The National Finance Center (NFC) – a Federal shared service provider of payroll, human resources, and retirement services to more than 650,000 government employees – is suffering from a range of operational problems including woefully outdated IT infrastructure, and is “at risk without prompt action,” according to a report released this week by the National Academy of Public Administration (NAPA).

Those findings stem from NAPA’s engagement last year by NRC – which is housed within the U.S. Agriculture Department – to analyze the service provider’s organizational capacity to meet its mission requirements.

NAPA’s findings are sobering, including significant problems with technology, physical facilities, and financial support.

“NFC leaders will need to take immediate remedial action while simultaneously planning for a multiyear transformation that will affect almost every aspect of NFC’s governance and operations,” the report says, adding that achieving future success “will be both a marathon and a sprint for the National Finance Center.”

On the tech front, the report flags the need for “major investments to replace aging IT systems.”

“Due to decades of inadequate investment in its IT systems, NFC is running its operations and services on antiquated code and systems that are not user friendly,” NAPA said. “Many of NFC’s internal business processes have not been automated and are still paper-based or managed via Word documents or spreadsheets.”

Among the tech hurdles that NFC faces is its reliance on COBOL programming language, and the scarcity of experienced programmers in that field.

“Hiring more programmers is a government-wide challenge because the number of experienced COBOL programmers available in the job market is dwindling … but even if NFC were able to hire all the COBOL programmers it needs, those programmers would not necessarily have the ability to immediately work with the ‘spaghetti code’ resulting from decades of modifications, many of which were not documented,” NAPA said.

NAPA’s tech-related recommendations for NRC include:

  • Maintain strong leadership support and project management capabilities through the duration of system modernizations;
  • Expedite ongoing system improvements to build momentum and achieve quick success; and
  • Address cybersecurity vulnerabilities by immediately utilizing cybersecurity upgrades such as multifactor authentication, data masking, and mature software development processes.

NAPA also said NFC needs to address glaring concerns with customer experience, employee experience, and funding.

“While immediate action is needed to stabilize the organization, NFC’s ultimate success will depend on an organizational transformation. This multiyear undertaking requires an agreed-upon vision, stakeholder engagement, funding, and effective and efficient IT systems and business processes,” the report says.

In the event that NFC’s operations fail, “the consequences would be felt immediately by the hundreds of thousands of federal employees working for organizations like the Department of Homeland Security, Department of Justice, and NFC’s other approximately 170 clients,” NAPA said.

“It is unthinkable that the US government could find itself in a position where it could not pay a sizeable portion of the federal workforce —but it could happen, at least in the short term,” the report says. “No other organization currently exists that can readily absorb NFC’s customers, each with their own specialized and tailored procedures and requirements. Transitioning to a different provider would likely be a costly, complex, and time-consuming process for customers, even if there were ready options available.”

“NFC’s challenges have only increased over the half century that it has been in business,” NAPA said. “The nature of HR shared services has transformed, as have the requirements and challenges of the IT systems that are the heart of NFC’s operations. NFC’s leaders, with the active support of USDA, now need to take strategic, determined action to catch up and then keep pace with these developments.”

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Jose Rascon
Jose Rascon
Jose Rascon is a MeriTalk Staff Reporter covering the intersection of government and technology.