Online extra: Financial management systems make the upgrade

The Lowdown

What is it? The financial applications in this guide are enterprise-level tools, often part of an enterprise resource planning package, that can gather data from thousands of sources and put them into a single ledger. They are designed specifically for government use.

Why do I need one? The President's Management Agenda, the push toward e-government and a number of legislative mandates require accountability and have made integrated systems a necessity. Also, the age of some existing systems makes upgrading imperative.

Price? Like just about all enterprise-scale systems, prices vary widely, depending on the extent of the system. Sample prices for some of the systems in this guide run from $140,000 to nearly $600,000 per site license, with per-user fees of $1,500 up, and additional fees in the tens of thousands of dollars for optional modules.

Must-know info? The move toward ERP systems and financial tools, combined with Web services and a common Federal Enterprise Architecture, could eventually lead to consolidation of multiple agencies' financials, with one agency hosting the financials for several others. Tools must be certified by the Joint Financial Management Improvement Program.

How to pick the right financial application

Analysts and vendors recommend the following strategies for picking the right financial application:


  • Consider implementation and training costs. Integrators make a good living at this for a reason: It's hard to properly install enterprise software, convert mission-critical legacy data, test for reliability, then train users who may have decades of experience on a familiar old green-screen system. The META Group's Amy Santenello recommends paying special attention to the vendor or consultant project team's relevant experience and how it fits with the agency culture. She said that a META study showed customers most regretted not having sufficient change-management budgets.

  • Look for products with relatively open architectures that adhere to Web standards, have ample connectors to third-party programs, and can run on multiple platforms. You'll be better equipped to meet the new mandates for open sourcing and procurement and avoid creating another legacy system that can't easily migrate to future technologies.

  • Know your business processes. Enterprise financial applicationss don't just track and record dollar flows; they inevitably change the way business is done, which presents both challenges and opportunities for change.

  • Observe how quickly a vendor keeps up with regulatory updates.

Government bookkeeping used to involve people in green eyeshades who painstakingly wrote transactions in heavy, lined ledgers. The eyeshades are gone, but not all the ledgers are, even in shops that long ago built mainframe accounting programs.

Such leaky, creaky methods for managing government finance won't do in the age of secure e-government transactions and the President's Management Agenda. With mandates for improving accounting practices coming fast and furiously, governments at all levels are taking a hard look at upgrading their enterprise financial software.

We're not talking about QuickBooks or Peachtree here, but network server-based, Web-accessible programs that can gather information from thousands of far-flung invoices, forms and other records, and reliably place that information into a single electronic ledger.

The mandates give agencies little choice in the matter. On top of that is the realization that two or three generations have passed since the start of computerization, and the architects of the original systems are retiring, creating an urgent need for software that is more flexible, affordable, standardized across organizational boundaries, and easy to learn and use.

Besides adhering to broad industry accounting standards, federal agencies have to meet the requirements of the Joint Financial Management Improvement Program (JFMIP), an effort to certify commercial software that agencies can use to maintain a single, integrated financial system.

JFMIP released new standards last year that required all the major financial application vendors to reapply for certification, and all of them had received it by year's end. At the state and local level, the most important benchmark is Government Accounting Standards Board Statement 34, which requires governments to provide a publicly available overview of their total financial health, infrastructure assets and costs.

Agencies looking to jettison outmoded systems, while reducing the number of systems they manage, are moving increasingly to enterprise resource planning systems, according to vendors and analysts.

Oracle Corp., PeopleSoft Inc. and SAP America Inc. each sell their standard ERP software to governments, augmenting them with tailor-made modules for grants administration, federal purchasing and other special needs. PeopleSoft is working to expand its ERP functions beyond its niche as a human-resources vendor and claims to have the largest market share at all levels of government. The company says it will continue developing the J.D. Edwards 5 product it acquired last year (and renamed PeopleSoft EnterpriseOne), because it brings a stronger presence in asset-intensive agencies and industries.

American Management Systems Inc., a longtime Washington stalwart in federal financial software and services, competes aggressively with these higher-profile newcomers and is moving more into the state and local markets, though it does not offer a full-blown ERP package.

AMS touts its government experience, chiding the ERP vendors for having generic solutions that were originally designed for industry. AMS claims, for example, that it does a better job of handling accounting practices that are unique to the federal government, such as continuing resolutions, which require tracking funds across fiscal years.

Digital Systems Group Inc. is another vendor with a long history of selling to the federal government, especially the Defense Department. It has a much lower profile, but prides itself on selling its well-tuned, real-time Integrated Financial Management Information System for a fraction of what SAP and the others charge.

"When we come back and say the transaction is complete, it truly is," said DSG president Stan Yavoroski, contrasting IFMIS with ERP packages that can take hours to refresh data.

SAP claims to have the most tightly integrated modules and a number of major government customers, including the Army and Navy. It also has a contract for ImaginePA, an ambitious effort, now partially implemented, to standardize accounting and e-gov systems in Pennsylvania. Despite slow adoption of ERP-style financials in the federal government overall, due to inadequate funding, the Army and Navy projects are far along.

"They're not all perfect, but I'm impressed," said John Kost, managing vice president at the government division of Gartner Inc. of Stamford, Conn.

SAP dismisses competitors' claims that its software is too generic for government. "If you look at the universe of requirements that the government has to meet, 85 percent are common with the business world," said Leslie Stevens, SAP's federal industry director. "What is unique to the federal government, SAP has been able to add that to the core financial product."

Something else is driving agencies to consider ERP financials: an increasing desire for control over the supply chains and fixed assets that ERP was born to manage. Federal departments, including the Army and Navy, have gone to ERP to keep better tabs on human and hard assets, especially during rapid deployments, which happened recently in the Iraq war.

Responding to this emerging demand for tools to run key business processes such as procurement, grants administration and travel management, application vendors added new modules that go beyond core accounting fundamentals identified by JFMIP, such as general ledger, accounts receivable and payable, and sometimes purchasing.

More recently, states and municipalities have expressed interest in optional modules to help harness the stream of antiterrorism funds coming from the Homeland Security Department.

PeopleSoft's Guardian, for example, is a bundle of financial modules combined expressly for this purpose. "We focus on the human capital-management area" to help localities manage who can be deployed, said Kimberley Williams, PeopleSoft's director of strategy for education and government.

But Amy Santenello, senior research analyst at META Group Inc. in Stamford, Conn., doubts whether the need is there just yet. "There's a lot of discussion around it, but the majority of the money is going to 'boots and suits,'" Santenello said.

Some predict these trends, combined with Web services and a common Federal Enterprise Architecture, will eventually converge to bring about much greater consolidation of multiple agencies' financials.

"The general notion is there ought to be some sort of financial consolidation of agencies, where practical," said Tim Hurlebaus, a senior principal at AMS.

Alternatively, one agency may simply host another's financial applications, serving as a sort of application service provider; the National Business Center of the Department of the Interior, an AMS customer, could be a model. Several agencies also outsource their financial processing, such as payroll, to the NBC.

The mandates are not just directed at accounting practices. They also require agencies to control costs and justify new programs by how well they achieve high-level goals. This trend is not only driving demand for portfolio management tools, but is bringing specific portfolio management functions into financial packages. The ERP vendors all offer optional business-analysis tools, portals, scorecards and executive dashboards designed to measure overall performance and compliance with agency goals.

David Essex is a free-lance technology writer based in Antrim, N.H.

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