Lawmakers flag concerns with payment delays, cost overruns for Coast Guard’s new financial system

The Coast Guard officially transitioned to the new system in January, but technical issues have led to a backlog of invoices.

The Coast Guard’s transition to a new Department of Homeland Security financial management system is under the microscope at the Senate Appropriations Committee, where lawmakers are seeking more information about delayed payments and cost increases.

The committee, in the report on its fiscal 2023 spending bill, is directing DHS’s chief financial officer and chief information officer, along with the Coast Guard, to brief the committee on the delays once the annual spending bill becomes law.

“The committee is concerned with delayed payments and significant cost escalations resulting from the Coast Guard’s transition to its new financial management system,” the committee’s report states.

Lawmakers want to know the “full extent of the delays,” as well as whether they’ve been fixed. The report also calls for the CFO and CIO to brief the committee on “lessons learned from all prior transitions and measures that are being taken to ensure that further transitions are successful and cost effective.”

The Coast Guard announced it had fully transitioned to the Financial Management System Modernization Solution in January. It’s the third DHS component to adopt the new system after the Countering Weapons of Mass Destruction Office and the Transportation Security Administration, respectively.

But challenges that existed prior to the official transition only deepened, with technical issues causing delays in payments across the Coast Guard, including for contractor invoices, permanent change of station (PCS) claims, temporary duty (TDY) claims and other expenses. At one point, the backlog reached 29,000 invoices.

In March, the Coast Guard established an Incident Management Team to address the technical issues and chip away at the backlogs. The team is led by Rear Adm. John Hickey, director of operational logistics. The team has been working with contractors IBM and Oracle on the FSMS technical issues.

In an Aug. 2 email, a Coast Guard spokeswoman said the backlog is down to 2,800 invoices. The service is now “on track” to pay all invoices over 30 days old by the end of fiscal 2022, according to the spokeswoman.

The Coast Guard has also fully cleared the backlog of PCS and TDY claims, respectively, and is processing those claims in real-time, according the spokeswoman.

“The Coast Guard continues to resolve defects and improve FSMS and its interfaces,” the spokeswoman said. “While system responsiveness has improved and significant progress has been made on fixing problems, the Coast Guard continues to work with the contractors to prioritize efforts, reduce latency and resolve remaining defects to improve user experience.”

Meanwhile, Senate appropriators are asking  more questions about DHS’s broader financial systems modernization plans. The report on the fiscal 2023 spending bill directs DHS “to provide a strategy for the acquisition of software and services related to FSM, including an analysis of alternatives and a plan for how the department will ensure full and open competition in the award of all related contracts.”

Budget documents show DHS is requesting $114 million for financial systems modernization in fiscal 2023. The funding covers software upgrades for the Federal Emergency Management Agency, Immigrations and Customs Enforcement, the Cybersecurity and Infrastructure Security Agency, DHS’s Science and Technology directorate and the department’s management directorate.

“The Committee is concerned that an expectation of implementation by components exists for these efforts without properly planning for contingencies that preserve congressional prerogatives, and consequently the department is encouraged to ensure transitional flexibility,” lawmakers write in the report on the fiscal 2023 spending bill.

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