IT Cost Accounting Decision Brief for NOAA CIO Council

1
IT Cost AccountingDecision Brief for NOAA CIO
Council

• Zach Goldstein
• NESDIS
• January 16, 2007

2
Agenda

• Challenges
• Benefits
• Solution
• Approach
• Request of CIO Council

3
Challenges

• IT expenditures are pervasive but hidden among
  almost all NOAA activities
• NOAA program and line office managers have little
  understanding of their financial requirements or
  expenditures for information management functions
  
• Current IT-related object class codes do not
• distinguish among the uses of ADP or
  telecommunications equipment
• Identify the purposes of IT contractual services
• Break-out IT from non-IT costs within a contract
• Identify federal employee activities as IT or
  non-IT-related
• Determining IT security cost has been difficult,
  time consuming and yields questionable results
  (e.g. CA cost, IT security dollars against IT
  budget)
• Recent increase in IT data calls that include IT
  cost elements

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Challenges (continued)

• Line Offices lack ability to easily capture IT
  cost data
• Line Offices do not have a uniform approach in
  capturing and analyzing IT costs
• Line Offices lack ability to review IT costs
  against organizational measures of performance
  and priorities in order to allow senior
  management to make informative decisions for
  capital reallocation (e.g. IT operation vs. IT
  security)
• CFOs demanding greater historical cost detail in
  IT budget requests
• CIO Council provides IT spending guidance through
  PPBES but cant determine what is actually
  obligated or spent for IT

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Challenges (continued)

• Common IT performance metrics such as Total Cost
  of Ownership difficult to calculate and compare
• Cost distribution for proposed common IT services
  are difficult to measure or defend against
  scrutiny
• Charge-back basis are ad-hoc and difficult to
  compute
• Absence of charge-back causes under investment in
  shared infrastructure
• Lack of an IT cost accounting structure prevents
  portfolio analysis and management

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Benefits of Establishing a Common IT Cost
Structure

• Better IT cost identification, analysis and
  reporting, especially IT security
• Enhances CFO and CIO interaction
• Comparability among NOAA line offices, projects
  and programs
• Better links IT expenditures with Goals/Programs
• Foundation for better investment and portfolio
  management
• Facilitates charge-back
• Benchmarking against other federal and private
  sector organizations
• Activity Based Costing to support efficiency
  initiatives

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Costs, Difficulties and Risks of a Common IT Cost
Structure

• Costs
• Time and cost to set up and maintain the cost
  reporting structure
• Time to record employee time
• Contract modifications for increased cost
  reporting detail
• Difficulties
• Agreement on common categories belief were
  unique
• Resistance to changes e.g., federal employees
  charging time to multiple cost centers, capturing
  federal employee time as part of IT project costs
• Risks/Mitigation
• Data capture burden causes non-compliance
• Limit data capture to validated, recurring
  requirements, secure executive advocacy, and
  include in employee performance assessment
• Confusion and lack of compliance will yield
  inaccurate or incomplete data
• Educate and train. Audit data quality
• Misinterpretation of data, even if accurate and
  complete, because it is not comparable or
  analyzed without context (e.g., differences among
  workload, activity or output measures)
• Define common measures and always provide data in
  context

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Solution

• Outcome Specified tasks, each with a 3-place
  alpha/numeric code, for NOAA information
  management-related activities
• Follow model of NOAA facility maintenance
• First define high-level reporting and
  decision-making requirements for IT investment
  management
• - OMB, DOC reporting requirements
• - NOAA, Goal, Council, LO management
  responsibilities
• Identify a common group of IT cost categories
  and/or elements that are implied by the
  requirements
• Assess, screen cost elements by expected
  materiality
• Integrate into existing financial management
  system (e.g. Commerce Business System) and feeder
  systems (e.g. WebTA) with cost rollup (e.g. NOAA)
  and decomposition (e.g. Line Offices)
  capabilities
• Plan the implementation of data structure into
  future systems and plan the development of needed
  IT management applications

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Notional Plan

• Assemble cross functional working group
• NESDIS willing to chair
• Working group members from OCIOs and OCFOs to be
  identified within two weeks of NOAA CIO Council
  approval of this project
• Meet with NOAA Facility Management and review
  Gartner research to leverage lessons learned
• Develop project plan detailing tasks and interim
  deliverables and frequent checkpoints
• Define application requirements (required reports
  and questions to be answered) and recommend cost
  categories/elements
• Consider IT cost accounting structures of other
  organizations, federal and private sector
• Consider materiality of cost category
• Consider availability of activity and output
  measures
• CIO Council decision point (April 2007)

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Notional Plan (continued)

• Paper prototype
• Two months
• Desktop exercise with IT employees and IT
  COs/COTRs
• Verify cost structure meets reporting
  requirements and answers questions
• Estimate costs, difficulties and risks of
  approach
• CIO Council decision point (June 2007)
• Selected Line Offices pilot approach
• One fiscal year duration FY 2008
• Two LOs (e.g., NWS and NESDIS), selected
  projects, selected offices within LOs
• NOAA programs?
• Document CIO, CFO and NEP/NEC approval of
  piloting plan

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Notional Plan (continued)

• Evaluate effectiveness and cost of pilots and
  implement refinements based on customer and
  stakeholder feedback
• 9-month checkpoint (June 2008) consider
  expanding in FY 2009
• 13-15 month checkpoint present results of first
  fiscal year
• Develop plan for NOAA-wide implementation in 2010
• Allocate new applications to existing, emerging
  (e.g., a NOAA commitments system) or future
  systems
• Target cost accounting structure for
  implementation in current financial systems,
  possibly in advance of specific applications
  which will use the cost elements
• Develop communication and implementation plan to
  raise awareness and facilitate organizational
  adoption
• Document CIO, CFO and NEP/NEC approval of plan

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Decisions Requested of CIO Council

• Agree IT cost accounting should be addressed by
  this Council
• Approve creation of working group to
• review other experiences (e.g., NOAA Facilities,
  Gartner research)
• review and modify notional plan,
• draft project plan,
• create example list of cost categories, and
• report back to CIO Council in April 2007
• Nominate one person from each LO to serve on
  working group, invite LO CFO to nominate members
  also
• Agree that working group selects leader or
  designate an LO to provide working group
  leadership