New governmentwide financial systems on tap

OMB controller Danny Werfel said the Treasury Department should be finished testing and analyzing systems in the next six months. The CFO Council highlights pri...

By Jason Miller
Executive Editor
Federal News Radio

By the summer, agency chief financial officers will begin figuring out how to move to new governmentwide systems to process intergovernmental transactions and vendor invoices.

Danny Werfel, the Office of Management and Budget’s controller, said the Treasury Department is in the middle of testing and analyzing existing systems to see which could be expanded.

“One of the major objectives of the CFO community is to drive efficiencies and bottom line results for taxpayers, and we want to start at home with our own operations and improve efficiencies of them,” Werfel said in an interview with Federal News Radio. “So what we are doing is identifying different areas where agencies are running the same or similar solutions to basic functions and where can pool resources and invest in one solution.”

Werfel said by May or June Treasury and OMB should come to a final decision about which systems to use and begin to figure out how agencies should migrate to these common systems.

OMB and Treasury has been working on these common systems since last winter.

It’s also how the Obama administration has modified the Financial Management Line of Business initiative started under the Bush administration. The FM LOB tried to standardize business processes and terminology, and get agencies to shut down their systems and move to shared service providers. OMB announced in March it was closing the Financial Systems Integration Office (FSIO), which led much of the business process standardization work. Instead of FSIO, OMB set up the Office of Financial Innovation and Transformation (OFIT) within Treasury to lead these intergovernmental transactions and vendor invoicing pilots.

Werfel said the governmentwide systems are among the CFO community’s top priorities in 2011.

One of the top goals is to further reduce improper payments. Werfel said agencies made significant progress in 2010, reducing the governmentwide improper payment rate to 5.49 percent, from 5.65 percent in 2009.

Werfel said this means that agencies prevented an additional $3.8 billion in improper payments from being made in 2010.

Additionally, eight of the 11 largest programs saw declines in the amount of improper payments they handed out.

Overall, agencies issued about $125 billion in improper payments in 2010, up from $110 billion in 2009. But because the amount of overall payments increased significantly, OMB states the percentage decline shows agencies are making progress.

President Obama challenged agencies to reduce improper payments by $50 billion by 2012.

“The numbers show two different things, one is that we are trending in the right direction, and two, it shows we have large amount of improper payments on the books so we still have a significant amount work to get done,” he said. “We want to go even further and make deeper cuts. We have several activities to execute on, and through transparency, tougher audits using more forensics, I have a lot of confidence that we will drive the numbers down in 2011 and beyond.”

One area where agencies were making progress is recovering improper payments to vendors. Werfel said last year the government tripled the amount recouped from vendors to $680 million. He said part of the reason for the increase is the launch of the site that lets agencies check vendors’ information against several different databases, including the debarred or suspended contractors list, and lists of whether people are deceased or in jail.

OMB also is expanding the use of software used by the Recovery Board to help identify potential improper payments before they happen.

The Centers for Medicare and Medicaid Services tested the software from June to December on the Medicare program.

“CMS and HHS determined the tool was effective in helping identify fraud and errors we previously hadn’t been able to find,” Werfel said. “I know CMS sent some of findings to their Inspector General and the Justice Department for future investigation because they uncovered instances of fraud. The software lets the agency look at data differently and add more texture and dimension to the searching using public source data.”

Werfel said CMS is now ready to expand it to other programs. He added that other agencies also could begin using the software this year.

Along with improper payments, Werfel and other agency CFOs detailed priorities and plans at a recent CFO Council meeting. The 47-page PowerPoint presentation goes through everything from improper payments to technology innovation to open government and transparency to decision support and workforce challenges.

Werfel said federal financial management is getting better each year despite the Defense Department’s inability to get audited.

The Government Accountability Office issued its annual report last month finding for a 14th straight year that auditors could not issue an opinion.

Still, Werfel said the total number of clean opinions is up to 20, including NASA, which moved from a disclaimed opinion to a qualified opinion.

“We are getting closer and closer to the point where all 24 agencies will have clean opinions,” he said. “What happens with these audits is GAO identifies material weaknesses or significant problems. Last year, agencies had 38; this year 31. It’s the eighth year in a row that the number of material weaknesses declined.”

OMB also is working closely with DoD on its financial books.

Werfel said the Pentagon is focused on different key areas to help it become auditable. He said DoD is starting with activities that are most closely related to their operational and mission success, which includes things like how money flows through the agency, managing execution and cash flows.

“DoD has updated schedules and action plans for when they will get clean opinions on cash flows,” Werfel said. “In the next few years, DoD will be auditable on cash basis, and that will then leave accruals or other elements of the balance sheet.”

(Copyright 2011 by All Rights Reserved.)

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