Financial Management and Analysis

 

I. FINANCIAL MANAGEMENT SYSTEMS

In October 2003, the Department completed the implementation of its financial management system, the Commerce Business System (CBS), formerly known as the Commerce Administrative Management System (CAMS). CBS replaced non-compliant legacy financial systems within the Department. Bureaus that were previously on compliant systems continue to use those systems with some entities potentially converting to CBS at a future date. The financial information from these systems and CBS is integrated in the Corporate Database (as discussed further below) for consolidated financial reporting, resulting in a single integrated financial system. A Consolidated Reporting System (CRS) integrates existing management data from financial, human resource, acquisition, and federal assistance enterprise databases, and provides senior management with online desktop access to information about bureau programs and resources that is critical to strategic decision-making.

CBS provides reliable and timely information within a sophisticated security infrastructure. The system is capable of producing both financial and budget reports from information generated within the financial management system. CBS includes a Core Financial System (CFS) interfaced with administrative systems for small purchases, bankcards, grants (Automated Standard Application for Payments [ASAP]), a data warehouse, and time reporting/labor cost distribution module, collectively called Core CBS. Planned is an obligation and requisition interface between CBS and the Commerce Standard Acquisition and Reporting System (CSTARS), the Department’s acquisition system.

The Corporate Database is a commercial off-the-shelf software package for consolidating financial data and producing financial reports. The Corporate Database provides an integrated solution to financial statements and Federal Agencies Centralized Trial Balance System (FACTS I) Adjusted Trial Balances reporting at the Department, bureau, and Treasury Appropriation/Fund Group level, and also provides the ability to perform data analysis. The database was updated in FY 2004 to produce the Department’s footnotes, financial analysis reports, and other additional information required for the government-wide financial statements.

During FY 2005, the Department accomplished the following initiatives:

• Completed the business case on the review of information technology and system support activities associated with CBS and the financial feeder systems. The business case identified opportunities within the existing financial systems environment to consolidate hardware and software and reduce redundant responsibilities. The Department will benefit from this consolidation by reducing the systems infrastructure and reducing overall financial systems costs, and positioning the Department for the replacement of CBS in FY 2012.
• Successfully completed the Next Generation Financial Management Solicitation process for replacing the current Corporate Database with upgraded technology and expanded capabilities.
• The Department’s executive information system, CRS, for the first time included performance data in addition to financial, procurement, human resources, and grants information. The performance data provides Department executives and managers with easy access to bureaus’ performance against established GPRA goals.
• Completed the CBS Web Migration Business case and had an independent company perform an independent technology assessment of the Web Migration Business Case to validate the assumptions, proposed options, proposed architecture, and approach presented in the business case.
• Had an independent company perform and complete an Independent Verification and Validation (IV&V) of the Oracle code and database design for usability and sustainability through the CBS life expectancy of 2012 and beyond.
• Conducted a deconstruction of six common business systems other than CBS for FYs 2005-2008 in which the bureaus and the Office of Financial Management (OFM) (1) developed a common basis for reporting costs by standard cost categories, activities, and functions using commonly agreed-upon definitions; and (2) reviewed bureau spending by cost categories to ensure consistent spending across those categories.

Although the Department has an integrated financial system with the implementation of CBS and the Corporate Database, there is still a need to look forward to ensure that it continues to provide reliable, timely, and accurate financial data to management. In FY 2006, the Department plans to accomplish the following:

• Implement recommendations from the CBS business case study by beginning the process of consolidating financial system applications from the existing locations to one data center.
• Conduct a Web migration pilot project to refine the approach and cost of migrating CBS to the current version of its software. In addition, Commerce will implement best practices identified in the Web Migration IV&V for maintaining CBS software.
• Complete the implementation process of replacing the current Corporate Database with upgraded technology and expanded capabilities.
• Continue to identify and employ controls necessary to provide, improve, and maintain general controls, specifically security of financial management systems.
• Implement the interface between the CBS and procurement system in production throughout Commerce. This interface will permit the procurement system to send requisition and obligation documents to the CBS for processing.

The Department is already looking beyond FY 2006 in an effort to plan improvements to its financial management systems and operations, including:

• Conversion of the International Trade Administration (ITA) to the CBS. This effort will continue to expand the benefits of CBS in standardizing financial management activities across the Department and in providing a centralized financial system for financial management and reporting. In addition, ITA’s existing system supporting its core business functions is technologically out-of-date and is no longer being supported by the software vendor.
• Planning for the transition to a Financial Management Line of Business Center of Excellence by 2012. The Department has begun mapping out a timeline that includes the required phases and activities for this transition, including beginning planning activities in FY 2008; identification of the Center of Excellence by FY 2010; and implementation/deployment occurring between FY 2010 and FY 2012.

II. FINANCIAL REPORTING

The Department is committed to making financial management a priority and significant efforts are being made to further improve the management of its financial resources. The Department has received unqualified opinions on its consolidated financial statements since 1999. In addition, one bureau subject to individual audit has maintained unqualified opinions on its principal financial statements. The Department met or exceeded the accelerated financial statement submission deadlines for FY 2005. These achievements resulted from the Department’s commitment to strong management controls and accountability for its resources. Two reportable conditions were cited relating to some identified deficiencies in general information technology (IT) controls remaining from the prior years and one bureau’s controls over reporting Construction-Work-in-Progress. Although the Department did not identify any significant problems with erroneous payments, it recognized the importance of maintaining adequate internal controls. The Performance and Accountability Report (PAR) section, Improper Payments Information Act of 2002 (IPIA), and the Appendix on the IPIA reporting details describe the Department’s implementation efforts of this Act along with the results of Commerce’s reviews.

The Department accomplished the following initiatives that resulted in meeting the aforementioned goals:

• Implemented Section 831 of the Defense Authorization Act of 2002 (P.L. 107-107, Title VIII, Subtitle D, Sec. 831; 31 USC 3561-3567) by contracting with a private vendor to perform recovery auditing. The audit included thorough reviews of sample invoices from two of the Department’s largest payment offices, and an independent confirmation of open items with key vendors. Also, as a separate effort, the Department performed disbursement sampling to identify improper payments. Results of the audit, confirmation efforts, and disbursement sampling revealed no significant improper payments or internal control deficiencies.
• Completed a business case that studied the structure of, and processes and business practices followed by, the Accounts Payable function across the bureaus. The business case made several recommendations to streamline financial management within the Department, including implementing best practices and researching the feasibility of a Web invoicing system.
• Participated in the government-wide Chief Financial Officer (CFO) Council, Financial Management Policies and Practices Committee and led the development of the revised Internal Controls Assessment (Office of Management and Budget (OMB) Circular A-123) Implementation guidance that was issued by the OMB in July 2005.
• Actively participated in the government-wide development of the revised Form and Content of Agency Financial Statements (OMB Circular A-136) that was issued by OMB in July 2005.
• Published guidance on the preparation and submission of financial statements, including a calendar of milestone dates. Each quarter, with the participation of all bureaus, guidance was reviewed and updated to reflect lessons learned and to identify best practices among the bureaus. When necessary, task forces were formed to resolve issues that impeded the Department’s ability to produce timely and accurate financial statements.
• Prepared Corrective Action Plans for the reportable condition and management letter comments, and progress was monitored throughout the year.
• Held meetings throughout the fiscal year with the Office of Inspector General (OIG) and independent auditors to ensure timely completion of the audit and issuance of the financial statements.
• Held monthly meetings led by the Department’s Deputy CFO with the bureaus’ CFOs to discuss financial management issues, including financial statements, the CRS, and financial performance metrics. These meetings were in addition to the Department’s monthly CFO Council meetings led by the Department’s CFO, and the monthly Finance Officer meetings led by the Deputy CFO.
• Participated in the Financial Metrics Workgroup led by the CFO Council Committee. Monthly financial metrics were compiled, analyzed, and reported in the government-wide consolidated CFO measurement tracking system. This information is also included in Commerce’s CRS for senior management’s review. Individual bureaus were provided with a monthly status report comparing and analyzing their results with the Department’s goals, and the Department and government-wide results.
• Facilitated intragovernmental reconciliations using the Department’s Corporate Database application to collect, extract, and report on a quarterly basis its intragovernmental account balances, by trading partner, to the Treasury Department. The Department took a proactive approach of initiating contact with all trading partner agencies to reconcile large differences. However, despite its considerable effort, the Department has been unsuccessful in its attempts to reconcile all differences primarily due to a lack of participation by its trading partners.

Although the Department has accomplished much in the area of financial management, there is still a need to improve upon these accomplishments to ensure that the Department produces and reports accurate, reliable, and timely financial information. In FY 2006, the Department plans to accomplish the following:

• Implement the requirements of OMB Circular A-123, Management Accountability and Control, and OMB Circular A-136, Financial Reporting Requirements.
• Implement recommendations from the CBS business case study to streamline business processes throughout the Department. As a first step, the Department will implement best practices identified in the business case to improve financial operations and examine the cost and feasibility of Web invoicing.
• Continue to identify areas that will facilitate the acceleration of providing accurate and reliable financial information to Commerce managers and central agencies. This will be achieved through ongoing meetings and workgroups amongst the Department’s financial managers and participation in government-wide financial management committees and workgroups.
• Develop corrective actions to resolve outstanding internal control deficiencies and monitor their implementation.
• Continue to monitor and perform reviews of the Department’s progress in preventing improper payments.
• Continue to work with OMB, Treasury, and the Government-wide Intragovernmental Subcommittee to improve the intragovernmental reconciliation process.

GRANTS MANAGEMENT

The Department is an active participant with the government-wide implementation of Public Law (PL) 106-107 (The Grants Streamlining Initiative) to simplify and automate the grants process, including participation on various interagency workgroups. The Department’s Office of Acquisition Management (OAM) coordinates quarterly Departmental Grants Council meetings and works closely with the OIG and General Counsel to implement sound policy and ensure consistency for the Department’s financial assistance programs. The Department is committed to the goal of strengthening its grant operations and improving its business processes to provide better services to its customers in the federal grant recipient community.

An active partner in e-grants initiatives, OAM serves on the Grants.gov Executive Board and the Grants Line of Business Taskforce and participates on workgroups and pilot activities. The Department is now fully compliant with Grants.gov, and has revised its Grants and Cooperative Agreements Manual and Standard Grants Terms and Conditions to recognize the emerging growth of electronic government.

Integral to the Department’s effort to move aggressively into the world of e-grants is the continued utilization of the National Oceanic and Atmospheric Administration’s (NOAA) Grants Online System, a back-office solution to the Grants.gov’s storefront. The system, which went live in January 2005, was designed to facilitate efficiencies through standardized business processes and provide a direct interface to other Departmental systems. It has demonstrated significant potential for reducing paperwork, increasing accountability, simplifying the application process, and is being considered for enterprise-wide implementation.

The Department has taken additional steps to adapt its operational structure and business processes to the streamlined vision of federal grants operation expressed in PL 106-107. During FY 2005, OAM has undertaken a high-level reengineering survey of the Department’s grant operations in an effort to develop a more interactive, synergistic enterprise-wide model for federal assistance programs in the emerging electronic environment. The goal is to create a performance-based culture utilizing value-added business processes with maximum use of automation for improved timeliness and quality of service delivery.

OAM’s efforts to facilitate the approval of indirect cost rates for award recipients continued throughout FY 2005. OAM continued working with a contractor in reviewing applications submitted to the Department for indirect cost rate determinations, and made significant progress in facilitating the approval of indirect cost rates for award recipients throughout the fiscal year. In addition, OAM incorporated new audit and risk management features into the program and looks forward to reaping the benefits of these efforts in FY 2006 and beyond.

HUMAN CAPITAL

The Department recognizes the need to ensure succession planning in the area of financial management and to enhance the current workforce development. The Department provides internships through a variety of sources to give finance and accounting majors an opportunity to gain hands-on accounting experience, while introducing potential future employees to the opportunities that exist at the Department. In FY 2005, the Department initiated a two-year career internship program for college level graduates interested in pursuing a career in federal accounting. A total of 11 candidates are currently participating in finance related training courses and rotational assignments throughout the Department and its bureaus. The Department continued its partnership with the National Academy Foundation (NAF) by employing finance interns from local high schools and participating in NAF sponsored events. In addition, the Department initiated a panel of subject matter experts, consisting of representatives from the bureaus, to review the current accounting position descriptions, performance plans, and hiring criteria to ensure that the Department hires and retains high quality accountants.