process payments in a timely manner during the first few months of using the new financial management system. Finance did not anticipate that the productivity rate would decrease as a result of the changes in policies and operating procedures that were required to implement FFS. Because of this, Finance did not obtain sufficient additional support from their data entry contractors or request the hiring of new House staff.
High occurrence of errors in processing transactions
During the first four months of processing under FFS, Finance and Office of Procurement and Purchasing staff experienced a number of errors. Listed below are examples of the errors experienced.
· Checks issued without information on the check stub explaining the reason for payment.
· Custom interfaces executed with the wrong parameters.
· Recurring payment program executed days after recurring payments were due.
· Recurring payment program executed with wrong date parameters.
· Payments issued without liquidating the obligation.
· Multiple checks issued to the same payee instead of combining payments into one check.
· Payments recorded without the full description of the purpose of the expense.
As a result of these errors, Finance resources were diverted from their primary duties to correct the errors. In addition, because of the errors, the Monthly Financial Statement and the Statement of Disbursements often contained inaccurate information. This also resulted in the user community losing confidence in the new system.
However, many of the errors were actually due to the absence of an established management review structure and the lack of completed policies and operating procedures. Specifically, Finance did not have staff available to review standard FFS reports to verify the accuracy of data entered into FFS. Errors such as checks issued without information on the check stub explaining the reason for payment and checks issued without utilizing the group check indicator could have been identified and corrected immediately if appropriate management review had occurred. Other errors such as executing the custom interfaces and recurring payment programs with the wrong parameters could have been prevented if proper procedures were fully implemented. Some errors occurred because documented policies and operating procedures did not always provide sufficient steps or details. For example, payments issued without liquidating the obligation and multiple checks issued to the same payee instead of combining payments into one check could have been avoided if the documented policies and procedures contained more steps and details on processing payments.
If all of the policies and operating procedures for the Phase II tasks had been completed in a timely manner, many of these errors would not have occurred. The errors would have also been minimized if a management review structure had been established to ensure FFS users were correctly following the policies and operating procedures that were developed prior to implementation. A management review structure was not established, because Finance staff were already overtasked with the implementation and not enough resources were available.
Recommendations
We recommend the Chief Administrative Officer:
1. Fully document requirements for changes to the Monthly Financial Statement and the Statement of Disbursements.
2. When planning to make changes to reports, prepare a level of effort analysis to determine how much time is needed to identify and document requirements (i.e., the changes), make the changes, and test the changes. Using information on available resources, identify realistic completion dates that support issuing reports by the expected issuance dates.
3. Devote more resources from Finance to produce and review the Monthly Financial Statement and the Statement of Disbursements.
4. Identify and plan for additional support from data entry contractors to maintain the acceptable productivity rate during peak periods in the payment process by analyzing past years' workload levels and decreased productivity periods when changes to policies and operating procedures are implemented.
5. Expeditiously complete policies and operating procedures associated with the Phase II implementation.
6. Modify existing policies and operating procedures to add steps that will help minimize the errors experienced to date.
7. Identify and use standard FFS reports, such as the daily FFS transaction report to monitor accuracy of data entered into FFS.
8. Establish an organization structure within the Office of Finance to review transactions processed in FFS on a regular basis.
Management Response
On December 23, 1996, the Acting CAO fully concurred with the finding and recommendations (see Appendix). As indicated in the response, the Acting CAO intends to implement all aspects of the recommendations.
Specifically, the Acting CAO plans to defer all changes to the Monthly Financial Statement and Statement of Disbursements until a System Development Life Cycle methodology is implemented. At that time, changes to these statements, as well as the Statement of Obligations, will be documented, formally reviewed, and presented to the Steering Committee for approval before the statements are modified. In addition, cost and schedule envelopes will be developed for each proposed change. The Acting CAO also indicated that Finance will dedicate personnel to ensure the timeliness and accuracy of the statements. In addition, Finance plans to use its records on voucher flow and productivity, as well as historical data to ensure that forecasted periods of reduced productivity are properly addressed. The Acting CAO will also include in his plan to complete the implementation of Phase II the task to complete policies and operating procedures. The Acting CAO's response also noted that Finance is undertaking a plan to modify existing policies and procedures to add steps that will help minimize the errors experienced to date. Finance also plans to review all applicable standard FFS reports to identify their utility. Additionally, the organization and staffing plan described in the response to Finding A allows for a review of samples of processed transactions in FFS. This function will identify the cause of the error and the corrective actions required to eliminate the cause.
Office of Inspector General Comments
The Acting CAO's planned actions are responsive to the issues
we identified, and when fully implemented, should satisfy the
intent of our recommendations.
