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How USDA became a designated shared services provider

Jun. 10, 2014 - 04:47PM   |  
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Michael Clanton Interview MWM 20140521

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Last month, the Obama administration tapped the Agriculture Department’s National Finance Center and three other agencies as the government’s four designated shared service providers for financial management services.

For USDA’s associate CFO Michael Clanton, getting to that point was a long journey that began in 2007. That’s when the department awarded a $103 million financial services contract to Accenture to transition the department from a mainframe-based infrastructure that supported different financial systems for each of the department’s 17 bureaus and agencies to a single, integrated system based on the SAP HANA platform called Financial Management Modernization Initiative (FMMI). That rollout, which Clanton helped manage, was completed in 2012 and now USDA’s National Finance Center aims to expand that capability to other departments.

“Anyone who is a current customer of the National Finance Center’s shared services for payroll, for example, could find several advantages in coming to us as a financial service provider because we have already built a suite of reports, including some in HANA, about payroll detail, spending detail, taking in the payroll expenses,” Clanton told Federal Times Editor Steve Watkins

How did USDA get designated as a shared service provider for financial services, and what are you doing now in terms of reaching out to other departments?

I will start with the second part of that first. We had started talking to other departments back I think in the summertime. We knew that there were players who were going to be looking for a provider, who were larger than some of the ones who had gone before. And, we wanted to see, in talking to different organizations, what were they looking for in a shared service provider. USDA, the first time the shared service provider push came about, actually was getting ready to move off of a mainframe financial system, and we looked for a shared service provider. We originally were not going to do it ourselves. At that time, there really was not anyone who was well-positioned to take on someone as large and as complex as USDA. So after discussions with the Office of Management and Budget, USDA decided to continue to do it in-house.

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We remembered that experience as we started doing the design work, and we said, “You know, there’s got to be a place for the big guys out there, if somebody else ever wants to do this.” And, we made conscious decisions as we went along to not box other people out. There was a design question early on as to how to represent organizational structures in SAP. We chose to make USDA the company and the subcomponents business areas instead of having the Forest Service be a company and Natural Resources Conservation Service be a company, so that later we would be able to bring in another cabinet-, CFO-sized agency as an independent company in SAP.

We had design choices around how the accounting structure would work. My counterpart, John Brewer, who is the associate CFO for operations, said, “No, we’re not going to be prescriptive to people. What they do with it is up to them, so that they can map their business process into the account.” So, we left room for people to be flexible while setting up a framework that people could grow on. People would not have to start from scratch.

So you had the shared service provider idea in mind as baked into your design and in your rollout from the very get-go.

We knew that it could be a possibility, and we made a conscious choice to not do anything that would prevent it.

Were there some departments in particular that you were communicating with that you had in mind as you were doing that?

Not as we were doing the implementation. While we were implementing USDA, we did not talk to anyone else. We were strictly doing USDA business. In stepping back and looking at who our customers could be: Anyone who is a current customer of the National Finance Center’s shared services for payroll, for example, could find several advantages in coming to us as a financial service provider because we have already built a suite of reports, including some in HANA about payroll detail — spending detail — taking in the payroll expenses. So, there is a natural synergy there of things we have already built.

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So, who are you in active discussions with now?

We have not really done active discussions with anyone since we responded to the Department of Homeland Security-Immigration and Customs Enforcement (DHS ICE) request for information last summer. We did talk to Department of Labor when they had an industry day earlier this spring.

Are you overseeing the
USDA shared service provider business now?

We are still trying to see how some of the organizations should be shaped, but I am leading the federal shared service provisioning for financials at this point in time, yes.

How would this work financially? How does that transaction work, between you and SAP and the customer agency?

We are a USDA working capital fund, and that is the authority under which we operate. And, essentially, it is an Economy Act reimbursable agreement between two parties, where our actual expenses to get the work done would be charged back to the serviced agency. We have worked with our customers within USDA to see what are the best ways to allocate costs. What business drivers are pushing expenses, whether it is volume, people, what have you. There is a component of the service where the license costs for SAP are based on the number of users, for example. That is only part of the cost. You have to recover the cost for the IT infrastructure itself. That is driven by the financial activity volume. So you look at the share of the business drivers and which costs those are impacting, and then allocate the costs back like that to generate the bill.

Presumably, depending on what agency we are talking about and what their infrastructure needs are, some may have a lot of their own in-house infrastructure, some may use that as an excuse to consolidate and close data centers, go to the cloud and so forth. Is all of that completely flexible, depending on each agency, or is there some kind of requirement on the agency to close data centers, consolidate infrastructure and that sort of thing?

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This is basically a business transaction, business decision. No one in the federal government’s mission is to do financials, right? It is something that we have to do in order to conduct the public’s business. And, this is an era of declining budgets, and we try to find ways to do as cost effectively as possible. Within USDA, we consolidated onto a single footprint, and now we are offering people the opportunity to leverage that and take advantage of that economy of scale.

What are the capabilities of this system?

We are trying to help people by automating things to make it easier and faster to be able to do their current jobs, so that they can be more effective with the people they have. And, one of the ways that we have done that is with the implementation of HANA. Data analysts at USDA, much like financial analysts all over, are not known for their patience when they need to get an answer for someone.

We found that because of USDA’s size and complexity, it was taking a while to be able to pull spending detail at the level they wanted to go through to look for patterns. It was one of the bigger problems they wanted us to solve. We were not really aware of HANA, had not been doing market research. We had been in the middle of the implementation, and SAP came by and talked to us about it. And, we thought, wow, the technology sounds great, but what are we going to use that for again? What is the use case? Why would the people who are paying my bills pay me to get this technology? Where can we use it? And, we started talking through where we are generating big volumes of data in a financial system. We are not somewhere where someone is doing statistical analysis looking for patterns. We are keeping track of USDA’s finances. We talked about how long it was taking to generate a status of funds report that had a high level of detail, where people could see exactly what were all the supporting events that made up that balance. SAP worked with us to come up with a prototype, and we showed that to our user community, and the question was, “Well, great, when is that going to be in production?” I had to say, “Well, I’ll get back to you with that.”

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So that was one of the first reports that we brought out there for them. And it reads through a half a billion general ledger postings and produces a status of funds report in well under a minute. And, then you can select an account, a fund, an organization, click on that and drill down to another level of detail. And, you can keep going until you get to the bottom and you get a list of transactions.

And, with some of the features SAP has built into HANA, you can select the transaction. Say it is a purchase order where you were buying some goods or services. You have now received all that you are ever going to receive, but there is still $100 left on the obligation. You can select that transaction, it will open up the transaction data entry screen, you can free up the money on the transaction and release the obligation, save it, run the report again and you will see the $100 difference in real time. Where before, the business warehouse technology is great that SAP has, do not get me wrong, but it was yesterday’s news. The analysts, after having taken data action or a series of them, would have to wait until the next day to see what the net effect was and now they don’t.

So, what we have done is bought people back time. Now, can I point to [our bureaus] and say, “Because you now have these reports, you’ve saved X amount of dollars?” No. But, I can say, “Now, you don’t have an information lag of 24 hours to find out what the impact is.” I can say that now when your analyst is running a report, they do not start the report, go get a cup of coffee, talk to somebody, come back, see if the report is done, and then maybe not remember exactly what particular fact they were looking for. They get the answer then, while they are at their desk. They are more efficient as they do the work.

Does it help in areas like improper payments, for instance?

People have used it to do data mining for improper payments, areas where discounts are not taken. They are able to use it to look for discrepancies and patterns that they simply could not get to before, because it took too long, you know, to formulate the question. You think of something to look for, you would run the report. You would see that it did not quite answer, you would run the report, you would wait again. Now, they can turn that around in a couple of hours instead of a couple of days.

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Now, before the SAP implementation, how was that enterprise reporting done? Was it all manually, or some other way?

Before we had it in SAP, we had 17 copies of a financial system doing the salaries and expenses. And, it was pulled into a homegrown data warehouse that had 17 versions of the truth, each according to each agency and they each became slightly different over time. Doing something at the departmental level was almost impossible. Instead, you would have to do data calls, sending out the questions to the CFO community across the department and have their analysts run the reports and come back and get the data.

You are essentially marketing this solution to other agencies -- if they are an NFC customer or if they are not, what does this option hold for them in the context of other options that may be available that are in the market?

Right now, the other shared service providers are offering Oracle of some kind or some version. We are the only ones currently who are offering SAP. We have a broad range of experience implementing fairly large organizations. We’ve done every business process from loans to direct payments to grants. The Forest Service sells timber. So, we have had experience with almost all the business processes. We have built up a good bit of experience in interfacing and integrating with agency systems. For instance, when we brought Forest Service on, we do not do timber sales inside our solution, but their timber sales system talks to the financials and records it there. NRSC took the opportunity to take their system that they use to manage their conservation work with called ProTracks and tightly integrated to the financials. They, beforehand, they would do their business offline in the system and send us a summary result at night, saying, “Here’s how much money we obligated.” When we implemented them, we went to a real-time, Web-enabled interface, so that when someone in the field would like to obligate money for an easement, the funds control is done in the official system of record. It is not an after-the-fact, where if they did not get it right, a budget person has to fix it.

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The other thing that it gives us by having a one integrated solution in SAP and bringing in HANA is there’s now the opportunity there for an agency to have a single source of truth. You can have all of the elements about your financial transaction in one place at one time, where you can get to them. So, no more data calls.

One problem with those data calls that we had done, an example that I gave some of our USDA customers when we were implementing is hypothetically suppose the secretary is on his way to a meeting in the West Coast. He is on his way to the airport. He says, “I’m going to talk to some people in a specific county in this state. I’m getting on the airplane in 45 minutes. When I get there, I want to know what economic impact we had on that county, which agencies and what kind of business.” Before we implemented SAP, no one would be able to answer that question. The data would have been in too many different places. Now, we’ve got all the salary and expense data and most, not all yet, of the program financial activity, and we’re starting to collect it in one place at one time. Today, if they got on the plane, we could tell him when he landed about all the salaries, all the purchases that were made by organizations in that area. Soon, we’ll be able to tell him about the SNAP [Supplemental Nutrition Assistance Program] and WIC [Women, Infants and Children] assistance program that Food and Nutrition Service is doing. We are working on integrating that program accounting system now. The 17 that I said we consolidated were the ones that do the salaries and general administrative expenses and some program information. Some of the larger USDA programs still have not been consolidated yet.

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