Audit of the worldwide deployment of the New Management System (NMS)

Audit covers the period 10/96-3/97. Six months after deployment, NMS is not operating effectively. Problems are especially severe at overseas missions, where communications difficulties have prevented effective use of most system functions. All 28 sites responding to the audit questionnaire reported continuing to use existing systems to conduct most business. As of 1/31/97, none have been able to make payments through NMS, and few financial transactions have been recorded in the AWACS subsystem. Transactions are largely limited to new activities funded from FY 1997 appropriations. NMS has been unable to handle important Agency business, including processing transactions needed to carry out USAID"s almost $14 billion of ongoing development activities, making payments in a timely manner, accounting for receivables, and processing loan repayments. NMS also does not meet basic federal financial system requirements, such as being able to generate financial and management information. For the 5-month period between 10/96 and 2/28/97, USAID obligations totaling $1.737 billion were recorded in NMS, or about 32% of Agency obligations during the same period in FY 1996. NMS" ability to make payments is even more limited. For the same period, NMS disbursements totaled about $1.225 billion -- of which $1.2 billion was wired to a bank in the United States. This amounts to 3% of Agency disbursements during the same period in FY 1996. Due to limitations in the system"s ability to generate accurate reports of transactions, NMS is not currently producing any official Agency financial reports. As a result, statistics regarding transactions processed in NMS should be viewed as estimates, rather than reliable financial information. NMS has not corrected previously identified financial and management information deficiencies or satisfied users needs for more timely and efficient work processes. NMS deployment has not corrected any of the material weaknesses reported in USAID"s FY 1996 Federal Managers" Financial Integrity Act report and does not meet federal financial management system requirements. NMS is intended to, but has not, corrected weaknesses relating to the lack of an integrated financial management system, a transaction level general ledger, and effective systems to account for receivables, property, and loans. In fact, NMS deployment has worsened the problems by further fragmenting USAID"s accounting records, reducing USAID"s ability to prepare financial and management information, and creating computer access control weaknesses. Operational problems such as slow system response times, frequent system errors, and unreliable system performance have disrupted Agency operations. These problems have (1) hindered users in performing important duties related to development assistance; (2) wasted large amounts of employee time and resources (several missions reported that users have spent several days trying, often unsuccessfully, to process a single transaction); and (3) lowered morale. Although Washington and mission users have been affected, the problems are more severe at missions. These problems exist because NMS was deployed before severe technical and implementation problems were corrected. USAID"s high-risk acquisition approach deviated from guidelines calling for agencies to thoroughly test system performance and adequately for implementation before deployment. To a large extent, the failure to follow accepted system development practices was due to underlying organizational and management deficiencies that allowed substandard information resources management (IRM) practices to continue despite high risks of adverse consequences. It is unlikely that NMS will achieve its full potential until these underlying management deficiencies are corrected. USAID was asked to comment on the audit findings but did not do so before this report was issued.