Maximizing the value of economic stimulus funds

By Sherry Amos and Maureen Coveney, SAP

Ensuring transparency and accountability in utilities and government agencies.

Recipients of ARRA funds must meet new mandates for public transparency and accountability

“Simply recording output has far less impact than achieving outcomes. The difference is fundamental to meeting ARRA objectives”

While the American Recovery and Reinvestment Act (ARRA) was passed to quickly spur economic recovery in the United States, it also marked the beginning of a new era in the regulation, oversight, and accountability of the use of millions of dollars of public funds to be spent over the next five years on programs in education, infrastructure, technology, healthcare, sustainable energy, and public assistance, among others.

As a result, utilities and government agencies that received these funds will be challenged to maintain their focus on developing programs that achieve long-term results for constituents while ensuring that these programs adhere to the complex requirements for economic stimulus funds. Increasingly, they realize that they need to take action early to administer large programs while conforming to the federal mandate to use taxpayer funds effectively. Key areas of concern include:

• Maximum use of funds. Organizations must manage ARRA funds to optimize the benefit provided to individual citizens, the community, and the overall economy of the United States.
• Visibility of spend. As funds are disbursed, organizations need complete visibility into spending across programs and projects to ensure that taxpayer money is properly allocated in line with the federal government's goals.
• Program execution. With the large number of projects and programs that will be in place, program leaders must manage an extensive portfolio of recovery initiatives in an effective manner.
• Outcome versus output. To determine success, taxpayers and the administration will be looking for measurable results. Programs need to shift from output-focused projects to outcome-focused projects.
• Compliance and risk. With strict and evolving federal requirements attached to ARRA funds, transparency is absolutely critical. Organizations must be able to mitigate risk and report on their program status and use of ARRA funds.

To face these challenges and transform their organizations to devote more resources to achieving program goals and less on administrative overhead, utility and government agency leaders must answer the following questions:

• How can we measure performance and report outcomes associated with economic stimulus funds?
• How can we ensure the required levels of transparency and accountability?
• How can we effectively manage project resources and fulfill the program requirements of stimulus-based initiatives?

The answers to all of the above may be summed up in one word: technology.

Developing the right strategies

Because technology is seen as a key enabler for the federal, state and local agencies implementing the stimulus plan - with $100 billion of funding specifically for technology to be spent incrementally over the next five years - it will help utilities and government agencies see, think, and act more clearly as they develop and execute the strategies to:

• Measure and report on outcomes. Utilities and government agencies must accurately measure and report the outcomes of funded programs. To do so effectively, they must first define the metrics to be monitored and establish the proper measurements for quantifiable and qualitative benefits.
• Ensure transparency and accountability. An open government is one of President Barack Obama's key objectives for his administration and the recovery plan. Specifically, utilities and government agencies are advised to employ technologies that enable them to put information about their operations and decisions online so that they are available to the public.
  
  
• Provide consistent management of stimulus initiatives. In response to today's mandates, agencies should consider a shift from a project-centric management style to one that is optimized for the challenges of an extensive program portfolio. This approach can provide consistent management of current stimulus-based initiatives as well as future public-policy programs.

Picture 2. Utilities that received funds will be challenged to maintain their focus on developing programs that achieve long-term results while ensuring that these programs adhere to the complex requirements for economic stimulus funds.

What and how to measure

ARRA and the Office of Management and Budget (OMB) require fund recipients to measure and report the outcomes of stimulus-funded programs. As a result, agency and utility leaders should carefully consider what to measure, how to measure, and which enabling IT functions provide the best support.

The ARRA has put the public value proposition at the center of its efforts with a focus on tangible benefits for citizens, businesses, and society in general. ARRA-funded programs should also show financial returns, such as cost savings or cost avoidance, and these results should have public visibility. However, due to the unique nature of government, measuring performance, return on investment (ROI), and value is multidimensional. For example, the value from programs that create new jobs also can include reduced welfare rolls, fewer foreclosures, and increased consumer spending.

To ensure positive outcomes for citizens, governments, and the private sector, a comprehensive method for measuring the value of government spending should consider such factors as: financial effects on incomes, asset values, liabilities, and risks; social impact on families and community relationships; realized benefits from government actions and policies; and the potential influence on the public's view of government's stewardship, public trust, integrity, and legitimacy.

Simply recording output has far less impact than achieving outcomes. The difference is fundamental to meeting ARRA objectives. Output typically describes the creation, productions, or completion of goods or services, and it is usually measured in terms of quantities or units. Outcome, on the other hand, describes the result, impact, and culminating performance of an effort.

With respect to the Economic Stimulus Plan, outcomes are benefits or long-term changes that are sought from a policy, program, or individual project. These benefits will be achieved along with the usage of outputs. Utilities and government agencies must initiate programs that have targets outcomes with measurable benefits that can be used to gauge success.

Collaborating to achieve value

Taking this a step further is the concept of collaborative outcomes. Even before the stimulus program was enacted, utilities and government agencies were looking for collaborative outcomes as a way to reduce cost, improve service, and maximize the value they deliver among, between, and outside their organizational boundaries. Now, with the passage of the ARRA, a renewed interest in collaborative outcomes across all levels of government is seen as a way to increase efficiency and productivity while maximizing public value.

Also, in light of a rapidly aging and retiring workforce, utilities and government agencies need to attract the next generation of workers who are familiar with use of Wikis, blogs, social networking, and related collaborative tools as a way of life. Meanwhile, the complexity of utilities' and government's missions is increasing, along with citizens' demand for transparency. So, the success of utilities and government agencies will hinge on their ability to share and use information and business processes effectively across organizations, among, and between the organizations that often interact with the same stakeholders across a variety of services.

Utilities increasingly realize the benefits of collaboration, and that, accomplishing this in real time, online, or via automation, and through enabling technologies, will provide them collective power to share information and processes that deliver operational, social, and compliance benefits. With such technological capability, utilities and governments can break down layers of inefficiency, deliver responsive services, and ultimately achieve positive collaborative outcomes for their stakeholders.

Choosing the right technology

However, to combine these activities effectively, and support the measurement guidelines of the ARRA, utilities and agencies must leverage common solutions, processes, and technologies whenever possible. These include software applications for enterprise performance management; governance, risk, and compliance; business intelligence; and resource and portfolio management. Integrated, comprehensive performance optimization and project management solutions such as these help utilities and agencies to:

• Implement cascading strategies, plans, and consistent measurement factors through the organization to connect policies to programs and programs to projects.
• Gather accurate, timely, and unified information spanning multiple sources to provide actionable insights and accelerate decision making
• Monitor key performance indicators to measure the efficiency, effectiveness, and outcomes associated with stimulus-funded initiatives.
• Instill and improve governance through role-based access and built-in process controls.
• Monitor and detect improper payments or fraud and identify expenditures for projects not affiliated with ARRA funding.

Ensuring transparency

The federal government has made it clear that recipients of economic stimulus funds - now and through subsequent budgets and policy initiatives - are required to operate as clear enterprises. All levels of government and private industry must meet stringent new mandates for public transparency and accountability in the stewardship of federal spending for the public benefit.

With the passage of the ARRA, the OMB has issued new guidance that starts with the implementation of these new requirements. To provide long-term support for compliance, organizations should establish an effective information-management strategy based upon proven principles, such as: transparency should be enabled as closely as possible to the system of record; enhanced with an open process for improving data quality that includes feedback from data users; implemented as a utility-grade service with a commitment to long-term data persistence, historical data feeds, availability, reliability, security, and no repudiation; enabled with minimal encumbrances to maximize reuse of data; and accomplished with common, cross-government technical and data standards.

Responsibility for accuracy and transparency rests with the owners or steward of the data. In addition, transparency should support innovation and performance improvement by both governmental and non-governmental actions. Since the ARRA outlines a vision where the goals and strategies of organizationsand their respective programs are linked directly to the goals and strategies of the stimulus plan, it would be wise for these organizations to implement a plan now for integrated enterprise solutions for business intelligence, analytics, and enterprise performance management to be better prepared for this new era of transparency and accountability.

Providing consistent management

Many utilities and government agencies will receive stimulus funding for the implementation of programs consisting of multiple projects. A large number of those agencies and organizations are currently project-centric in their management approach.

Taking a holistic management approach to a project portfolio helps ensure that public money is spent for its intended purpose and that quantifiable benefits are achieved. Without an effective enterprise program management structure, executives can find it difficult to manage multiple projects that compete for limited resources. Project managers also lack the ability to effectively manage overallocated or underfunded resources. Therefore, organizations that will be most successful in managing both current and future public-policy investment programs will start to enhance the functionality of their internal systems now. Implementing management-focused solutions can transform the organization into a more program-centric enterprise.

The end results of these strategies and tactics are the improvement in fulfilling the organizations' missions; well-coordinated, responsive, and improved services; and higher value delivered to customers and constituents across operational, social, and political dimensions. Political value is enhanced as elected officials can highlight these collaborative outcomes as examples of government "doing more with less," improving the quality of life, and meeting service goals. Social value is improved when eligible customers and entitled citizens receive necessary aid or services. It is also enhanced when taxpayer compliance is enforced, since tax dollars account for the bulk of government revenues. These revenues in turn fund various service agencies and programs serving the public, such as education, health, environment, infrastructure, public safety and others as outlined in the Economic Stimulus Funds' disbursement.

What remains is a highly effective government promised by the wise use of technology.

Sherry Amos is Executive Director, Industry Strategy, Public Services, and Maureen Coveney is Industry Director and Senior Principal, Utilities Industry, for SAP AG, headquartered in Walldorf, Germany.