MEMORANDUM

TO: Cheri Tyner FROM: Vincent R Gibson DATE: March 17, 2013 SUBJECT: Immigration Customs Enforcement Core Financial System Modernization Upgrade In support of the Immigration Customs Enforcement (ICE) agencys Core Financial System (CFS) Modernization effort, this memorandum seeks to clarify current financial management capabilities and gaps as well as identify and analyze options for improving or replacing the enterprise CFS architecture. More specifically, the objective is to determine the recommended course of action that will most effectively improve the performance, reporting, and compliance of the CFS environment to promote financial stewardship and more fully support the ICE mission. Background: ICE relies on the Core Financial System to provide the accounting of financial transactions and maintain financial management activities for ICE and its Department of Homeland Security (DHS) component customers. The CFS has been used by at ICE since its inception in 2003 and Savantage Financial Services, Inc. is the service provider. The CFS is a proprietary COTS software solution with a full suite of applications designed to be a Federal ERP Solution. The CFS had several goals and objectives to include by not limited to: Increase analytic capability, Enhanced Intelligence, Information sharing, Integration operation, and Promote efficiencies. Current Situation: ICEs Office of the Chief Financial Officer (OCIO) operates and maintains the CFS, which supports financial management activities and processes for ICE and five other DHS components. While the CFS supports a multitude of processes and interacts with many systems across the DHS organization, the focus of the CFS modernization effort is initially on the core financial activities. The core processes include System Management, General Ledger, Payment Management, Receivables Management, Cost Management, Funds Balance with US Treasury and Reporting. The determination of core processes was elicited during the interviews with ICE OCIO staff and there was generally a consensus regarding the determination. Capability Assessment / Gap Analysis: The table below presents the current configuration of the CFS and four of the seven core processes areas as identified by the ICE OCIO staff. The four core processes were chosen that the staff felt to be most salient to mission success. The rating column provides a Harvey Ball rating of the current configuration of CFS. 4Fully Meets Requirement 3Meets significant portion of requirement 2Partially meets requirement, but exhibits some deficiencies 1Meets small portion of requirement 1


Core Process System Management

0Does not meet requirement

Requirement Document and Transaction Control Document Referencing and Modification GL Analysis and Reconciliation Accounts Payable Invoicing Rating 2 1 1 2 2 1 1 1 Gap No integrated document management capabilities within the current CFS. No interface between CFS and the system of record for acquisition (PRISM). Extensive usage of offline databases/ and spreadsheets to preform CFS activities cannot be performed in current CFS. The lack of an interface between CFS and Prism results in duplicate data entry. Must entering obligation manual reconciliation need to occur to ensure both systems are in accord. No integrated document management capabilities. Low usage of "canned reports in CFS by ICE/ Extensive usage of offline databases and spreadsheets. Extensive usage of offline databases / and spreadsheets to preform Cost Accounting. Extensive usage of offline databases / and spreadsheets to support reporting functions to US Treasury. Gap Severity High High

General Ledger Payment Management

High High High High High High

Reporting

General Reporting Internal Reporting External Reporting

Value Proposition Assessment: The value ICE currently provides to its customers is accounting of financial transactions and maintenance of financial management activities by consolidating financial data from disparate financial systems in a web-based environment. The Capability Assessment and Gap Analysis indicate that the current value proposition does not meet the needs of ICE and their customers. ICE and their customers requirements are partially met, moreover the core processes exhibit some deficiencies or meet small portions of the requirements. In addition to limited financial processing efficiency, the core processes dont meet the objectives of the agency and its customers. Alternatives: Varieties of solutions were evaluated for their potential to meet the current challenges associated with the CFS. Below are the three potential options to include key assumptions identified to facilitate further analysis of each option recognized to achieve the ICEs stated goals. 1. Status Quo Plus Enhancements - This option focuses on incremental improvements to the CFS and utilizing the incumbent vendor to close gaps identified in the Capability Assessment (All gaps in the current environment will be addressed, The incumbent service provider shall implement enhancement, O&M will be conducted by incumbent service provider). 2. Government Shared Service Provider - ICE and its customers transition to government shared service provider (All gaps in the current environment will be addressed, No customization will be conducted, only configuration, Change management will be needed, Implementation will be co-managed by ICE and Government shared provider).

3. Commercial Off the Shelf Product ICE implements a commercially available software solution to replace current CFS (All gaps in the current environment will be addressed, no customization will be conducted, only configuration, Change management will be needed, Implementation will be managed by ICE, O&M will be provided by ICE at data center selected by ICE). Cost Analysis: The cost analysis below is a rough order of magnitude based on several assumptions. The first assumption is that the life cycle for the requirement is 15 years. The second assumption is that the discount rate of 2.8 was used from the Nominal 10 Year Note, per OMB Circular A-94. Finally, market research was conducted with Government Services Providers, Industry Service Providers, as well as historical data from ICEs contract with Savantage Financial Services, Inc. to derive the Life Cycle Cost Estimate (LCCE). After was estimate completed the cost was divided by 15 for the number of years of services provided and used to calculate Net Present Value.
Recommendation Status Quo + Enhancements Government Shared Services COTS Total $457,189,000.00 $330,174,000.00 $421,212,000.00 PV Total $39,965,525.00 $28,863,189.00 $368,211,52.00

Risk Analysis: In addition, to cost, the risk associated with each option were analyzed to support decisionmaking. To structure the risk analysis, key risk were identified and a score of Low, Medium or High was given based on assumptions of historical implementation of services of similar size, magnitude, scope and complexity.
Risk Category Change Management Scope Creep Interoperability Schedule Feasibility Status Quo + Enhancements Low Medium Low Medium Government Shared Services High Low Low Low COTS High High Low High

Recommendation for Consideration: In the long term if ICE and its customers want to achieve their goals and objectives of increased analytic capability, enhanced intelligence, information shared, integrated operations, and gaining operational efficiencies then option 2 would be my recommendation. The concept of government-shared services for financial management activities is logical and emerges as the most cost effective way to acquire an improved solution. However, given the time and investment required to implement a new solution, I recommend implementing short term risk mitigation strategies to shore up the current environment and gain operational efficiencies prior to embarking into the option 2 government-shared services. Finally, once ICE moves toward the new solution I recommend moving a smaller component into this environment to mitigate risk and provide lessons learned for subsequent implementation. 3