Panel: Feds should overhaul funding rules

State officials continue to face an uphill battle trying to get the federal government to ease rules governing how they can spend federal funds targeted for state IT systems.

Long-time rules barring the mixing of federal funds allocated for different systems have become increasingly troublesome as states try to implement enterprise architectures, said members of a panel "Coping with the State 'Side Effects' of Federally Funded Initiatives" at the National Association of State Chief Information Officers midyear meeting.

Besides the negative impact on EA efforts, other unintended side effects include the disruption of established state procurement processes, increased liability risks to states and the continued creation and proliferation of agency stovepipes.

The federal government's practice of providing funding for vertical sectors of state government, such as healthcare, human services, criminal justice and public safety, is at odds with enterprise architecture initiatives, said Jim Dillon, New York's CIO.

"The hard line taken [against the] co-mingling of funds is out of date," he said.

OMB Circular A-87 sets the rules for mixing federal money from separate funding streams and also contains the cost principles for federal awards to state and local governments.

The current set of rules is hampering New York's ability to upgrade and integrate multiple legacy systems across a number of state government agencies, Dillon said.

State officials shouldn't bow before the circular, he said. "I don't equate OMB Circular A-87 with the Constitution or the Magna Carta," Dillon said.

The reason the federal government restricts the mingling of funds is so that they can be audited back to specific programs, said Dan Chenok, vice president and director of policy and management strategies at SRA International Inc., and former branch chief for information policy and technology with the Office of Management and Budget's Office of Information and Regulatory Affairs.

He suggested that the OMB could issue guidance below or short of revising the circular that would help states work around this problem. In the meantime, state CIOs should work closely with the Federal CIO Council to begin to bring about the desired changes, he said.

There are some positive signs, Chenok said. For example, the federal government relaxed the rules regarding mixing of federal funds in order to facilitate the wireless interoperable communications initiative known as Operation Safecom, he said.

Chenok said that state CIOs could develop business cases and case studies to persuade federal officials that the time has come to relax outdated funding rules.

"The OMB loves business cases," he said.