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Millions lost by ERP System in Government

 

July 8, 2013

Doug Hadden, VP Products

News comes of yet another Enterprise Resource Planning (ERP) failure in government in the US federal government at the Department of Health and Human services:

"Medicare hasn't recovered $543 million in overpayments to providers in 2010 because the new accounting system for the Center for Medicare Services did not automatically extract data and provider information was lost, says a June Health and Human Service inspector general report (.pdf)  that was released July 2."

It takes a bit of time to discover what this HealthCare Integrated General Ledger Accounting Systems (HIGLAS) actually is. There's a lot of claiming that it's Commercial Off-the-Shelf, double-entry bookeeping that meets US government financial management standards. It's from one of the Tier 1 ERP providers. The presentation from 2007 claimed that it would support improved auditing – apparently not the conclusion of the Inspector General. (Also, the word "budget" isn't used in the presentation. So, the Department of Health and Human Services planned to spend $600 Billion a year in an ERP system without budget and commitment controls?)

Many government organizations look to buying software from the largest ERP companies and systems integration firms thinking this reduces risk. As we have seen from ERP government implementations worldwide, this approach seems to be high risk. Why?

  • Highly complicated computing code that originated for private sector requirements that needs to be adapted to government needs
  • Bolted-on government functionality like budget and commitment controls (that operates especially strangely with US federal "standards" of putting budgets and commitments into the General Ledger)
  • Significant human capacity constraints to operate and maintain systems
  • High cost to maintain customizations through multiple forced ERP upgrades
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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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