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The Joint Financial Management Improvement Program Strikes Gold.

The JFMIP, at 50, continues its dedication to improved practices, as substantial legislative requirements are implemented by the feds.

This year is the golden anniversary for the Joint Financial Management Improvement Program (JFMIP), which was established by the 1950 Budget and Accounting Procedures Act. Our mission is to improve financial management practices in the government through the joint and cooperative efforts of the US Department of the Treasury (Treasury), the General Accounting Office (GAO), the Office of Management and Budget (OMB), the Office of Personnel Management (OPM), and all federal agencies.

However, our focus has evolved significantly in step with major changes in federal financial management statutes, institutional arrangements, business processes, and technology infrastructure.

The Financial Management Challenge: Raising the Bar

Statutes passed in the 1990s continue to drive change in the federal financial management framework. Compliance with these laws increased accountability now measured by consistent standards and reporting methodologies. Also, technology available to support systems has changed dramatically in the last decade with the emergence of powerful computing and communications technologies. Finally, government is experiencing unprecedented human capital challenges to replace the graying federal workforce with a new workforce. The future workforce must be able to conduct the business of government that has been redefined by recent legislation and using new technology and business processes.

What are the recent changes? The 1990 Chief Financial Officers (CFO) Act changed federal accounting and reporting by transferring responsibility for establishing accounting standards to the executive branch, requiring agencies to improve financial systems and internal controls, and mandating the conduct of independent audits of agencywide financial statements. The CFO Act provided for the designation of a CFO in each major agency to oversee these responsibilities and for the establishment of a government-wide CFO Council to collaborate on common challenges.

The Government Performance and Results Act of 1993 amplified accountability by requiring a formal strategic planning, performance planning consistent with an agency budget request, and performance reporting to disclose what federal agencies achieved for what they spent. The Government Management Reform Act of 1994 further expanded accountability activities by mandating the consolidated annual audited financial statement for the preceding year that includes all accounts and associated activities of the executive branch. The passage of the Federal Financial Management Improvement Act (FFMIA) in 1996 reemphasized the need for federal financial systems to support the building blocks of financial and performance information by placing in statute three existing policy requirements. This statute recognized the Federal Accounting Standards Advisory Board. Section 803 (a) requires that each agency shall implement and maintain financial management systems that comply substantially with federal financial management sys tems requirements, applicable federal accounting standards, and the US government standard general ledger at the transaction level.

Financial management systems that support federal accounting needs are key for achieving the improvement in financial management envisioned by the CFO Act and subsequent legislation. The vision for federal financial management systems is to support partnership between program and financial management to assure integrity of information for decision making and performance measurement. To achieve that vision, federal financial systems need to:

* produce accurate, timely, complete, reliable, and consistent information;

* provide adequate agency management reporting;

* support governmentwide and agency policy decisions;

* support preparation and execution of agency budgets;

* facilitate financial statement preparation;

* provide information to central agencies; and

* provide audit trail information.

Without timely, accurate, and consistent financial data, it is difficult, at best, to make informed decisions regarding the delivery of federal programs. The importance of financial systems in providing this functionality is indisputable.

Many federal financial systems are antiquated and unable to provide critical financial information. Currently, most financial management systems used by federal agencies are internally-developed products. Only about 13 percent of current system applications are commercial off-the-shelf (COTS) products, and many of those are highly customized, making it difficult to accommodate new requirements. While some agencies have been able to implement new financial systems successfully, many other agencies have struggled. Federal agencies are trying to meet the challenge and significant efforts are planned. The 1999 inventory of federal financial systems reports that federal agencies plan to substantially upgrade or replace 79 percent of the 1,107 current financial system applications. Agencies will rely heavily on the COTS market for the next generation of systems.

The Changing JFMIP Role

Prior to the CFO Act, JFMIP was uniquely chartered to facilitate collaborative improvement efforts among federal agencies and GAO. In the last decade, JFMIP responsibilities have been augmented with specific focus on improving financial management systems--an issue that was highlighted in the CFO Act. JFMIP responsibilities now include issuing federal financial system requirements, testing and qualifying core financial system software for federal agency use, and facilitating information exchange among all stakeholders.

The 1999 "Federal Financial Management Status Report and Five-Year Plan," prepared by OMB and the CFO Council, articulates the governmentwide priority to establish financial management systems throughout the federal government to support fiscal and programmatic accountability. Strategies are to:

* provide a financial management systems environment in which financial systems can be successfully planned, developed, operated, and maintained;

* establish government systems requirements that support information standards; and

* improve the availability of systems that meet governmentwide systems requirements.

JFMIP provides key building blocks to achieve those goals. JFMIP issues comprehensive functional requirements, tests and qualifies core financial system software for federal agency use, and provides critical tools through the establishment of the electronic "knowledgebase" to facilitate industry and other stakeholder partnerships.

The CFO Council's commitment to developing and using these capabilities is demonstrated by its dedicating a portion of member agencies' charge card refunds to support the JFMIP program management office (PMO). Starting in fiscal year (FY) 1999, at the request of OMB, the JFMIP Steering Committee, and the CFO Council, Congress passed Section 652 of PL 105-277, the FY 1999 Treasury and Postal Service Appropriation Act, to fund the JFMIP PMO. Similar funding provisions have been included in subsequent appropriations acts, These provisions allowed CFO Act agencies to transfer a portion of charge card rebate funds up to a total of $3 million to JFMIP. These joint investments enable the retention of a mix of highly qualified staff and access to private sector experience through consultants to provide more long-term strategic solution to long-standing shortfalls in federal financial systems. JFMIP has a long history of support and cooperation from all federal agencies.

Modernizing Federal Financial System Requirements

JFMIP has been in the business of issuing financial system requirements documents since the 1980s. The "Framework for Federal Financial Management Systems" describes the federal agency system architecture as including the core financial system, managerial cost accounting, and 13 feeder systems. The system requirement documents serve many roles. Initially they were developed as guides to help facilitate the exchange of software for common administrative functions within the federal government. Now these are used to help justify agency system improvements or replacements. They help organize the private sector market by communicating mandatory functionality that commercial software must be able to provide to federal agencies, as well as identifying value-added features desired by federal agencies. They provide benchmarks for agency compliance under FFMIA and have served as a tool for oversight agencies to evaluate systems.

Upon passage of the FEMIA in 1996, requirements documents existed for the core financial system and 6 of the 13 subsidiary systems. Several of those documents needed to be updated for recent law and regulatory revisions.

Starting in 1998, JFMIP undertook efforts to bring all existing documents up to date and to develop documents for those functions where none existed. In 1998, "Systems Requirements for Managerial Cost Accounting" was issued for the first time, incorporating system requirements necessary to support FASAB Standard Number 4, "Managerial Cost Accounting Concepts and Standards for the Federal Government."

In 1999, JFMIP updated four financial system requirements documents, including "Core Financial System," "Human Resources and Payroll Systems Requirements," "Direct Loan System Requirements," and "Travel System." In 2000, system requirements' documents have been issued for "Seized Property and Forfeited Assets System" and "Guaranteed Loan System Requirements." JFMIP is currently reviewing exposure draft comments for "Grant Financial System Requirements" and "Property Management System Requirements" and anticipates their issuance this summer. Efforts are underway to develop benefit system requirements. Remaining for the future are acquisition system, revenue system, insurance claim system, and budget formulation system requirements. Our current goal is to have efforts underway by 2001 to address these functional requirements.

Development of these documents demonstrates commitment from stakeholder agencies to define governmentwide requirements and help organize standard expectations regarding what financial systems must be able to support. A senior executive from the financial or functional staff of a major stakeholder agency leads each team and the team includes expert representatives from other interested government agencies, GAO, 0MB, and in some cases, the private sector. JFMIP staff supports these collaborative efforts.

Core Financial System Testing and Qualification Process

Recently, the CFO Council and JFMIP partnered to reengineer the core financial system testing qualification and procurement processes to improve the availability of commercial software that supports federal requirements and to improve the chances that agencies can successfully implement new systems. Prior to 1999, testing of core financial system software was accomplished in connection with the mandatory General Services Administration's Financial Management System Software (FMSS) schedule. Information regarding the testing process was limited. The test addressed less than one-third of the existing requirements. Arrangements for the software testing relied upon agency volunteers and other ad hoc approaches. Past experiences indicated that these arrangements were not sufficient to meet the challenge. In 1997, the CFO Council endorsed change and adopted recommendations to:

* establish a PMO under the JFMIP to develop the tools and capabilities necessary to improve financial systems across the federal government;

* separate the test and qualification process from the procurement process; and

* establish an electronic "knowledgebase" to share information widely.

October 1, 1999 marked the transition from old process to new process. The components of this new process included:

* issuance of up-to-date core financial system requirements, complemented by identification and prioritization of value-added features desired by federal agencies;

* an open and comprehensive testing and qualification process that tests, in part or in whole, all testable mandatory requirements;

* modification of 0MB Circular A-127, "Financial Management Systems," to eliminate the mandatory use of the FMSS schedule to procure core financial systems and require federal agencies to purchase software that has attained the JFMIP certificate of compliance; and

* establishment of a web-based "knowledgebase."

The purposes of testing were to reduce the risk to the government, produce useful information, reduce agency test efforts, and provide critical information to commercial business partners to allow them to be successful in providing core accounting software that meets federal requirements. Before the first round of testing could even begin, several major tasks had to be accomplished. First, the system requirements had to be brought up to date. The core financial system requirements document, issued in February 1999, contains 251 mandatory requirements covering functions of core financial system management, general ledger management, funds management, receipt management, payment management, cost management, and reporting. About 20 percent of the requirements were new or changed since the last issuance. In addition, 143 value-added features were identified and prioritized by federal agencies.

JFMIP developed an efficient test of 166 steps that tests about 91 percent of the mandatory requirements fully or partially. This test was validated with help of the GAO. The test is an open book test. Test data, assumptions, data dependencies, and expected results are published on the "knowledgebase" for all stakeholders to use. We also published a test trace matrix to fully disclose the relationship between requirements and test steps, and to identify limitations of the test so that agencies have full information about the depth of the test and any requirements that are not tested.

As of October 1, 1999, OMB policy terminated the FMSS schedule for new procurements and required federal agencies acquiring new core financial systems to use JFMIP tested and certified software. At that time, four products were qualified. As of May 2000, nine software products offered by seven vendors have received certificates of compliance. JFMIP maintains a current list of qualified software on the "knowledgebase" along with information about value-added features to facilitate agency research.

JFMIP issues a certificate of compliance, which is valid for three years for specific versions of COTS packages. The process is designed to ensure that our commercial business partners update their products to meet new requirements. If federal requirements change during that three-year period, JFMIP administers an incremental test for the new requirements that vendors must pass to retain their certificate of compliance. In 2000, JFMIP is administering the first incremental test to ensure that software can support the Federal Agencies' Centralized Trial-Balance System II--or FACTS II--process for reporting budget formulation data and budget execution data to central agencies.

The JFMIP "knowledgebase," at, supports rapid and efficient communication among government and private sector stakeholders. Currently it hosts searchable database information on core financial systems requirements, test materials, reference materials, and best practices. We have had over 37,000 hits to this site in the last year.

Other JFMIP Efforts to Improve Financial Management Systems

In addition to the above initiatives, I would like to highlight three ongoing initiatives where JFMIP is partnering with the CFO Council and other stakeholders to leverage resources and address common financial management systems challenges. These include:

* The "Financial System Compliance Review Guide," jointly sponsored by the CFO Council, the President's Council on Integrity and Efficiency, the Federal Audit Executive Council, and JFMIP, is under development. Once completed this will offer a tool to agencies, the oversight community, and the vendor community to help establish consistent expectations and methods to conduct financial management system compliance reviews. The product is designed to help managers evaluate whether financial systems substantially comply with financial management system requirements that are contained in law and implementing policy to include FFMIA, the Federal Managers' Financial Integrity Act, and the Information Technology Management Reform Act. This guide been issued as an exposure draft and we are currently reviewing comments.

* The "Roadmap Project" is designed to create a framework to manage financial systems change in the federal government. By September 2000 we plan, in partnership with the CFO Council, to augment the JFMIP knowledgebase to include information on the full life cycle of financial management system planning, implementation, and management.

* The "Human Capital Project" is a collaborative effort by the CFO Council financial systems committee, human resources committee, and JFMIP designed to build capacity within the federal financial management workforce to meet this challenge. Having the right project management and functional skills are essential to transitioning to the next generation of financial management systems.

Communication of federal agency needs and willingness to reengineer business practices to take advantage of commercial services is stimulating new delivery mechanisms. The concept of using commercial infrastructure to support government administrative requirements is expanding rapidly. In 2000, federal agencies:

* use commercial charge cards for small purchases and business travel;

* make payments, and transfer benefits using commercial electronic funds transfers (EFT) infrastructure; and

* use the World Wide Web to access government information and process transactions.

These examples represent major changes in the way the government does business and forecast future transformations that will parallel industry business practices. Use of commercial infrastructure and services can allow the government to take advantage of economies of scale. For us to take advantage of these opportunities, the mandatory information requirements, including interface requirements to pass required information, must be identified in a standard way and communicated. JFMIP is helping agencies to take advantage of these new service delivery methods by communicating effective practices and organizing strategies to remove barriers.

In summary, the leveraging of resources through JFMIP to provide system requirements, testing, and tools demonstrates commitment among federal stakeholders to address common system challenges in a cost-effective manner. The short-term payoff has been to reduce agencies' cost and risk in replacing systems. The longer-term payoff will be achieving federal financial management systems that support the program management and financial management vision of having the right information at the right time to make informed decisions in the conduct of their missions.

Karen Cleary Alderman is the executive director of the Joint Financial Management Improvement Program.
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Publication:The Public Manager
Geographic Code:1USA
Date:Jun 22, 2000
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