A Game Plan for the New Year

Date: December 19, 2017

"Good hockey players skate to where the puck is. Great hockey players skate to where the puck is going to be."

When hockey great Wayne Gretsky said these words, he gave us good advice on how to think about the future. Analyze all the factors that influence where things are heading -- and then place yourself in the best position to take advantage of the new situation.

That is what we are trying to do on behalf of the Federal financial management community. At Financial Innovation and Transformation (FIT), we surveyed the landscape to identify the technologies and practices that will shape the future of Federal financial management. And we’re building a standards-based approach that will encourage their adoption across government.

1. Robotic process automation. Financial processes are clearly ripe for automation. Most large commercial banks are using robotics to increase productivity by automating repetitive tasks.  A recent study by McKinsey & Company found that as much as 30 percent¹ of the back-office operations in banking can be performed by robots, freeing staff for higher-value cognitive tasks.

   FIT has launched a pilot project that applies robotic process automation to some of the more common financial processes agencies often use.  Later this year, we’ll share the results of this experiment with the federal community to help educate them on what robotic process automation is, and when it makes sense to use it.

2. Data analytics to cut improper payments. Cutting Federal payments to unauthorized recipients has been one of the highest priorities of Federal financial management for over a decade. More recently, legislation has directed Federal agencies "to use data analytics for identifying, preventing and responding to fraud, including improper payments"².

   Many agencies, especially Internal Revenue Service (IRS) and Health and Human Services (HHS), have already shown the power of data analytics to identify and prevent improper payments. FIT collaborated with the Veteran’s Administration to develop a general model that integrates data analytics along with pre-payment controls such as DO NOT Pay to reduce improper payments. This work will produce a standard approach that other agencies can follow to install preventive and detective controls to combat improper payments.

3. A common method of identity assurance. The internet has changed the way that people conduct business. It's changing how citizens interact with their government. To protect privacy and enable efficient interactions, there is a need for a standard and trusted method to establish that a citizen is who he says he is.

   FIT is working with a variety of Treasury programs that provide services to citizens and businesses to develop a uniform approach to identity assurance.

   Together, we hope to develop a solution that provides a consistent end-user experience across several Treasury programs while meeting the stringent requirements for security and privacy protection³.

4. Distributed ledger technology, or blockchain, has received a lot of attention because of the current interest in Bitcoin. But, serious planners in commercial banking are separating the hype of the cryptocurrency from the potential⁴ of its technical underpinnings.

   Today, all major banks have launched research and experiments into how distributed ledger technology can improve their operations. These experiments share a common approach: they are narrow in scope, focused on a solving specific business problem, and designed to measure the technology’s benefit with hard facts – not hype.

   That is what we are doing at FIT. We have begun a proof-of-concept to apply distributed ledger technology to the rather prosaic problem of physical asset management. We’ll share the results of this experiment with the financial management community as we explore other opportunities to apply this promising technology.

These four innovations are not theoretical endeavors or stand-alone efforts. They’re inter-related in how they will be applied to Federal financial management.

Earlier this year, FIT worked with over a dozen agencies in documenting the common end-to-end processes of financial management. A government-wide committee has been established to develop standards for these processes.  

Our game plan for the New Year is to explore how to integrate the four innovations into the framework of the common financial management processes. In 2018, FIT will identify the common financial management processes where the innovations are best applied and quantify their cost-benefit in that context.

¹ Bloomberg Technology, July 20, 2017

² Public Law 114-186, "Fraud Reduction and Data Analytics Act of 2015".

³ NIST 800-63 rev 3

⁴ Business Insider, September 20, 2017