Federal, State and Local governments are entering a new phase where financial transparency, process excellence and efficiency at scale will matter more than ever. And Process mining and Execution Management can play a big role in zero-based budgeting.
Here’s the current situation facing the government.
Like enterprises, the public sector is facing a new financial era marked by inflation, higher interest rates and a funding spigot that's returning to normal after the COVID-19 pandemic. According to a recent US Government Accountability Office (GAO) report, there are multiple opportunities to address fragmentation, overlap and duplication of processes throughout the government. If addressed, the GAO estimates that the government could save tens of billions of dollars. The GAO report presents 60 new actions for Congress and agencies to take to address inefficiencies.
According to the GAO, the Federal government has accrued $531 billion in total benefits from 2010 to 2021 by addressing fragmentation, overlap and duplication.
Those potential benefits come as Carahsoft Technology Corp., a leading IT solutions provider to the public sector, has made Celonis' Execution Management System (EMS) widely available to US Federal, State and Local Governments via the US General Services Administration Schedule 70.
We caught up with Celonis' Chris Radich, Vice President of Solution Engineering, Public Sector, and Colin Wardlaw, Vice President of Public Sector at Celonis, to talk about how Process Mining and Execution Management can advance financial transformation at the Federal, State and Local levels of government. Here's a look at the key takeaways from the conversation.
The issue: "We are entering a new era of financial management in government," said Radich. "We've shifted from free flowing money to disciplined measures and it's unfolding as we speak. There was an influx of $3.4 trillion in relief from four COVID relief bills that flowed through all levels of government. In this new era, Government leaders are now forced to do more with less.”
The GAO report identifies multiple areas where fragmentation, overlap and duplication can be addressed. Fragmentation refers to circumstances where more than one agency or organization is involved with the same broad area of service delivery. Overlap is when multiple agencies or programs have similar goals and engage in similar activities. Duplication is when two or more agencies or programs provide the same services to the same beneficiaries.
Add it up and there are a bevy of inefficiencies to address across multiple functions. "An increased level of transparency and accountability on spending is here and process mining technology is uniquely positioned to solve the problems the government is facing," said Radich.
The GAO report aligns with this view, stating: “Contracting officials at federal agencies should use metrics measuring cost reduction or avoidance to improve the performance of their procurement organizations, a move with the potential to save billions of dollars annually.”
Transparency on legacy investments. Whether it's the Federal or State level, there are multiple enterprise resource planning (ERP) and financial systems that overlap, said Wardlaw.
The biggest difference between the Federal and State level is scale, but the legacy system problem remains consistent. Celonis can generate the X-rays and increasingly MRIs of systems and processes to enable governments to take on technology transformation projects with less risk, added Radich.
The opportunities. Radich and Wardlaw said governments can realize value by addressing three end-to-end processes; Procurement, Accounts Payable (payments to vendors and citizens) and Accounts Receivable (collections by the government). This allows Government leaders to free up cash flow and funding by tackling issues like improper payments and rogue spending. There is also an intangible benefit of freeing up institutional knowledge about government processes.
What's driving government financial transparency? At a high level, more outcome based funding at the Federal Level is driving more attention to Key Performance Indicators (KPIs). "From a process mining perspective, state and local projects are looking at KPIs more and more," said Wardlaw. This KPI focus is also prevalent at the Federal and Defense levels.
For instance, the Department of Defense (DoD) has a strategic planning process system called PPBE (Planning, Programming, Budgeting, and Execution). The GAO report outlines several areas of improvement for DoD processes ranging from Navy shipbuilding processes to procurement of weapons systems and food.
In addition, the DoD is aiming to deliver its first clean financial audit by 2027. The audit looks at every aspect of the DoD, which has more than 643,900 assets located on more than 4,860 sites worldwide covering nearly 25.8 million acres.
The challenges on the Federal, State and Local levels. Radich said the biggest challenge for the Federal Government is the scale and complexity of financial management processes. In addition, the Federal government is in the process of shifting towards a shared services model for financial management that makes it difficult to get a complete picture from budget appropriations to execution across hundreds of IT systems, he added.
Wardlaw said there are similar problems at the State and Local levels, but transparency is also required for bond ratings. "If states and municipalities are not being transparent with their financing, they can lose their bond ratings because there's a lot of capital improvement projects happening across the United States," explained Wardlaw. "If a State can save 10% on rogue procurement in six months, state financial leaders can do more with less, serve constituents in time of need and raise money to fund future projects."
Municipal challenges also revolve around utilities and public transportation. "From a utility perspective, the financial struggle is the meter-to-cash process," said Wardlaw. "Public transit is also a challenge since ridership is down, there's inefficiency and the supply chain is a mess."
How the government approaches Centers of Excellence (CoE). Enterprises typically use process mining and execution management to deliver value quickly and then scale across processes and business units. The government approach is to see that quick return and institutionalize it right away. In other words, the Process Excellence CoE approach is a core competency for governments. Radich said:
"We are finding that government customers want to establish a long-term capability of process excellence and transformation. They're building teams that scale this process mining technology, and ultimately X-raying core financial processes and other systems.
The government thrives on staffing against technology platforms and capabilities. They build teams and organizations for the long-haul."
The future. Radich said there's potential to scale process excellence as a top-level policy to create process digital twins. "Mandating a financial process digital twin for every Federal agency or State would fill a void," said Radich. For states, Wardlaw said the future is using process excellence to deliver services efficiently with a better experience. Medicaid is an example where states can address both efficiency and experience with health claims and other processes.