On Modernizing Financial Management Systems
Today, the nation faces a range of diverse threats and challenges. The U.S. Department of Homeland Security continues to play a leading role in battling the pandemic, securing the border, and implementing our immigration laws, strengthening the nation’s cybersecurity, building greater resilience and preparedness, and so much more. Now the third largest department in the U.S. federal government, DHS meets its mission with an annual budget of $49.8 billion and the dedication of more than 240,000 employees. One of its most important duties is to be good stewards of the taxpayer dollars. To do that, the department continues to modernize its financial management systems working to improve access to financial data across the enterprise and leveraging that data to inform decision-making and resource allocation. "Our financial management strategy has four core goals,” describes Stacy Marcott, acting Chief Financial Officer (CFO) at the U.S. Department of Homeland Security. “Number one be a workplace of choice for highly skilled and talented people delivering financial excellence. Number two revolutionize CFO business practices and systems to enable proactive decision support. Number three resource DHS based on mission requirements, priorities, and availability. Number four provide evidence to DHS partners, congress, and the public that we are good stewards of taxpayer money.” Stacy joined me on The Business of Government Hour to discuss DHS’ financial management strategy, progress on its financial systems modernization (FSM) journey, the U.S. Coast Guard's implementation of FSM, lessons learned and best practices in financial modernization, the impact of COVID-19 on DHS operations, and hiring opportunities within her office. The following is a edited excerpt highlighting insights from this interview.
On the Mission of the Office of Chief Financial Officer. First, the mission of the department is to safeguard the American people, our homeland, and our values. The ultimate mission of my office is to secure and protect resources that allows Homeland Security to perform its mission. Therefore, we are fundamentally mission enablers. We support the department’s frontline operators who are performing the business of DHS. This means getting the money to the right people, at the right time, who are in the right places.
DHS is a diverse organization composed of eight frontline components that include the following: Cybersecurity and Infrastructure Security Agency (CISA), Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), FEMA, Transportation Security Administration (TSA), U.S. Coast Guard (USCG), U.S. Secret Service (USSS), and U.S, Citizens and Immigration Services (USCIS). With an annual budget of about $90 billion, DHS is the third largest Cabinet agency after Department of Defense and the Department of Veterans Affairs. About 94% of our budget goes to the big 8 components identified above. We are the 2nd largest revenue collector in the federal government after IRS. With such an expansive mission, the department also has a diverse set of financial systems totaling 12 separate systems some with outdated technology. Some 240,000 people, including 43,000 active military personnel are dedicated to executing the mission of DHS. This is done throughout the country in 12,386 buildings and across 59 countries.
On Challenges. There are three top challenges. Number one to challenge is the growing mission areas and getting resources to support them. The scope of DHS continues to grow especially in response to national emergencies such as the pandemic, surge operations at the southwest border. Many of these efforts require cross agency collaboration such as partnering with U.S. Health and Human Services (HHS). We’ve been given mission sets to lead unified coordination groups across the federal government in response to things that the administration wants us to help tackle. Multiagency operations are extremely challenging given the department is only allowed to use its resources for certain purposes.
Second challenge is attracting and bringing onboard the right talent and the right people. For me, it is essential to grow pipeline of leaders for our organization and making sure they have the right skills.
The third most significant challenge we face is the ongoing pandemic and working in a remote/hybrid environment. It’s been a long and stressful two years dealing with COVID and my team, along with the rest of the world, has had to adapt and overcome. It can be harder to show folks you care; harder to feel like a team; harder to communicate; harder to do everything. It has made us stronger in some ways and enabled more flexibility. It has been what I call a social psychology experiment whose longer-term impacts become clearer with time. The pandemic impacted how we engage with each other greatly.
To address these challenges, I try my best and encourage my team to be very adaptive. Pandemic or not, change is difficult. You simply cannot communicate enough. The most important aspect of communication is listening. We need to mentally adapt and overcome. We need to work to get resources, training, and people in place to support our success
On Financial Systems Modernization Implementation. Financial systems modernization has been near and dear to my heart because we’ve lived it for the last 19 years. It’s been quite a long, bumpy, and windy journey, going around cliffs, up mountains, and down mountains to try to get to where we are today. We’ve made a lot of progress on the FSM front. To date we have: Consolidated 22 separate federal agencies in 2003 with diverse organizations, missions, accounting, and systems. DHS had diverse financial systems – more than 12 separate systems – many with outdated technology and only 5 previously subject to financial statement audits. Most recently, U.S. Coast Guard’s FSM went live. DHS now has 40% of its spending flowing through a modern, integrated, financial system. Prior to that, the two other components of what we call the “Trio” were migrated to a modern, integrated financial system. These are the Countering Weapons of Mass Destruction Office (CWMD) & the Transportation Security Administration (TSA). CWMD was the first in the Trio to go live in DHS Financial Systems Modernization Solution (FSMS). Their system went live at DOI in 2016 and moved over to DHS in 2019. TSA went live on FSMS in October 2020. TSA closed FY 2021 successfully on FSMS. USCG went live December 2021. Their transition took longer than TSA because USCG had more data that had to be migrated, as well as more feeder systems with over 40 interfaces required.
On Lessons Learned. First and foremost, the FSM is a component effort. We help, guide, and bring tools, but most of the work will always fall on the component. It goes without saying that subject matter expert engagement early and often in the process is irreplaceable. Grouping all user testing at the end of the project is a recipe for disaster. User testing must be incorporated throughout. One challenge we faced was migrating a massive quantity of old and often unreliable data. The migration was fraught with surprises. We performed 5 practice migrations before cut-over and still were often surprised and delayed by data anomalies during cut-over. Another key challenge involves a large, complex component like the USCG has many business processes across many layers of the organization. It is almost impossible to uncover all the business processes. And those that are buried the deepest and arise at the last minute are the most difficult to migrate. Continuous SME engagement is key to quickly addressing these issues. Overall, change management is a challenge – although our old systems had shortcomings, our users were familiar with them and knew how to make them work. One key lesson learned from our implementations is that you can never do too much training – however you can train too early. Getting the right training, to the right users, at the right time, is critical. In terms of timing, training just before go-live is critical along with post go-live hyper care support.
We’ve stayed in constant contact with the future system users, particularly over the last 100 days. USCG Leadership had an excellent engagement plan that included multiple messages per week from their CFO and Deputy CFO. Generating confidence in the inevitability of the successful migration to the new system is the most important thing we can do to help the end users through the adaptation process. Doubt prevents them from taking the actions they need to take to be successful (accessing training, engaging with the information we send out, preparing). We used a Change Champion network of “deck-plate” leaders that could answer questions and provide needed leadership and guidance to users with questions and concerns. We made most of self-paced web-based training. This means users can access it as often as they like. This was particularly important for the CG as they have high turnover due to their multi-mission military roles.
On the Future of DHS’ financial modernization journey. For the future, we have planned the completion of future migrations of the remaining agencies in FY 24 – FY 27. FEMA is 41% of DHS spending. What we call the DHS Cube Components (ICE, CISA, DMO, S&T, and USCIS represent 16% of DHS Spending. Having every dollar of DHS spending flowing through a modern, integrated, financial system is very important to me because it will reduce the risk of waste, fraud, and abuse. It will also better enable us to use financial reporting data to make data-driven decisions across the Department and become better stewards of the taxpayer dollars.
On Hiring and Training Staff. Senior leaders have made employee development a priority, and CFO has channeled efforts through a dedicated Workforce Development Division (WDD). WDD has developed a robust array of training and developmental opportunities, such as the Centralized Training Program, detail opportunities, intern and external leadership programs, and Career Path Guides. The Centralized Training Program delivers 60 distinct courses per year, covering a wide array of topics in technical, data analytics, leadership, and workplace skills. We focus training on competencies prioritized through the Annual Needs Assessment. With many vacancies throughout the department, as well as our continued focus on enterprise perspective and professional development, staff can broaden their skill sets through detail assignments. Technology expands training and developmental opportunities, improves efficiency and productivity, facilitates collaboration, and strengthens employee engagement across our CFO team. Building a workforce that embraces and applies innovative uses for technology remains a critical driver of future organizational capabilities. Partnerships are critical to continue to bring in fresh and innovative ideas to the organization as well as help to fortify our bench strength and skillsets.
On the Impact of COVID-19 pandemic. While the pandemic, and the ensuing quarantine orders in March of 2020, may have caught us off guard, our workforce adapted overnight. I think the key challenge was just the transition of our mindsets for all OCFO staff, including myself. Moving to a hybrid or fully virtual environment impacted everyone a little differently, but the workload never ceased, nor did the productivity. There was no change in our workload, or the quality of our products. Our people really stepped up to the challenge despite the uncertainty the last two years presented.
On Leadership. The characteristics that make a great leader are the characteristics that make a good person. An aspect of leadership is making a positive difference in other people’s lives. It’s been a long and stressful two years dealing with COVID and my team, along with the rest of the world, has had to adapt and overcome. It can be harder to show folks you care; harder to feel like a team; harder to communicate; harder to do everything. It is about creating a positive environment where people can be successful and authentically themselves. Leaders help people be successful by investing in and developing people to reach their full potential.
I like to characterize my leadership philosophy as the ABCs of leadership. The A is your attitude and keeping it positive. Attitudes have the potential to build up or tear down the success of teams. We all know a bad and negative attitude can spread across an organization. You can build your teams with respect by keeping things positive. B is for be bold. Look for gaps, or places where you can be helpful, and take the initiative to fill those gaps. You need to step outside your comfort zone. Being bold…looking for gaps and not waiting for tasks to be given to you is probably one of the characteristics that I value most in any employee.
Finally, the 5 Cs of leadership are about building connections with people. Leadership is not about control, power, or job title. It’s about building positive relationships with people. Leaders spend 70-90% of their time in group or team interactions every day (not working on spreadsheets or creating pivot tables). Communication and leadership are joined at the hip. The challenge with communication isn’t one of quantity – it’s a quality issue. The most important part of communication for myself, and I think for mostly everybody, is listening and listening with quality, which is extremely hard in the virtual environment. It is critical to share insights to create a shared understanding which is a foundation for future action. You can’t stay stuck in a silo if you want your team (your ship) to be successful. Problems today are multi-faceted, so good leaders are skilled facilitators who focus on getting problems out of their workers’ ways. The final C means cultivate curiosity. Again, don’t be satisfied with the status quo. It is about asking the “why” behind something, not being afraid to let other people ask why and understand why they’re being asked to do something. Leaders need to create an environment where people feel safe to try new things where failure is a learning experience not an embarrassing experience. You will create more curiosity because people will want to think of new and better ways of doing business. Those are my ABCs of leadership.