District of Columbia: Weaknesses in Financial Management System
Implementation (30-APR-01, GAO-01-489).
The District of Columbia is acquiring a new financial management
system to improve its accountability over government
expenditures. This report assesses the status of the District of
Columbia's implementation of important components of this system,
including its new core general ledger System of Accounting and
Reporting (SOAR). GAO found that the District is in its fourth
year of implementing its new financial management system, but
essential elements of the system are not yet operational. Two
components of SOAR have not been fully implemented: the budget
module is on hold, and the fixed assets module is incomplete. The
implementation of the systems that feed into SOAR--personnel and
payroll, procurement, and tax--is incomplete and the systems lack
electronic interfaces with SOAR. Because the financial management
system is incomplete, much of the District's financial management
and budget information is produced through cumbersome, manual
processes and the extraordinary efforts of a few key staff.
District officials need to take time to assess the current status
of the city's financial system, to identify problems, and to
establish a disciplined process to address these problems through
the completion of its financial systems implementation.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-489
ACCNO: A00925
TITLE: District of Columbia: Weaknesses in Financial Management
System Implementation
DATE: 04/30/2001
SUBJECT: ADP procurement
Cost overruns
Financial management systems
Information resources management
Private sector practices
Schedule slippages
Strategic information systems planning
District of Columbia System of
Accounting and Reporting
District of Columbia
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GAO-01-489
GAO United States General Accounting Office
Report to the Chairman, Subcommittee on the District of Columbia, Committee
on Appropriations, House of Representatives
April 2001 DISTRICT OF COLUMBIA
Weaknesses in Financial Management System Implementation
GAO- 01- 489
Page 1 GAO- 01- 489 District of Columbia Financial Management System
April 30, 2001 The Honorable Joe Knollenberg Chairman, Subcommittee on the
District of Columbia Committee on Appropriations House of Representatives
Dear Mr. Chairman: This report responds to your concerns about the District
of Columbia?s progress in implementing its financial management system and
the system?s ability to provide reliable data for decision- making. As
agreed with your office, we assessed the status of the District?s
implementation of important components of the overall financial management
system, including its new core general ledger System of Accounting and
Reporting (SOAR). You also specifically asked us to review the District?s
budget formulation process, including how the District accounts for its
operations and monitors budgetary status. We are also providing a status of
the District?s efforts to implement our prior recommendations on these
matters. (See appendix I.)
The District is now in its fourth year of implementing its new financial
management system, but essential elements of the system are not yet
operational. 1 Two components of SOAR have not been fully implemented: the
budget module is on hold, and the fixed assets module is incomplete. The
implementation of systems that feed into SOAR- personnel and payroll,
procurement, and tax- is incomplete and the systems lack electronic
interfaces with SOAR. Further, the personnel and payroll system, which the
District estimates has cost about $13 million so far, may be abandoned.
Currently, the District has no timetable or comprehensive plan for fully
implementing its financial management system.
Because the financial management system is incomplete, much of the
District?s financial management and budget information, including its annual
financial statements, is produced through cumbersome, manual processes and
the extraordinary efforts of a few key staff. For example,
1 The financial management system includes SOAR as well as other feeder
systems requiring interfaces with SOAR.
United States General Accounting Office Washington, DC 20548
Results in Brief
Page 2 GAO- 01- 489 District of Columbia Financial Management System
the District does not have a formal budget formulation process to ensure
that planned spending is carried out as envisioned. Instead, it relies on an
error- prone manual process to periodically compare actual spending to
planned budget limits. Thus, the District cannot reliably and regularly
report on whether it has spent its budget as intended for targeted city
services, such as trash collection, nor can it reliably report on the cost
of those services. The District is continuing to conduct business process
reengineering for its budget process before making any decisions about
implementing a budget system.
The District recently received its fourth consecutive unqualified or ?clean?
opinion on its financial statements for fiscal year 2000 and reported a
$240.7 million surplus. Consequently, as called for by statute, the District
of Columbia Financial Responsibility and Management Assistance Authority
(Authority), which has overseen financial management since 1995, will return
full financial management to the elected District government by October
2001. The District?s unqualified opinions on its financial statements,
however, are primarily the result of the tremendous amount of effort
expended by a few key individuals who were able to accomplish this yearly
task despite the serious weaknesses of the city?s financial management
system, including its inability to routinely produce reliable data on
demand. Such a situation cannot be sustained without significant costs to
the District. One of the reasons that the District finds itself in this
situation is that it has not employed the necessary disciplined processes to
develop and implement its financial management system. In addition, the
District has not conducted a comprehensive assessment of its human capital
needs for financial management functions. Such an assessment would help to
ensure that the District?s financial professionals are equipped to meet the
challenges of successfully implementing its financial management system to
support the District?s mission and goals. Reflecting the current overall
status of implementation, officials from the District?s five pilot agencies
have indicated that the experience of their agencies with SOAR, as it is
currently implemented, does not meet the expectations originally set forth
for the new system, and that old deficiencies have still not been remedied.
In our earlier work, which addressed the District?s need for a new financial
management system, we reported that experience studying the success and
failure of hundreds of information systems has shown that hardware and
software do little to improve financial management unless they are part of
an overall assessment of the processes, personnel, and equipment that make
up the entire system. In each of our reports leading up to the September
1997 system acquisition contract and since the acquisition, we
Page 3 GAO- 01- 489 District of Columbia Financial Management System
have emphasized the need for a disciplined approach to the development of a
financial management system. We noted that the key to having a disciplined
system development effort is to have disciplined processes in multiple
areas, including requirements management, project planning, project tracking
and oversight, quality assurance, configuration management, and risk
management.
In our July 1997 report, 2 we stated that it was important that the District
adopt and follow the best practices of information management in order to
avoid costly failure while acquiring a new financial system that meets the
city?s needs. We also noted that computer modernizations are typically risky
ventures, especially if entities do not take basic steps in planning
projects and controlling costs. In 1998, 3 we reported that the District was
depending largely on specific individuals for success in acquiring its
financial management system rather than basing success on well- defined
software acquisition management practices. For example, we noted that the
District did not have an organizational policy for establishing and managing
software- related requirements. We cautioned that this approach greatly
reduced the probability that the system would be delivered on schedule and
within budget and consistently perform as intended.
The District proceeded with an ambitious implementation schedule that
abbreviated and eliminated key steps in a disciplined process. As our
current review indicates, SOAR implementation has been plagued by delays and
increasing costs. Almost 6 years after we began reviewing the system and
started making recommendations, the District?s financial management system
now serves as yet another cautionary example of the risks entities run when
they choose to short- cut a structured, disciplined approach to the
planning, acquisition, and management of a new financial management system.
The District has completed action on very few of the recommendations we have
made in reports dating back to 1995.
We are making recommendations that focus on the District?s need to apply a
structured, disciplined approach to completing the implementation of SOAR
and related financial management systems to ensure that the entire financial
management system is properly, expeditiously, and fully
2 District of Columbia: Status of Efforts to Develop a New Financial
Management System (GAO/ AIMD- 97- 101R, July 9, 1997). 3 District of
Columbia: Software Acquisition Process for a New Financial Management System
(GAO/ AIMD- 98- 88, April 30, 1998).
Page 4 GAO- 01- 489 District of Columbia Financial Management System
implemented. These recommendations also address the District?s need to
ensure that, when SOAR is fully implemented, it effectively and efficiently
meets the requirements of its intended users and achieves the needed
financial management reform in the District envisioned at the outset of
implementation.
In commenting on a draft of this report, the Chief Financial Officer of the
District agreed with our recommendations and provided additional details on
four areas: (1) our prior recommendations, (2) our recommendation about
assessing human capital needs, (3) our recommendation regarding the budget
process, and (4) implementation of SOAR. With respect to the CFO?s comments
on SOAR, the results of our work showed that the CFO?s characterization of
the progress made to date was overly optimistic. The CFO?s comments are
reprinted in appendix II. A representative from the Mayor?s Office also
reviewed this draft, along with the CFO?s comments, and stated that the
Mayor?s Office had no further comments.
On June 21, 1995, we testified 4 that the District?s financial records were
inadequate and that the City did not have the most basic financial data,
including the status of its expenditures against budgeted amounts, the
amount of bills owed, or the balance of cash available. As a result,
District managers did not have fundamental financial information necessary
to help control spending and costs and to estimate budget and cash needs.
Given the long- standing problems with the District?s financial management,
we recommended that the Authority study the accounting and financial
management information needs of the District. 5
Subsequently, the Authority and the District requested and the Congress
approved funds to assess the need for implementing a new financial
management system. The 1996 District of Columbia Appropriations Act (Public
Law 104- 134) authorized the District of Columbia government to spend $28
million of its revenues to implement a replacement for its existing
financial management system. Of the $28 million, $2 million was provided for
a needs analysis and assessment of the existing financial management
environment. Public Law104- 134 made the remaining $26 million available to
procure the necessary hardware; install new
4 District of Columbia: Improved Financial Information and Controls Are
Essential to Address the Financial Crisis (GAO/ T- AIMD- 95- 176, June 21,
1995 ). 5 See GAO/ T- AIMD- 95- 176, June 21, 1995 . Background
Page 5 GAO- 01- 489 District of Columbia Financial Management System
software; and perform system conversion, testing, and training after the
needs analysis and the assessment were received by the Congress.
The District is now in its fourth year of implementing its new financial
management system. On September 4, 1997, the Authority awarded a 1- year
contract with four option years potentially totaling $21 million to design
and install a state- of- the- art financial management system for the
District. The District began working with the contractor in September 1997
and piloted the new system at five agencies beginning February 1, 1998, with
the goal of District- wide implementation of SOAR on October 1, 1998.
SOAR consists of commercial, off- the- shelf applications used by state and
local governments. SOAR was expected to strengthen control over
appropriations and spending plans; enhance tracking of grants and projects;
automate and streamline the financial management process; record obligations
as incurred; make and track payments and disbursements; monitor performance
measures by program and organization; prepare timely, accurate, and reliable
financial reports; expedite the month- end closing process; and provide the
ability to input and control data on- line.
SOAR is the District?s central general ledger system and includes the five
following components:
The Relational Standard Accounting and Reporting System (R* STARS), the
core accounting module, provides general ledger capabilities as well as
budgetary control, cash management, expenditures/ payables, revenue/
receivables, and budget execution functions.
The Advanced Purchasing and Inventory Control System (ADPICS) is
integrated with R* STARS and provides a comprehensive system of materials
management encompassing requisition/ purchase transactions, accounts
payable, and inventory processing.
The Performance Budgeting module supports the development of operating and
capital budgets and provides information on program costs and performance
measures.
The Fixed Assets System supports accounting, management, and control over
capital and controllable assets.
The Executive Information System (EIS) is a high- level analysis tool for
program and financial management that enables data modeling, creates
analyses for ?what if? scenarios, and offers the flexibility to generate ad
hoc reports.
Page 6 GAO- 01- 489 District of Columbia Financial Management System
In addition to SOAR, there are other critical feeder systems that make up
the District?s financial management system. Figure 1 shows the various SOAR
components within the District?s overall financial management system.
Page 7 GAO- 01- 489 District of Columbia Financial Management System
Figure 1: Current Status of the District?s Financial Management System S OAR
Fixed Assets
(FAS) Purchasing
(ADPICS) Executive
Information System
Procurement (Prism/ OCP
Express) Core
Accounting (R* STARS)
* funds/ cash control accounts receivable accounts payable general
ledger budget execution Personnel
& payroll (CAPPS)
Integrated tax (ITS) Personnel
& payroll (UPPS) Business Individual Real
property Manual interface Partially implemented
Fully implemented Automated interface Not implemented
Budget Creation Performance
measures Program cost
information (Performance
Budgeting)
Page 8 GAO- 01- 489 District of Columbia Financial Management System
To fulfill our objectives, we
analyzed the District?s financial management systems project and program
management plans, work breakdown implementation schedules, project cost
tracking documents, contract records, meeting minutes, and briefing reports;
reviewed the District?s budget formulation process, budget process manual,
and the Government Finance Officers Association?s report on the District?s
budget office organizational structure;
reviewed reports issued by the Inspector General of the District; and
reviewed audit reports and related documents describing financial
management system implementation activities and weaknesses identified during
financial statement audits of the District covering fiscal years 1995
through 2000.
We met with the following District personnel:
Chief Financial Officer;
Deputy CFO for the Office of Budget and Planning;
Deputy CFO for the Office of Financial Operations and Systems;
SOAR Program Management Office officials;
Director, Mission Support, OCFO;
Director, Information Systems Administration, Office of Tax and Revenue;
Office of the Inspector General officials;
Representatives from the Authority;
agency CFOs and financial staff; and
Office of Procurement staff. We also met with contractors responsible for
implementing the new system.
Our work was performed from September 2000 through February 2001 in
accordance with generally accepted government auditing standards. We
requested and obtained comments on a draft of this report from the Mayor of
the District of Columbia and the District?s Chief Financial Officer. These
comments are discussed in a later section of this report and reprinted in
appendix II. Scope and
Methodology
Page 9 GAO- 01- 489 District of Columbia Financial Management System
Financial management requires that financial and program managers be
accountable for financial results of actions taken, control over the
government?s financial resources, and protection of assets. The District?s
Office of the Chief Financial Officer (OCFO) has responsibility for
effective financial management in the District. In order to meet the above
requirements, financial management systems must be in place to process and
record financial events effectively and efficiently and to provide complete,
timely, reliable, and consistent information for decisionmakers and the
public.
Over the past several years, the District has undertaken a number of
initiatives designed to improve its financial management environment.
However, a number of key initiatives have still not been completed or have
been placed on hold, and some are still being revised. For example, the
District has yet to complete implementation of SOAR, the personnel and
payroll system, the procurement system, and the tax system. The District is
also in the process of reengineering its budget process before deciding
whether to implement a new budget process and fully integrate the budget
data within SOAR. In addition, the District has not yet implemented the
fixed asset module of SOAR.
The original implementation schedule indicated that SOAR would be fully
implemented by September 30, 1998, and the external feeder system and the
related interfaces were scheduled for completion by April 1999. The SOAR
implementation, however, has been marked by delays. As we noted in our April
1998 report, 6 we found severe weaknesses in critical implementation
processes, including lack of requirements development and project
management. For example, the District did not have an organizational policy
for establishing and managing software- related requirements and no clear
assignment of responsibility for requirements development and management. As
a result, the District did not have assurance that the new financial
management system or any other software acquisition project undertaken would
be conducted in a disciplined manner. Further, studies have shown that
problems associated with requirements management are key factors in software
projects that
6 See GAO/ AIMD- 98- 88, April 30, 1998. Major Components of
the District?s System of Accounting and Reporting Are Not Operational
Page 10 GAO- 01- 489 District of Columbia Financial Management System
do not meet their cost, schedule, and performance goals and that these
systems can cost many times more than expected if done improperly. 7
The Performance Budgeting module included in SOAR was expected to facilitate
the management of the entire budget formulation process, from budget
submission to final review and approval. One of the primary objectives of
the Performance Budgeting module is the automation of the annual budget
development process to replace the present cumbersome, manual process. The
module was also expected to provide financial reporting at various program
levels as needed and contains a performance measures feature to capture
information for performance measures. District officials anticipated that
the performance measures feature in the module would be able to provide
comparative and cost information for all levels of programs throughout the
District. Comparative and accurate cost information would enable
stakeholders to make more informed decisions, eventually providing better
service to the citizens of the District. District officials anticipated that
performance measures, once they were developed for programs in the District,
could be maintained and tracked easily and accurately in the module.
At the time of our review, the District had decided to suspend the
implementation of the Performance Budgeting module. District officials told
us that in addition to the need for reengineering the budget process, the
current design of the Performance Budgeting system does not fully support
the District?s information needs. Specifically,
the Performance Budgeting module is not a fully integrated product of the
core accounting system and will require multiple and frequent updates to the
two systems in order to maintain a fully integrated system as updates or
upgrades occur to one or both systems;
the current, nonintegrated design of the Performance Budgeting module
limits both agency budget staff and the Office of Budget and Planning (OBP)
from fully using information from the core accounting system; and
7 Barry W. Boehm and Philip N. Papaccio, Understanding and Controlling
Software Costs, IEEE Transactions on Software Engineering, Volume 14, Number
10, October; Charting the Seas of Information Technology, The Standish
Group, 1994; Capers Jones, Assessment and Control of Software Risks,
(Yourdon Press), 1994; and Dean Leffingwell, Calculating the Return on
Investment from More Effective Requirements Management, American
Programmer, 1997. Performance Budgeting
Module Put on Hold
Page 11 GAO- 01- 489 District of Columbia Financial Management System
inadequate reporting tools within the Performance Budgeting module prevent
OBP from generating essential budget reports on a timely basis to the
stakeholders.
In addition to the above financial system issues, District officials stated
that use of the Performance Budgeting module at this time presents a number
of other technical support system challenges and the current condition of
the District?s financial support systems needs to be stabilized before
implementation. For example,
The lack of a stable unified Wide Area Network (WAN) precludes District
agencies from accessing the system and developing their fiscal year 2002
budgets. However, according to the SOAR Project Plan, the necessary
infrastructure analysis was completed on January 6, 1998.
Current client server resources prevent agency budget staff from
concurrently accessing the Performance Budgeting module during peak budget
season, which can result in users being locked out or knocked off the
system.
In addition to the above factors, further review by OBP has resulted in a
decision by the District to reengineer the budget formulation process and
develop a requirements definition 8 for the new process and then select a
new software solution to deliver the results.
The Fixed Assets module was intended to track the acquisition, transfer,
disposition, and maintenance of the District?s capitalized assets (such as
personal property, equipment, and buildings) and support accounting,
management, and control over these assets, which totaled a reported $3.1
billion in fiscal year 2000. The District?s implementation schedule for this
module has continually been revised. For example, originally scheduled to be
implemented in February 1999, the Fixed Assets module is now planned to be
implemented by the end of fiscal year 2001- over 2 years after the initially
planned implementation. According to the SOAR
8 Requirements are the blueprint that system developers and program managers
use to design and develop a system. It is critical that requirements be
carefully defined and flow from the concept of operations (how the
organization?s day- to- day operations are or will be carried out to meet
mission needs). Ill- defined or incomplete requirements have been identified
by many system developers and program managers as a root cause of system
failure. Without adequately defined and organizationally approved
requirements, a system will need extensive and costly changes before it can
become fully operational. Fixed Assets Module Has
Not Been Implemented
Page 12 GAO- 01- 489 District of Columbia Financial Management System
Program Management Office (PMO), the delay was the result of multiple
competing priorities such as the Year 2000 conversion and the production of
the Comprehensive Annual Financial Report (CAFR) combined with the problem
of limited personnel resources. Currently, fixed assets are recorded by each
agency using a variety of methods, including manually updated ledger books
and off- line automated tools. Such methods, however, are error- prone and
could lead to incorrect recording and reporting of assets. Once the Fixed
Assets module is implemented, according to District officials, all District
agencies will use this same tool to account for assets. However, the SOAR
PMO does not have a documented comprehensive plan for managing the
implementation of the Fixed Assets module.
Although the financial management system was scheduled to become fully
integrated in April 1999, significant external feeder systems, including
personnel and payroll functions, the procurement system, and the tax system,
are not fully integrated with SOAR as originally planned because the feeder
systems have not been completed.
In addition to the feeder systems not being completed, current monitoring of
interface development is not documented. For example, we asked the SOAR PMO
for an update on the status of the interface development and we were given
the most recent interface status report, which was dated September 14, 1998.
The SOAR PMO was unable to provide an explanation as to why the status
report was not being updated more frequently even though work was ongoing.
In our July 1997 report, 9 we raised concerns about the District?s failure
to focus more broadly on its financial requirements, such as those stemming
from the need to integrate SOAR with feeder systems. We noted that the
District had not defined how the interfaces would work or what data would be
provided for each feeder system. In addition, as we reported in October
1997, 10 the District?s time frames for implementing its systems seemed to
be ambitious in light of the complex nature of the District?s financial
management structure and the lack of identified and confirmed requirements
for several key systems, such as the feeder systems.
9 See GAO/ AIMD- 97- 101R, July 9, 1997. 10 District of Columbia: Inspector
General Independence as Compared to Federal Agencies and Acquisition of a
New Financial Management System (GAO/ AIMD- 98- 27R, October 21,
1997 ). Significant Related
Financial Systems Are Not Fully Operational
Page 13 GAO- 01- 489 District of Columbia Financial Management System
The District acquired and developed a new personnel and payroll system in
order to improve the quality of its business processes and to replace an
aging legacy system. As we noted in a 1995 testimony, 11 personnel
information on the District?s 40,000 employees has long been error- prone
and inconsistent. Beginning in 1991, the District created an action plan to
acquire an automated human resources management information system, called
the Comprehensive Automated Personnel and Payroll System (CAPPS). CAPPS was
estimated to cost about $13 million to develop and was expected to be
deployed by December 1999. The District had anticipated that CAPPS would
provide more robust human resources capability than the prior legacy system,
such as providing on- line funding data at the agency level, budgetary and
spending controls at the position level, and accurate accounting of
expenses, such as overtime.
However, as we reported in December 1999, 12 the District did not
effectively plan for CAPPS. We noted that the District did not develop a
project management plan and a risk management plan; obtain agreement from
the acquisition team, system users, and the contractor on detailed
requirements for CAPPS; or establish a configuration control process to
control the changes that were made to data tables connected to the software
package that the District acquired for CAPPS. By not implementing these
critical management processes, the District lacked the means to establish
realistic time frames for CAPPS, track development along those time frames,
and ensure that changes being made to CAPPS were consistent and in line with
business requirements. In fact, since beginning the CAPPS initiative in
1991, the District has had to continually revise its CAPPS implementation
deadline.
As a result of these delays, some District agencies are using the CAPPS
system, while others continue to use the old personnel and payroll system,
the Unified Personnel and Payroll System (UPPS), until a plan for a new
payroll processing system can be developed. DC Public Schools, the Fire
Department, and a few smaller agencies are using CAPPS to process payroll,
while the remaining District agencies process their payroll through UPPS.
Relying on dual systems in this manner leads to lack of standardization and
creates unnecessary effort and inefficiencies. In
11 District of Columbia: Weaknesses in Personnel Records and Public Schools?
Management Information and Controls (GAO/ T- AIMD- 95- 170, June 14, 1995).
12 District of Columbia: The District Has Not Adequately Planned for and
Managed Its New Personnel and Payroll System (GAO/ AIMD- 00- 19, December
17, 1999). Weaknesses and
Uncertainties Surround Personnel/ Payroll System
Page 14 GAO- 01- 489 District of Columbia Financial Management System
addition, CAPPS is not electronically integrated with SOAR, and both CAPPS
and UPPS data must undergo a conversion process before interfacing with
SOAR, creating further inefficiencies in processing and reporting payroll-
related costs.
Furthermore, the District is in the process of determining whether it will
continue with CAPPS or whether an entirely new system is needed. In an
August 11, 2000, letter to the Mayor, the District CFO stated that ?the new
CAPPS system, for a number of reasons, is compromised beyond repair. While
it continues to pay people accurately, it has been customized to the point
that its basic architecture has been destroyed. Underlying calculations
necessary to make retirement computations and W- 2s are likely fatally
compromised.? This combination of weaknesses and uncertainties surrounding
CAPPS further call into question the District?s ability to resolve
implementation issues and its ability to pay its employees accurately and on
time and account for their retirement and benefits.
According to a District official, the Integrated Tax System (ITS) is
intended to be a complete reengineering of the Office of Tax and Revenue?s
(OTR) business process, at an estimated cost of about $63 million. It came
about because of serious concerns related to business processes, collection
of delinquent accounts, tax compliance/ discovery, data purification, work
flow management, and the integration of revenue management with other key
governmental functions (for example, unemployment compensation, business
registration and regulation, and child support enforcement).
The old system consisted of a stand- alone, nonintegrated system for each
major tax category- business, real property, and individual. For example, if
a taxpayer was due a refund from an individual tax return but owed property
taxes, there was no linkage under the old structure that would allow these
two tax systems to interact to offset one another. District officials told
us that the Integrated Tax System will allow the District to integrate all
tax types under one system. On November 13, 2000, the District?s Business
Tax module became operational and interfaced with SOAR. The real property
and individual tax modules are expected to be completed and integrated with
SOAR in January 2002. Until the real property and individual tax modules are
implemented, the District will continue the cumbersome practice of manually
entering data for property and individual taxes into SOAR. Integrated Tax
System Is
Not Fully Implemented
Page 15 GAO- 01- 489 District of Columbia Financial Management System
In July 2000, the District?s Inspector General reported 13 that the District
was using two distinctly different procurement systems. The Office of
Contracts and Procurement (OCP) purchased PRISM/ OCP Express 14 as its
procurement package, while the CFO uses ADPICS for procurement transactions.
As a result, various offices rely on different systems to process
procurements. OCP has spent at least $14 million since it began the process
of implementing a new procurement system 13 years ago. A July 2000 DC Office
of Inspector General report stated that PRISM/ OCP Express and SOAR had
interface problems and that procurement data were being maintained in both
systems. Furthermore, reports generated with procurement data must be
developed with the coordination of the responsible agencies and after
reconciliation of data from both systems. According to a District official,
this situation makes it difficult for them to track procurements and
payments, and the use of both systems has produced inefficiencies,
duplication, and waste within the District. An OCP official told us that
they recently hired a contractor to review OCP Express capabilities and
determine what modifications, if any, could be made to enhance its
functionality. According to District officials, until the District completes
its assessment of the procurement system, it plans to continue using ADPICS
to process procurement transactions through SOAR as ADPICS is the only
available mechanism for entering procurement transactions into SOAR.
We also reported in our January 31, 2001, report 15 that serious and
pervasive computer security weaknesses place the DC Highway Trust Fund and
other District financial, payroll, personnel, and tax information at risk of
inadvertent or deliberate misuse, fraudulent use, and unauthorized
alteration or destruction without detection. A primary reason for the
District?s information system control problems was that it did not have a
comprehensive computer security planning and
13 Audit of Procurement Activities Office of Contracting and Procurement,
Office of the Inspector General, Government of the District of Columbia,
OIG- 20- 99PO, July 27, 2000. 14 PRISM is an automated commercial off- the-
shelf procurement system that tracks and maintains small purchases and
contract records. PRISM has three modules: (1) OCP Express (small
purchases), (2) planning, and (3) contracts. PRISM was intended to allow
District agencies the ability to interface and automate all procurement
activities from the requisition to the receipt of goods or services.
15 Information Security: Weak Controls Place DC Highway Trust Fund and Other
Data at Risk (GAO- 01- 155, January 31, 2001). The District Relies on Two
Procurement Systems Computer Security Weaknesses Place Information at Risk
Page 16 GAO- 01- 489 District of Columbia Financial Management System
management program. An effective program includes guidance and procedures
for assessing risks, establishing appropriate policies and related controls,
raising awareness of prevailing risks and mitigating controls, and
evaluating the effectiveness of established controls. Such a program, if
implemented effectively, would provide the District with a solid foundation
for resolving existing computer security problems and managing its
information security risks. District management stated that it has
recognized the seriousness of the weaknesses we identified and expressed its
commitment to improving information system controls.
As discussed earlier, the District has placed the implementation of the
Performance Budgeting system module on hold. A District official told us
that it needs to conduct business process reengineering of the budget
process before making a decision on the appropriate solution for its budget
and related reporting needs. In the meantime, the District continues to rely
on a manual, cumbersome process each year to develop the budget.
District budget officials have told us that a number of improvements have
been made to the budget process for fiscal year 2002 that they believe will
address some of the problems they faced in developing the fiscal year 2001
budget. Table 1 compares the fiscal year 2001 budget process and results to
the planned fiscal year 2002 budget process, modifications, and expected
results, as provided by the District CFO. However, the District will enter
its budget formulation process for fiscal year 2002 without an implemented
financial system for gathering and formulating its budget data. Furthermore,
the District will not have adequate program- level cost and budget results
data for fiscal year 2001 for use in formulating its fiscal year 2002
budget. Status of District Efforts to
Improve Its Budget Process
Page 17 GAO- 01- 489 District of Columbia Financial Management System
Table 1: Comparison of Fiscal Year 2001 and 2002 Budget Processes and
Results FY 2001 process FY 2001 results FY 2002
process FY 2002 modifications
FY 2002 expected results
Budget developed without goals
Agency budget allocation decisions and programmatic narratives did not
support Mayor?s priorities or Citizen Summit goals a
Budget will be guided by goals
FY 2002 budget manual articulates Mayor?s priorities, includes performance
measures, and establishes clear funding targets that agencies must achieve
during the baseline budget development
Budget development and presentation will clearly support goals
Top- down development of budget
Budget failed to completely account for onetime costs only known to the
agency for FY 2000 and FY 2001
Bottom up development of budget
Agency baseline budgets will be requested at the detail level. Changes from
FY 2001 reallocated budget will be identified during the agency baseline
submission
Budget will be developed with clear explanation for each change from the FY
2001 congressional budget at the responsibility center level Unilateral
Baseline budget
did not receive acceptance by executive or legislative branch
Collaborative Draft copies of the budget manual were distributed to all
agency directors and CFOs along with stakeholders. Input was requested and
used to finalize the FY 2002 budget manual
Agency directors and District stakeholders will be active participants in
developing and shaping the FY 2002 budget
Reactive Fostered a perception of incompetence, detracted from substantive
issues, and jeopardized the FY 2001 Mayor?s budget
Proactive and guiding FY 2002 budget
manual provides
?forward thinking? process that anticipates stakeholder requests for
detailed information. This process provides information needed to develop a
sound
The budget process will provide a structured format for policy development
and will anticipate inquiries on the content and development
Page 18 GAO- 01- 489 District of Columbia Financial Management System
FY 2001 process FY 2001 results FY 2002
process FY 2002 modifications
FY 2002 expected results
baseline budget that will allow stakeholders to focus on policy issues
of the budget a On November 20, 1999, as part of Mayor Williams?
Neighborhood Action initiatives, more than 3,000 residents came together at
this summit to review and comment on the Mayor?s Draft City- Wide Strategic
Plan and identify citywide goals.
Source: Office of the Chief Financial Officer, District of Columbia
Government.
Because the District was in the early stages of budget formulation, we were
not able to assess whether these improvements will achieve their intended
results. Further, the District was unable to provide us with any
documentation to support that it had undertaken a structured and disciplined
approach to implementing these actions.
In order to address its budget processes and systems, the District
contracted with the Government Finance Officers Association (GFOA), a leader
in state and local budgeting and finance, to help evaluate how well OBP was
structured to carry out its budget and financial functions. The report, 16
which GFOA issued on November 2, 2000, focused on an organizational review
of the budget office internally and as it related to other District
agencies.
GFOA found that OBP faced organizational and personnel management issues.
For example, the study cited the following issues: organizationally, there
is little communication or coordination between OBP divisions during major
budget cycle periods; OBP lacks clear organizational and management policies
regarding budget development and execution; staff need training on the
current financial management system and the acquisition of analytical tools
to perform financial analyses; and OBP staff have not had fiscal analyses
sufficiently incorporated into their typical duties, such as expenditure and
revenue analyses, cost- benefit analyses, and program outcome analyses. OBP
officials stated that, as a result of the GFOA recommendations, they have
made a number of staffing and organizational changes, which were consistent
with many of the initiatives
16 The District of Columbia Government, Final Report: Organizational Review
of the Office of Budget and Planning (Government Finance Officers
Association, Report 2000- 52, November 2, 2000).
Page 19 GAO- 01- 489 District of Columbia Financial Management System
for change they had already started. OBP officials stated that they have
taken the following actions:
created the position of Chief Operating Officer to increase overall
program efficiency and accountability in three programs: data management,
organization management, and communications;
realigned the Associate Deputy CFO (ADCFO) position to sharpen OBP?s
quality of forecasting and long- term fiscal planning ability with ADCFO
assuming responsibility for the functions of economic analysis, budget
execution and reporting, and legislative affairs, which are three new
branches;
assigned the Economic Analysis Branch the lead on improving performance-
based budgeting for the District;
designated the Legislative Affairs Branch as the leading provider of
legislative support to OCFO and other stakeholders, providing legislative,
legal, and policy analysis to ensure that the goals of District stakeholders
are achieved;
gave the Organizational Management Branch responsibility for supervising
and coordinating general office operations and building morale and reducing
attrition through reform, orientation, recruitment, outreach efforts,
training, and career development; and
reorganized the Operating and Capital Budget divisions, which under the
old structure functioned independently of each other with little or no
collaboration or interaction, into a two- pronged division that
strategically links operating and capital budget operations.
According to District OBP officials, the above changes have improved budget
forecasting activities as well as provided greater control over budget
execution and fiscal oversight.
We agree that OBP needed to address personnel and related organizational
issues in order to better align its operations and facilitate and enhance
its ability to carry out its budgetary and financial responsibilities.
However, because these efforts were only in the early stages of
implementation, we could not assess their impact on OBP?s operations or on
its ability to successfully implement a budgeting system in the future.
Until the District develops a disciplined and structured approach to its
business process reengineering efforts for its budget process, it will
continue to develop its budget using a process that is cumbersome and
inefficient. Until a budget formulation and execution system is implemented
and fully integrated with its financial systems, the District?s budget is
not likely to reflect the cost of services at the program level
Page 20 GAO- 01- 489 District of Columbia Financial Management System
because the District currently does not have a way of measuring those costs.
As originally envisioned, SOAR was expected to provide general ledger,
grants management, fixed assets management, budget execution, cash
management, and budget formulation functionality. SOAR was expected to
strengthen control over appropriations and spending, provide enhanced
tracking of grants and projects, automate and streamline the financial
management process, record obligations as incurred, track payments and
disbursements, monitor performance measures by program and organization,
prepare timely, accurate, and reliable financial reports, expedite the
month- end closing process, and provide the ability to input and control
data on- line. Overall, the District and its residents were expected to
benefit from improved financial management and reporting of public services
and resources. Our discussions with SOAR pilot agencies indicate that these
expectations have not been realized.
Five District agencies were used as pilot agencies during the systems
implementation- the District of Columbia Public Schools (DCPS), Department
of Public Works (DPW), Department of Human Services (DHS), Metropolitan
Police Department (MPD), and Financial and Technical Services. The pilot
program provided an opportunity for agencies with unique requirements to
customize the implementation of SOAR in their agencies. The pilot program
also provided a test and
?exercise? of the implementation process as well as a test of the function
of the new system. The pilot was designed to identify problems and develop
solutions prior to full implementation.
We contacted each pilot agency to obtain officials? views on SOAR?s current
operational status. In conjunction with our discussion with the pilot
agencies, we reviewed the expectations communicated in a December 1997
presentation in which the OCFO provided a detailed list of the former
financial management system?s deficiencies along with the anticipated
capabilities of the new financial management system that were expected to
remedy these deficiencies. The following are examples of current operational
issues identified by officials at the pilot agencies where anticipated
resolutions did not materialize.
All five pilot agencies reported that they need more recent data to more
fully use the SOAR EIS, a high- level management tool capable of generating
ad hoc reports. Currently, data in EIS is updated weekly, even SOAR User
Expectations Have Not Been Fully Met
SOAR Currently Does Not Meet Financial Information Needs
Page 21 GAO- 01- 489 District of Columbia Financial Management System
though the expectation for the new system was that users would have
?real time, on- line information.?
Four of the five pilot agencies indicated that the lack of full
integration between the core accounting system and feeder systems is a
problem. For example, two agencies said that they have to spend extra time
reconciling payroll transactions between CAPPS and SOAR in order to ensure
that the payroll data in both systems is accurate and complete.
Four of the five pilot agencies indicated that the help desk facility
needs improvement because it does not provide adequate assistance.
Four of the five pilot agencies indicated that the SOAR training was not
tailored to their specific needs.
Three out of the five pilot agencies indicated that they need enhanced
project costing capabilities. According to one agency official, SOAR does
not provide cost information on specific programs or activities. This
results in agencies having to maintain information outside the system in an
attempt to track program costs.
Our work as well as other studies have shown that problems associated with
requirements management are key factors in software projects that do not
meet their cost, schedule, and performance goals. By not clearly identifying
and defining user requirements up front, the financial management system is
currently not able to fulfill the financial management and reporting needs
of its users.
Training is a critical component of successful implementation of a new
financial management system and can be accomplished through a formal
program, on- the- job training, and the use of experts assigned to each
agency. We previously reported 17 that from January 1998 through April 1999,
42 percent of SOAR users did not attend scheduled training. In December
2000, the SOAR PMO identified a core training curriculum consisting of nine
courses. According to the SOAR PMO, less than 50 percent of the SOAR user
community had completed the new core training curriculum.
The SOAR Program Director told us that conflicting priorities contributed to
the low attendance rate, including the large amount of effort needed to
complete the District?s annual financial statements and prepare for its
17 District of Columbia: New Financial Management System (GAO/ AIMD- 99-
217R, June 18, 1999). SOAR Training Was Not
Comprehensive
Page 22 GAO- 01- 489 District of Columbia Financial Management System
annual audit. According to the same official, another factor was the lack of
complete buy- in by the users of the new system. In addition, a District
official stated that many reported transaction errors resulted from a lack
of understanding of the impact of transactions and their effect on general
ledger accounts, coupled with the learning curve experienced with the
implementation of the new system. Furthermore, several pilot agency
officials stated that the overall training was generic and not specific to
the District?s needs.
In our June 1999 report, 18 we stated that the District planned to pilot a
job certification program for employees in financial positions. Under this
program, employees would be certified for financial positions based on
training and testing. In November 2000, the SOAR PMO told us that they are
still reviewing the details of implementing a certification program. The
SOAR PMO also said that a comprehensive training plan for financial
management personnel for fiscal year 2001 does not exist. The SOAR Steering
Committee had determined that there was a need for more District user access
to individuals with enhanced SOAR expertise.
At the same time, the District is in the process of implementing a new
program called the ?Super Users? program. The goal of the program is to
develop a team of ?super users,? individuals with advanced SOAR skills, to
serve as mentors and providers of on- the- job training to users. District
officials said they had recently selected eight individuals for this
program, and a recruitment effort is underway to identify eight more
individuals for the program.
The current system does not have the capability to capture the costs of
specific District programs or activities. Project cost accounting is
important in determining whether specific programs or activities are
achieving their goals within budget. To compensate for the lack of a project
cost accounting capability, agencies are capturing and maintaining
information outside SOAR manually or by using other software applications.
According to District officials, there are no plans to implement a separate
module, such as activity- based costing. Comparative and accurate cost
information would enable stakeholders to make more informed decisions, which
would, in turn, provide better service to the citizens of the District
through improved service delivery. Currently,
18 See GAO/ AIMD- 99- 217R, June 18, 1999. SOAR Does Not Capture
Cost of Specific Programs
Page 23 GAO- 01- 489 District of Columbia Financial Management System
various District activities, such as the cost of trash collections, motor
vehicle inspection, clinical care, and street repairs, must be calculated
manually, which is inefficient, time- consuming, and prone to error.
District officials anticipated that the performance measures featured in the
performance budget module would be able to provide comparative and cost
information for all levels of programs throughout the District. However, it
is unlikely that the District will have a solution for its program cost
needs until after a budgeting system is implemented and integrated with
SOAR.
In September 1997, the District planned to spend $26 million (plus related
costs for personnel and space) to implement SOAR. According to the Deputy
CFO, as of March 8, 2001- almost 3- 1/ 2 years later- the actual cost had
climbed to about $41 million, an increase of about $15 million.
According to the PMO, one of the reasons for the increased costs was the
need to provide knowledge transfer (this refers to agency- specific
implementation assistance, enhanced training, and help desk operations) at
the major agencies and transition assistance, which were not originally
included in the contract. According to another District official, the
increase in implementation costs also resulted from the District initially
not completely understanding user requirements. Consequently, the District
found it necessary to implement additional requirements after the fact. For
example, after the SOAR contract was awarded, the University of the District
of Columbia (UDC) determined that SOAR could satisfy its requirements for
higher education accounting and opted to install SOAR, rather than a
separate new system, at a cost of $1 million. Also, according to a District
official, the District underestimated the level of support and time required
to implement SOAR. Accordingly, the District contracted for additional
implementation support. Further, additional District users required access
to EIS and thus required the purchase of additional EIS licenses, licenses
which cost the District approximately $900, 000. SOAR Project Costs
Have Significantly Exceeded Original Estimates
Page 24 GAO- 01- 489 District of Columbia Financial Management System
Acquiring an effective information system must begin with a clear definition
of the organization?s mission and strategic goals. To assure a solid
foundation for the District?s system, we offered a structured approach in
our July 1997 report 19 based on three building blocks especially important
in the early stages of a project: concept of operations, requirements
definition, and alternatives analysis. A concept of operations- the panorama
of a system?s purpose and the environment in which it will function- is the
basis on which specific requirements- functions the system must be able to
perform- are developed. With a complete set of well- defined requirements
based on a clear concept of operations, District leaders could make an
accurate analysis of how well available alternatives would meet the needs of
the government and its citizens.
In April 1998, 20 after the District had contracted for and begun
development of its new system, a more detailed study led us again to the
conclusion that the District?s process, while strong in some areas, was
undisciplined and immature. Our conclusion was based on a wellrecognized
model of software process assessment, the Software Engineering Institute?s
Software Acquisition Capability Maturity Model (SA- CMM). In our
recommendations, we stressed the need for written policy and documentation,
the development of a management plan, the assignment of responsibility for
areas of planning and development, and requirements development in the key
process areas of software acquisition planning, requirements development and
management, project management, contract tracking and oversight, evaluation,
and acquisition risk management.
Although the processes spelled out in the SA- CMM model and our
recommendations are detailed, rigorous, and time- consuming, they are, in
the long run, cost- effective and vital elements of success. Unfortunately,
in its efforts to meet an overly ambitious time schedule, the District has
spent considerably more money than planned to acquire a system that- 6 years
after we began our review and started making recommendations- now serves as
yet another cautionary example of the risks entities run when they choose to
short- cut a disciplined approach to the planning, acquisition, and
management of a financial management system.
19 See GAO/ AIMD- 97- 101R, July 9, 1997 . 20 See GAO/ AIMD- 98- 88, April
30, 1998. District Did Not
Follow a Structured Approach
Page 25 GAO- 01- 489 District of Columbia Financial Management System
Another key component of successful financial management for the District is
conducting a comprehensive assessment of its human capital needs for its
financial management functions. In our Executive Guide: Creating Value
Through World- class Financial Management, 21 we outlined
three critical elements for developing first- rate financial management
staff teams. These elements were: (1) determining required skills and
competencies, (2) measuring the gap between what the organization needs and
what it has, and (3) developing strategies and detailed plans to address
current or expected future deficiencies. We reported that having staff with
appropriate skills is key to achieving financial management improvements,
and managing an organization?s employees is essential to achieving results.
Entities that focus on valuing employees and aligning their policies to
support organizational performance goals start with a human capital
assessment. The results of such an assessment could help to determine the
resources needed to successfully implement financial management
improvements. And, as we reported in September 2000, 22 performing a self-
assessment of human capital needs helps organization leaders understand the
strengths and limitations of their human capital information systems. These
data can help an organization develop a profile of its human capital.
Further, because human capital information can spotlight areas of concern
before they develop into crises, gathering these data is an indispensable
part of effective risk management. Without a formal assessment of its
requirements and needs, and a strategy for addressing them, the District?s
efforts can become piecemeal, incomplete, and ineffective. The challenges
the District already faces in implementing its financial management system
could be exacerbated by its lack of a human capital assessment for its
financial management functions. By not identifying staff with the requisite
skills to implement such a system and by not identifying gaps in needed
skills and filling them, the District has reduced its chances for successful
implementation.
21 Executive Guide: Creating Value Through World- class Financial Management
(GAO/ AIMD- 00- 134, April 2000). 22 Human Capital: A Self- Assessment
Checklist of Agency Leaders (GAO/ OCG- 00- 14G, September 2000 Version 1).
Page 26 GAO- 01- 489 District of Columbia Financial Management System
In reports dating back to 1995, we have reported on the District?s financial
situation and efforts to improve its financial management, including the
implementation of SOAR. For example, in 1995, we recommended that the Mayor
clean up existing data in the financial systems and place special emphasis
on ensuring that basic accounting policies and procedures are followed and
that the Authority study the accounting and financial management information
needs of the District. 23 In a July 9, 1997, status report, 24 we noted that
the District had not completed three key elements of its system acquisition:
concept of operations, requirements definition, and alternatives analysis.
We also noted that the time frames for completing several of these important
tasks were unknown and that the District had adopted an overly ambitious
schedule.
On April 30, 1998, we reported 25 that the District?s software acquisition
processes, while having some strengths, were not mature when compared to
standards established by the Software Engineering Institute. Weaknesses
noted in the report included: (1) requirements definition problems; (2)
project management and oversight weaknesses; (3) lack of an effective
evaluation process; (4) lack of a formal risk management process; and (5)
failure to meet some milestones. In that report, we made six recommendations
for strengthening the processes that relate to the SOAR project and
improving future software acquisition efforts. As discussed earlier, in our
December 1999 report on the CAPPS system, 26 we noted that by not
implementing critical management processes, the District lacked the means to
establish realistic time frames for CAPPS, track development along those
time frames, and ensure that changes being made to CAPPS were consistent and
in line with business requirements. We made six recommendations to the
District that focused on the need to implement effective management controls
and processes for maintaining, operating, and protecting CAPPS.
Together, those reports established a framework for actions the District
needed to take in order to (1) improve its financial management and (2)
avoid costly failure when acquiring a new financial management system that
would successfully meets its needs. In our reports, we
23 See GAO/ T- AIMD- 95- 176, June 21, 1995 . 24 See GAO/ AIMD- 97- 101R,
July 9, 1997 . 25 See GAO/ AIMD- 98- 88, April 30, 1998 . 26 See GAO/ AIMD-
00- 19, December 17, 1999. Most of Our Prior
Recommendations Related to the Financial Management System Have Not Been
Implemented
Page 27 GAO- 01- 489 District of Columbia Financial Management System
indicated that major improvements in the District?s financial management and
other management information can only be realized if they are part of an
overall assessment of processes, people, and equipment.
As of April 3, 2001, the District had implemented 3 of the 16
recommendations we made since 1995, and critical recommendations have yet to
be fully addressed. The District had action in process on another 13
recommendations. Table 2 in appendix I provides the implementation status of
recommendations made in our reports and testimony on SOAR implementation
covering fiscal years 1996 through 2000.
The District continues to face significant challenges in its efforts to put
in place a financial management framework that ensures timely and reliable
financial data on the cost of the District?s operations. In its efforts to
meet an overly ambitious schedule, the District has spent considerably more
money than planned to acquire a system that- 6 years after we began our
review and started making recommendations -now serves as yet another
cautionary example of the risks involved in not following a disciplined
approach to the planning, acquisition, and implementation of a financial
management system.
Almost 4 years after the District?s acquisition of its core financial
management system, SOAR and related systems are in various stages of
implementation and some elements have been put on hold. The current mix of
components involves duplication of effort and requires cumbersome manual
processing instead of automated interfaces. Staff members who use the system
are inadequately trained. In its current state, the system is unable to
produce relevant, useful, timely, and reliable information adequate to the
needs of government officials for assessing the costs of programs, measuring
program performance, and making wellinformed decisions in forming the city?s
budget and in providing city services.
With a system that is still incomplete more than 2 years after the planned
date for citywide implementation, the District has already spent over 50
percent more than originally planned for SOAR implementation. The project
continues to experience implementation delays, and the final cost of the
complete financial management system cannot yet be determined.
Disciplined acquisition and implementation processes are designed to prevent
the types of problems experienced by the District in its financial
management systems implementation. The key to a disciplined system
Conclusions
Page 28 GAO- 01- 489 District of Columbia Financial Management System
development effort is the use of disciplined processes in multiple areas,
including requirements management, project planning, project tracking and
oversight, quality assurance, configuration management, and risk management.
These key areas have been the focus of our recommendations in reports dating
back to 1995. The District has not yet completed action on most of these
recommendations and has failed to institute the disciplined approach needed
to ensure the successful implementation and management of a financial
management system.
The District?s difficulties reflect the experience of other entities that
have attempted to build a financial management system without first laying a
solid foundation. Essential to that foundation is the definition of
requirements. A system cannot be counted on to fill needs that have not been
clearly defined. When those needs are later identified, retrofitting
software can cost significantly more than the same work done during original
development. The District continues to develop its system without clearly
defined user requirements.
Although the District recently received its fourth consecutive unqualified
or ?clean? audit opinion on its financial statements, the financial
information needed by decisionmakers to measure and manage performance
requires greater precision and more timely access than that needed to
satisfy a financial audit. Furthermore, to continue achieving clean opinions
without the support of an efficient financial management system, officials
and staff will be forced each year to devote extraordinary effort at the
expense of other city government operations. As the city moves toward
greater financial independence, the weakness of its financial management
system may become increasingly difficult to overcome.
As we recently reported in our Executive Guide, 27 to provide meaningful
information to decisionmakers, entities must develop systems that support
the partnership between finance and operations. Entities must ensure that
the systems accurately measure the program costs and that they provide
decisionmakers and line managers with timely, accurate financial information
on the quality and efficiency of business processes and performance.
Entities must also identify their human capital needs by conducting a human
capital assessment in order to develop human capital strategies to address
current and future risks faced by the entity. Such an
27 See GAO/ AIMD- 00- 134, April 2000.
Page 29 GAO- 01- 489 District of Columbia Financial Management System
assessment is critical to helping entities establish the systems and
processes needed to successfully improve financial management and
accountability.
District officials need to take time now to assess the current status of the
city?s financial management system, to identify problems, and to establish a
disciplined process to address these problems through the completion of its
financial systems implementation. As we discussed in our Executive Guide,
financial management improvement needs to be an entitywide priority- in this
case, the District- overseen by leadership that is in control of the process
and accountable for its success. Financial and program managers need to be
able to rely on the system for adequate, timely cost and performance
information needed to manage costs, measure performance, make program
funding decisions, and analyze outsourcing or privatization options. With
such information District decisionmakers will have the tools they need to
meet the demands of managing the city?s finances efficiently and serving its
citizens effectively.
Before moving forward on the implementation of the District?s financial
management system, we recommend that the Mayor, in concert with the Chief
Financial Officer, take the following actions:
Assess the status of current financial management operations, including
financial management policies and procedures and systems acquisition and
development policy and procedures, and determine whether the current systems
have the capability of meeting the District?s financial management needs.
Develop an overall concept of operations which clearly articulates overall
quantitative and qualitative system characteristics to the user, developer,
and other organizational elements and which facilitates understanding of the
user organizations, missions, and organizational objectives from an
integrated systems point of view.
Develop an action plan based on that assessment and the overall concept of
operations that addresses any identified weaknesses, including the necessary
systems and procedural changes, and that specifies a disciplined process
with milestones and clear accountability.
Incorporate our prior, open recommendations in the action plan to address
the key areas of requirements development and management, project planning,
project tracking and oversight, quality assurance, and training as they
apply to components of the system that are not yet fully implemented,
including the fixed asset module, performance budgeting, personnel and
payroll, procurement, integrated tax, and all interfaces. Recommendations
Page 30 GAO- 01- 489 District of Columbia Financial Management System
Determine the competencies required at leadership, management, and
functional levels for financial and nonfinancial managers and develop
appropriate training. Strictly enforce the implementation of the training
curriculum and mandate attendance at user training sessions.
Conduct an assessment of the District?s human capital needs for financial
management in order to strategically develop its financial management team
to successfully address the current weaknesses in financial management
systems, as well as to support the District?s overall mission, goals, and
objectives.
Complete the reengineering of the budget process in conjunction with the
implementation of a budget and project costing system.
In commenting on a draft of this report, the Chief Financial Officer of the
District agreed with our recommendations and provided additional details on
four areas: (1) our prior recommendations, (2) our recommendation about
assessing human capital needs, (3) our recommendation regarding the budget
process, and (4) implementation of SOAR. With respect to the CFO?s comments
on SOAR, the results of our work showed that the CFO?s characterization of
the progress made to date was overly optimistic. The CFO?s comments are
reprinted in appendix II. A representative from the Mayor?s Office also
reviewed this draft, along with the CFO?s comments, and stated that the
Mayor?s Office had no further comments.
In regard to implementing our prior recommendations, the CFO stated that the
District is taking action as described in a March 12, 2001, letter to us.
This letter was in response to our recent request that the District provide
us an update on the actions it had taken to address recommendations from our
December 1999 report. 28 As part of our ongoing work in the District, we
will be evaluating these actions to determine whether they satisfactorily
address our prior recommendations.
Concerning our recommendation that the District assess its human capital
needs, the CFO noted that the District had taken the initial step in
conducting a human capital assessment by engaging a professional services
firm to help review the District?s organizational structure and identify
performance measures and best practices. However, as the CFO noted, the
professional services firm review provides the groundwork for the first
phase of the CFO?s financial management performance measures
28 See GAO/ AIMD- 00- 19, December 17, 1999. Agency Comments
and Our Evaluation
Page 31 GAO- 01- 489 District of Columbia Financial Management System
program. A complete human capital assessment will be an essential part of
the CFO?s improved financial management leadership and support.
Although the CFO agreed with our recommendation that the District complete
the reengineering of the budget process in conjunction with the
implementation of a budget and project costing system, the CFO took
exception to certain statements pertaining to our finding. Specifically, the
CFO disagreed with our statement that the fiscal year 2002 budget
formulation process did not have the benefit of an ?implemented financial
system gathering and formulating its budget data? and that it would not have
?adequate program- level cost and budget results data for fiscal year 2001.?
The CFO stated that the fiscal year 2002 budget process did in fact
integrate data from several financial systems: CAPPS, UPPS, and SOAR.
However, this reliance on compiling data generated from multiple,
nonintegrated systems contributed to our finding that the District relies on
a cumbersome process to generate financial information. Instead of relying
on one unified system to reliably and routinely provide information as
needed, the District must compile information from various different
systems, which creates inefficiencies and rework.
The CFO also stated that the District has an updated timetable and
comprehensive plan for fully implementing the SOAR system. However, at the
time we had finalized our report, the District had not provided us with a
plan. In addition, as discussed in our report, the District?s performance
budget module has been put on hold and the fixed asset module is incomplete.
Both of these modules are key components of the SOAR system. Further, the
implementation of systems that feed into SOAR- personnel and payroll,
procurement, and tax -is incomplete and the systems lack electronic
interfaces with SOAR. Also, it is uncertain whether the currently envisioned
successor to the personnel and payroll system- CAPPS- will be retained or
whether an entirely new system is needed, and we were unable to obtain
updated timetables and comprehensive plans for the implementation of these
key feeder systems. As we recommended, the District needs to formulate a
comprehensive plan that includes details of estimated dates, actions needed,
and assignment of responsibilities for the completion of these modules and
related systems.
The CFO also stated that the District?s annual financial statements are an
output of the SOAR system and thus reliable, auditable financial data is
available from SOAR and the Executive Information System. However, as we
noted in our report, the financial information needed by decisionmakers to
measure and manage performance requires greater precision and more timely
access than that needed to satisfy a financial
Page 32 GAO- 01- 489 District of Columbia Financial Management System
audit. Financial and program managers need to be able to rely on the system
for adequate, timely cost and performance information needed to manage
costs, measure performance, make program funding decisions, and analyze
outsourcing or privatization options.
The CFO also stated that the core SOAR implementation was delivered on
schedule and performs as intended. He further noted that the increased costs
of the SOAR implementation were directly associated with changes in scope
not cost overruns. As we noted in our report, however, the District?s
performance budget module has been put on hold and the fixed asset module is
incomplete. Both of these modules are key components of the SOAR system.
Further, as discussed above, the implementation of systems that feed into
SOAR- personnel and payroll, procurement, and tax- is incomplete and the
systems lack electronic interfaces with SOAR. As we also discussed, many of
the cost increases were also the result of additional requirements and the
District not completely identifying user requirements up- front.
Finally, in regard to the CFO?s comment that not all SOAR users are required
to complete all core modules, according to the SOAR PMO, less than 50
percent of the SOAR user community had completed the new core training
curriculum.
We are sending copies of this report to Senator Mike DeWine, Senator George
Voinovich, Senator Mary Landrieu, Senator Richard J. Durbin, Representative
Chaka Fattah, Representative Constance A. Morella, and Representative
Eleanor Holmes Norton in their capacities as Chairmen or Ranking Minority
Members of Senate and House Subcommittees. We are also sending copies of
this report to Anthony A. Williams, Mayor of the District of Columbia;
Natwar Gandhi, Chief Financial Officer of the District of Columbia; Charles
Maddox, Inspector General of the District of Columbia; Deborah K. Nichols,
District of Columbia Auditor; Suzanne Peck, Chief Technology Officer; and
Alice Rivilin, Chairman of the District of Columbia Financial Responsibility
and Management Assistance Authority. Copies will be made available to others
upon request.
Page 33 GAO- 01- 489 District of Columbia Financial Management System
Please contact me at (202) 512- 2600 or Jeanette Franzel at (202) 512- 9406
or by e- mail at franzelj@ gao. gov if you have any questions about this
report. Other major contributors to this report were Richard Cambosos, Linda
Elmore, Maxine Hattery, Jeffrey Isaacs, John C. Martin, Meg Mills, and Norma
Samuel.
Sincerely yours, Jeffrey C. Steinhoff Managing Director, Financial
Management and Assurance
Appendix I: Status of Prior Years? Recommendations Pertaining to SOAR
Implementation
Page 34 GAO- 01- 489 District of Columbia Financial Management System
Date and report number Recommendation Status as reported by District
officials
To the District of Columbia Financial Responsibility and Management
Assistance Authority (Authority) June 21, 1995 GAO/ T- AIMD- 95- 176
1. Study the accounting and financial management information needs of the
District of Columbia government.
Completed. The Authority has (1) performed site visits and benchmarking
analysis of accounting and financial management information systems similar
to that used in the District; (2) hired a consultant with extensive business
process reengineering and systems implementation experience to analyze the
District?s financial management information systems implementation effort;
and (3) created a System of Accounting and Reporting (SOAR) Steering
Committee, headed by the Chair of the Authority, which includes the Mayor,
CFO, Chief Technology Officer, Inspector General, and a DC Council member.
June 21, 1995 GAO/ T- AIMD- 95- 176
2. The Authority should ensure that any improvements to management
information be consistent with both the financial plan and the performance
plan which are required by the Authority Act, Fiscal Year 1995 Appropriation
Act, and Federal Payment Reauthorization Act of 1994.
Action in process. According to the Authority, it is (1) assessing the
functionality of the SOAR Performance Budgeting module; and (2) including
performance budgeting as an agenda item for the SOAR Steering Committee.
April 30, 1998 GAO/ AIMD- 98- 88
Direct the District?s Chief Financial Officer to (1) take the following
actions for the six key process areas we reviewed to ensure that the current
financial management system acquisition and implementation is satisfactorily
completed and (2) apply these actions to any future software acquisitions.
See items 3 through 8 below. April 30, 1998 GAO/ AIMD- 98- 88
3. Software Acquisition Planning:
(1) document decisions and update planning documents to ensure that large
acquisitions such as FMS can be effectively managed; (2) designate
responsibility for software acquisition planning activities; (3) determine
required resources for acquisition planning; (4) ensure that measurements of
software acquisition activities are taken; (5) ensure that the software
acquisition planning documentation is updated as well as make program
changes regarding outsourcing of the data center and upgrading the current
system versus buying off- the- shelf; (6) ensure that the software
acquisition planning documentation
Action in process. The Authority is working with the following: (1) SOAR
program management office and the District?s Chief Technology Officer to
develop performance metrics and reports that enhance accountability and
project management control; and (2) the District?s CFO to determine
resources required for acquisition planning. In addition, the Authority
worked with the District?s data center manager and information technology
consultant in structuring an
Appendix I: Status of Prior Years? Recommendations Pertaining to SOAR
Implementation
Appendix I: Status of Prior Years? Recommendations Pertaining to SOAR
Implementation
Page 35 GAO- 01- 489 District of Columbia Financial Management System
Date and report number Recommendation Status as reported by District
officials
addresses life- cycle support of the software; and (7) develop a written
policy for software acquisition planning.
alternatives and cost- benefit analysis of out- sourcing the data center and
upgrading versus replacing the current system. April 30, 1998 GAO/ AIMD- 98-
88
4. Requirements Development and Management: (1) develop an organizational
policy for establishing and managing softwarerelated requirements; (2)
clearly assign responsibility for requirements development and management;
(3) document other resource requirements or resources expended for
requirements development activities; (4) develop the capability to trace
between contractual requirements and the contractor?s work products; and (5)
develop measurements to determine the status of the requirements development
and management activities.
Action in process. The Authority is: (1) emphasizing the importance of
implementing and enforcing clear policies and lines of accountability
through the SOAR Steering Committee; (2) requiring that the District provide
documentation and justification for resources requested or expended; and (3)
emphasizing the importance of explicitly linking contractor payments to
specific deliverables through the use of work breakdown structures. April
30, 1998 GAO/ AIMD- 98- 88
5. Project Management: (1) develop a written policy for the execution of the
software project; (2) authorize the project manager to independently alter
either the performance, cost, or schedule; and (3) require that measurements
be taken to determine the status of project management activities.
Action in process. The Authority has emphasized developing quantitative
measures of project performance. Examples include emphasis on the internal
transactions files and timeliness and accuracy of payroll data. April 30,
1998 GAO/ AIMD- 98- 88
6. Contract Tracking and Oversight:
(1) develop written policy for contract tracking and oversight activities
for the financial management system project; (2) support the project team
with contracting specialists; (3) require that the project team review the
contractor?s planning documents (for example, the project management plan,
software risk management plan, software engineering plan, configuration
management plan); (4) assign someone responsibility for maintaining the
integrity of the contract; and (5) take measurements to determine the status
of contract tracking and oversight activities.
Action in process. The Authority has emphasized to the SOAR PMO the
importance of developing clear project deliverables and matching these to
costs through the development of work breakdown structures.
April 30, 1998 GAO/ AIMD- 98- 88
7. Evaluation: (1) develop written policy for managing the evaluation of
acquired software products and services; (2) develop a documented evaluation
plan; (3) develop evaluation requirements in conjunction with system
requirements; (4) assess the contractor?s performance for compliance with
evaluation requirements; (5) develop measurements to determine the status of
evaluation activities; and (6) ensure that the Authority and project manager
review the status of evaluation activities.
Action in process. Utilizing benchmarking performance management and best
practices, the District is establishing a program to ensure adherence to
best technology practices for all future critical systems software
acquisitions. Policies and plans are being developed within the framework of
a long- term technology blueprint.
Appendix I: Status of Prior Years? Recommendations Pertaining to SOAR
Implementation
Page 36 GAO- 01- 489 District of Columbia Financial Management System
Date and report number Recommendation Status as reported by District
officials
April 30, 1998 GAO/ AIMD- 98- 88
8. Acquisition Risk Management:
(1) develop written policy for software acquisition risk management; (2)
designate a group to be responsible for coordinating software acquisition
risk management activities; (3) define resource requirements for acquisition
risk management; (4) ensure that individuals designated to perform software
acquisition risk management have adequate experience and training; (5)
integrate software acquisition risk management activities; (6) develop a
software acquisition risk management plan in accordance with a defined
software acquisition process; (7) develop a documented acquisition risk
management plan and conduct risk management as an integral part of the
solicitation, project performance management, and contract performance
management processes; (8) track and control software acquisition risk
handling actions until the risks are mitigated; and (9) ensure that risk
management activities are reviewed by the Authority and the project manager.
Action in process. The Authority has: (1) created the SOAR Steering
Committee, responsible for coordinating a variety of activities including
software acquisition risk management; (2) emphasized the importance of
ensuring that information technology employees within the District are
properly screened, certified, and qualified; and (3) hired a consultant to
review and assess overall SOAR acquisition and implementation performance,
including risk management.
To the Mayor June 21, 1995 GAO/ T- AIMD- 95- 176
9. Clean up existing data in the financial systems and place special
emphasis on ensuring that basic accounting principles and procedures are
followed.
Completed. The District has cleaned up its financial data and has continued
to place an emphasis on accounting principles and policies. The OCFO
obtained contractual assistance to work with the District agencies, identify
required adjustments to the SOAR system balances, and ensure that these
adjustments were properly recorded and reflected in SOAR. In addition, the
District reestablished the Committee for Financial Excellence charged to
build an infrastructure that supports a strong financial base. June 21, 1995
GAO/ T- AIMD- 95- 176
10. Establish a process of accountability for implementation of management
initiatives. Action completed. According to
the then- Interim Chief Financial Officer, all management reform and the
reporting of initiatives is done by the Chief Management Officer. This
monthly reporting process captures information by agency, including funding;
expense; cost saving; and project activity, including phase, duration,
Appendix I: Status of Prior Years? Recommendations Pertaining to SOAR
Implementation
Page 37 GAO- 01- 489 District of Columbia Financial Management System
Date and report number Recommendation Status as reported by District
officials
start date, and completion date. To the Chief Financial Officer a December
17, 1999 GAO/ AIMD- 00- 19
Direct the CAPPS program office to do the following: See items 11 through 15
below.
11. Develop and maintain a risk management plan. According to the Director,
Enterprise Office, action is in process to address this recommendation. 12.
Develop a requirements baseline and obtain agreement between the program
office and the system users.
According to the Director, Enterprise Office, action is in process to
address this recommendation. 13. Implement a configuration control process
to control and document further modifications being made to CAPPS. The
process should (1) clearly define and assess the effects of modifications on
future product upgrades before the modification is approved, (2) clearly
document the software products that are placed under configuration
management, and (3) maintain the integrity and traceability of the
configuration throughout the system life cycle.
According to the Director, Enterprise Office, action is in process to
address this recommendation.
14. Develop and implement a life- cycle support plan, assign responsibility
for lifecycle maintenance, and develop an estimate of maintenance and
operation costs for CAPPS.
According to the Director, Enterprise Office, action is in process to
address this recommendation.
15. Develop and implement a security plan based on a realistic risk
assessment of CAPPS security vulnerabilities.
According to the Director, Enterprise Office, action is in process to
address this recommendation. 16. Develop a centralized file for contract
task orders and other contract documentation related to CAPPS.
According to the Director, Enterprise Office, action is in process to
address this recommendation.
a As discussed in the report body, CAPPS, while not a component of SOAR, is
a critical interface to the system. Source: District of Columbia OCFO and
the Authority, September and October 2000, and January and March 2001.
Appendix II: Comments From the District of Columbia
Page 38 GAO- 01- 489 District of Columbia Financial Management System
Appendix II: Comments From the District of Columbia
Note: GAO comments supplementing those in the report text appear at the end
of this appendix.
See comment 1. See comment 1.
Appendix II: Comments From the District of Columbia
Page 39 GAO- 01- 489 District of Columbia Financial Management System
See comment 1. See comment 1.
See comment 1. See comment 1.
Appendix II: Comments From the District of Columbia
Page 40 GAO- 01- 489 District of Columbia Financial Management System
See comment 1. See comment 1. See comment 1. See comment 2.
Appendix II: Comments From the District of Columbia
Page 41 GAO- 01- 489 District of Columbia Financial Management System
Appendix II: Comments From the District of Columbia
Page 42 GAO- 01- 489 District of Columbia Financial Management System
The following are GAO?s comments on the District of Columbia?s April 3, 2001
letter.
1. See the ?Agency Comments and Our Evaluation? section of this report. 2.
The report has been changed to show 9 instead of 10 training modules.
As stated in our report, according to the SOAR PMO, less than 50 percent of
the SOAR user community had completed the new core training curriculum. GAO
Comments
(916321)
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