INTERVIEW: Patrick F. Smith, federal financial guru

SMITH: As you know, the Financial Management Systems Software Schedule expired on Sept. 30. The FMSS Schedule was designed to facilitate consolidation of accounting systems. There had been literally hundreds'probably approaching 1,000'accounting systems across government.What the Office of Management and Budget wanted to do was to try to give agencies options to cut down on the number of accounting systems that existed. It also wanted to try and push industry to create commercial packages so the government could use those packages for achieving higher degrees of standardization across agencies. FMSS was created to do that.FMSS was a mandatory schedule. Agencies had to go through a process to be able to purchase off that schedule. But for a vendor to be on that schedule, it had to go through a certification process.GSA, working with the Treasury Department, created a set of test scenarios that were representative of a sample. It was only meant to be a sample because we didn't want FMSS testing to be onerous to vendors. Plus, we wanted more vendors to become part of the schedule, not less.SMITH: In order for an agency to use FMSS, an agency had to issue a letter of interest, and vendors had to decide whether they were going to respond.'In many cases, agencies retested the systems because it was never clearly delineated what was tested as part of the FMSS process.That was veiled behind the procurement process'things had to be protected, that you didn't reveal so much. In many cases, agencies retested the system. That's a very expensive proposition, both for the agencies and for the vendors.What did occur over time is that the [letters of interest] grew bigger and bigger. Agencies kept putting more requirements and more modifications in their letters. Some agencies made as many as 600 changes to the software packages.SMITH: There were good points, and there were bad points. The fact that it was a mandatory environment was a bad point. I think agencies should be able to negotiate the deal that's best for them.Rather than having to go to the vendor, if they think an integrator was more suited to them, they should be able to make that choice. The assumption behind FMSS was that the software vendor had to be the prime contractor. You could have third-party integrators, but they had to be subcontractors.In today's environment, with more decentralization, with more technical differences between agencies, that right to choose becomes more critical. I think agencies should have options.I have always argued for giving agencies maximum flexibility. Where the work is going to be done, let them make the decisions affecting their plight. On the other hand, I don't accept that we are all so unique that we have to make lots of changes to commercial products. My experience is that if you make those changes, you are already heading for disaster. You have increased the probability of failure by making those types of changes.After the schedule expired on Sept. 30, agencies could continue using the existing FMSS vendors for orders in place, but no new orders could be placed.SMITH: For a core system for an agency, it has to be a system certified by the Joint Financial Management Improvement Program. But agencies don't have to buy the system through GSA. They can do it using any vehicle they want, and not every agency will want a core financial accounting system.SMITH: An agency's chief financial officer has to certify that the system is in compliance with all the rules and regulations, including the JFMIP system approval.If you buy a certified system, unless you put it in just as it was certified, do you still have that certification? I think it serves the purpose that when it was certified, it was in compliance under a specified situation. Once you start to migrate it into your environment, there could be changes. If there are significant changes, then you have to ask if the product is still certified.Eventually the question will be answered when an auditor looks at your financial statement. The audit will say whether you are or are not in compliance with JFMIP financial requirements.There is also a question about updates to certified software: Does it still meet the JFMIP certification? I think vendors will probably have to go back to JFMIP and get software recertified.These are all questions that will probably be answered over time.From my perspective, what the JFMIP certification does is it gives agencies guidance. The CFO has to accept the responsibility that the system works. Just because an agency has a JFMIP-compliant system, the ultimate compliance questions must be answered by the agency using the software.SMITH: The Financial Management Systems Services Center was established to work with agencies, vendors and the Federal Supply Service to develop procurement strategies and obtain the necessary services to install financial systems in federal agencies.We are especially focused on small and midsize agencies that may have the most need for financial management talent. With large agencies, the need for us might not be as great. And at the larger agencies, how many times do they revise their accounting systems? Some agencies are using systems that are nearly 40 years old. They're good systems that do the job.But there is nobody within those organizations who knows how to buy accounting systems.They haven't needed them. To buy a major system, and especially something major like financial and administrative systems, requires a certain talent.SMITH: They're critical but not well understood. Nobody cares about financial management systems unless somebody is complaining.We are also here to develop relationships with industry. I believe industry needs to make a profit, and I believe that the government needs to pay a fair price, but I don't think the government should have to pay over and over and over again.Therefore, we are working with vendors so that our needs are clearly articulated and products meet those needs. Then we can just pay for it once.SMITH: ERP is the latest in management improvement practices. ERP is an integrated financial and administrative system. You can approach them as a single entity, or you can take the best-of-breed approach where you go with the best individual systems, and the integrator has the responsibility of integrating the pieces.In my discussions with CFOs, they have said that they don't want to turn their whole system over to one company.But an ERP approach allows for executive information, which right now is lacking in most government organizations.