The Office of Management and Budget is developing new guidance that would strongly encourage agencies to use only the Invoice Processing Platform (IPP) for electronic transactions.
Federal CFOs currently are commenting on the draft guidance.
OMB’s push to use the IPP is part of a more aggressive plan for agencies to move to shared services in 2015.
The Treasury Department developed the Invoice Processing Platform in 2007 to make the processing of vendor invoices and intragovernmental transactions easier and cheaper. Intragovernmental transactions are those in which agencies pay for services. For example, if the Agriculture Department pays the General Services Administration for rent of a federally-owned property, that may go through the IPP.
The IPP provides five main features, including electronic purchase orders, payment notification services, electronic invoices, intragovernmental transactions and an automated workflow service.
OMB sees the greater use of the IPP as an opportunity to potentially increase efficiency, save money and reduce duplicative systems.
Several sources confirmed that OMB is circulating a draft memo that wouldn’t quite mandate the use of the IPP, but it would require agencies to justify why they wouldn’t use the IPP.
Sources say there are some agencies, such as the departments of Defense and Veterans Affairs, that may not use all of the IPP’s services because they have internal systems that meet their needs better.
David Mader, the OMB controller, didn’t confirm the guidance, but offered a little more about OMB’s plans for the IPP at the recent Association of Government Accountants national training event in Washington.
“We’ve had a series of meetings and I think this is another example of, we can better leverage the infrastructure Treasury has to pick up those sets of transactions from different departments and make it more efficient,” Mader said. “We’ve had conversations with the departments, with Treasury and there is a high degree of interest I think on both parts to do something. We are not at liberty to say what we will do or when we will do it, but we are going to address it certainly in this calendar year.
70 agencies, 80,000 vendors down with IPP
The IPP has been like most shared services in the government — there has been no mandate or requirement to use it. So that meant the Bureau of Fiscal Service had to convince or sell the benefits of the IPP to agencies.
The fiscal service has had adequate success in getting agencies to use it, but by no means has the fiscal service cornered the market. For example, the Agriculture Department recently fully implemented the IPP as the first major agency to go all in with the portal. A total of 70 agencies use the portal in some way today, but not all the services.
The IPP reports about 80,000 vendors use its services to submit and track invoices, but agency use remains limited.
Treasury estimates that if the entire federal government used the IPP, it could reduce the cost of entering invoices and responding to invoice inquiries by $450 million a year. Treasury says one federal agency already reduced the cost of processing undisputed and disputed invoices by 46 percent and 54 percent, respectively.
No matter what OMB eventually issues in terms of IPP guidance, it’s clear that the pressure to use financial management shared services is growing.
Mader said in many ways 2015 is a key year for that effort.
Mader said the shared services effort needs success stories, starting with the Department of Housing and Urban Development’s move of its financial management system to Treasury’s Administrative Resource Center.
This would be the first cabinet level agency to move to a federal shared service provider for financial management.
Mader said with the current budget landscape, it just makes sense to take advantage of the efficiency gains shared services brings.
“My concern over the next couple of years is can the supply meet the demand?” he said. “We do have probably a half a dozen or so entities that are in various stages of looking at moving to one of the finance shared services providers, and I think it’s a matter of capacity — both systems as well as human capacity.”
Helping providers prepare for new customers
Mader said currently there are four providers in the government, and he expects that number to increase if the demand warrants it.
But Mader added OMB recognizes that the government is not structured in the best way to support shared services. Provider agencies cannot easily find the money to increase systems or personnel to keep up with demand, which means the shared services providers don’t have franchise or working capital funds that are needed.
OMB says it plans to address this legislative issue in 2015.
In the meantime, agencies have been spending less on financial management systems.
Mark Reger, deputy controller at OMB, said in 2010, which was the last year the White House allowed agencies to replace their financial management systems, the total spent was $1.4 billion.
“We’ve managed to save that much money and we’ve very much targeted a few replacements, and pretty much everybody else is moving toward a shared services solution,” he said. “We’ve put some money in the shared service providers so they could gear up and be ready for the agencies to come toward them when they are ready. But this is a lot of agencies and a lot of activity so there is a lot of work to do.”
The money Reger referred to came from the Financial Management Line of Business initiative that every agency contributes to annually. In the 2013 E-Government Benefits report to Congress, OMB says agencies gave $3.4 million to support the FM Line of Business effort. OMB didn’t publicize the agency contributions in 2014, but figuring contributions were similar, some of that money went to the four shared service providers to prepare them for more customers.
The fact that OMB gave the four shared service providers money to prepare for more customers is significant because that has been one of the big stumbling blocks for this effort. The Economy Act prevents agencies from charging customer agencies more than the services actually cost. Therefore, the providers can’t prepare to accept more customers by hiring additional workers or contractors or by buying more IT software or hardware without having a signed contract from a new customer in place.
Beyond shared services, Mader and Reger said there are several other financial management initiatives agencies should be aware of that will be important in 2015.
Better data to reduce improper payments
One area that OMB will reinvigorate is the battle against improper payments.
This administration has overseen a significant decrease in both the dollar figure and rate over the last few years. In 2013, agencies saw the rate drop to 3.54 percent from 3.74 percent the pervious year.
Mader said the improper payment rate for 2014 isn’t finalized yet, but he said it will be different than it was in 2013.
He didn’t give any hints to whether the rate would increase or decrease.
Reger said in 2014 agencies classified their improper payments in 12 categories, up from three in previous years and that change helped tremendously.
“As we know more and more about the improper payment categories and as agencies actually segment their reporting, we are finding out a lot more, and it’s giving us tools. It allows us to go into the agency and work with them, and say ‘In the data you submitted, we found the following attributes and these look programmatic. What can we do to help you with programmatic improvements?'” he said. “This past year, like every year, Congress asked us if there is anything they can do to help us improve improper payments. We dusted off what looks like a pretty substantial book of things that came up over the last 10 years as programmatic improvements. We went back and looked at those and actually picked out the things that we think are programmatic improvements around documentation and problem areas. We’ll be working to see if there is some way to make some improvements in those things.”
Reger added OMB will meet with all the agencies with highest rates, show them the data and ask them to help us with ideas to lower the rates.
Mader said Treasury’s Do No Pay center also is maturing and he hopes over time the technology and business processes can help agencies use data to make decisions before they send out the money.
Another area that OMB will focus on is around audit efforts.
OMB plans to update Circular A- 123 and the focus on risk management as one approach. But Congress also gave OMB a requirement to submit a report about whether there is a more efficient yet just as rigorous way to do financial audits.
Mader said OMB is working on the report based on efforts by other agencies and see if they could do a pilot to improve how they do audits.
“Let’s say instead of doing 15 bureaus, could we actually do a slice across those bureaus and then be assured that because of internal controls and testing, this really does represent the totality of that department,” he said. “That’s something that Mark will be leading this year. Again, it depends on how much money do you want to spend on this. We need to do it. But is there a more efficient way to do it that gives us in the government, citizens, the Congress the assurance that they need?”
Reger said he’s met with several agencies and some agency inspectors general about the congressionally-mandated report, and there is a lot of interest in this concept. He said the value isn’t in the numbers, but the assurances that the agency can account for the money it is spending.