In a letter dated May 9 and made public this week, Ernst primarily requested details about how the SBA is managing IT investments through its IT Working Capital Fund, which the Iowa Republican said it hasn’t used appropriately. But she also probed the agency for details about its AI use cases, alleging the SBA had uses it hadn’t reported publicly in its annual inventory.

“In a recent interview, you stated that the SBA has embraced AI. Despite this, the SBA has not been transparent and reports that it has not used AI,” wrote Ernst, ranking member of the Senate Committee on Small Business and Entrepreneurship. 

AI use case inventories, which were required initially under a Trump-era executive order and later enshrined into statute, are intended to provide information about agency uses of the technology in disclosures posted on their websites. 

However, Stanford research, a Government Accountability Office review, and FedScoop reporting have found that AI inventories have lacked consistency and, in some cases, have omitted uses that should be made public. The Biden administration has recently expanded reporting requirements for those inventories and is looking to improve them.

While the SBA’s AI use case inventory currently shows no uses of the technology, Ernst cited several instances in which the agency had publicly touted AI use cases at the agency. 

She highlighted a May 2023 press release that stated “SBA will use advanced data analytics, third party data checks, and artificial intelligence tools for fraud review on all loans in the 7(a) and 504 Loan Programs prior to approval, starting August 1, 2023.” 

Ernst also pointed to a June 2023 press release that said the agency had used “several tools, including first-of-its-kind artificial intelligence,” to block millions of applications for pandemic relief that were ineligible, duplicative, or attempts at fraud.

In addition to IT investment information and AI disclosure, Ernst also requested information about how SBA planned to use its IT Working Capital Fund to improve its score for the Federal Information Technology Acquisition Reform Act.

Ernst said despite the establishment of the fund — which was created under the Modernizing Government Technology Act that became law in 2017 — SBA “has had declining performance in its efforts to manage IT and implement” FITARA. In the past three years, the agency hasn’t achieved higher than a “C” on its FITARA score, which tracks agency IT modernization progress.

The SBA confirmed to FedScoop that it had received the letter but didn’t provide further comment. Ernst had requested a response by May 23.

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The Committee on Oversight and Accountability met Wednesday morning to mark up the revision bill that would extend the Technology Modernization Fund through 2030. The new bill largely aims to rework the original Modernizing Government Technology Act from 2017 that launched the TMF but only authorized it to run through 2025.

The bill’s sponsors Reps. Nancy Mace, R-S.C., and Gerry Connolly, D-Va., introduced it Monday.

Not only would the MGT Reform Act extend the TMF, but it would also require agencies to adhere to the original intent of the bill and require any funds issued to be repaid or reimbursed to maintain solvency and ensure sustainability.

Under the revision, the TMF would also continue to act as a sustainable fund to help agencies with modernization efforts to protect against cyber threats and inefficient legacy technology, according to a committee aide, who said it would also make a permanent board member from the Cybersecurity and Infrastructure Security Agency. Currently, the board has a member from CISA but only on a term basis.

During the markup, Mace criticized the Office of Management and Budget and the General Services Administration for not consistently requiring agencies to repay money awarded through the fund.

“God knows the federal government has a lot of work to do in that regard,” Mace said. “Reforming this program through this legislation is essential to ensuring the solvency of our agencies at all, and a technological edge on our adversaries.” 

The committee aide stated that while the purpose of the new bill is consistent with the previous MGT Act, the new bill will ensure that those who administer the funds will have to adhere to the original bill’s objective. 

“The problem is that…those who influence how the TMF program office operates have veered away from congressional intent and have not required the fund to remain solvent, and have given out awards without requiring even a small percentage of those awards to be reimbursed,” the committee aide said. 

The TMF would continue funding the federal government’s most pressing modernization needs, like those that have aided in the digitization, service delivery and cyber-protection of agencies like the Department of Veteran Affairs, the Office of Personnel Management, and others.

Rep. Tim Burchett, R-Tenn., said in an interview that he will support the bill for its modernization efforts, but he thinks there needs to be safeguards in place so there are no “shenanigans.”

“The main thing is that it just makes sure the program stays funded through 2030 because if we have a lapse, that’s where we get into trouble,” Burchett said. “We have breakdowns and we can’t replace it…Those risks would be the complete collapse or hacking by foreign entities.”

Burchett stated that he hopes the bill’s continuation will be seamless.

The bill will now move on to the House floor for consideration.

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Reps. Gerry Connolly, D-Va., and Nancy Mace, R-S.C., introduced the Modernizing Government Technology Reform Act of 2023 on Monday, largely revising and adding some additional requirements to the original Modernizing Government Technology Act, passed in 2017. 

The new bill would reauthorize the TMF through 2030 and authorize the addition of $50 million to the fund, according to the bill’s text. Under the original law, the fund is set to sunset in 2025.

The bill also looks to increase the effectiveness of TMF by creating new reporting requirements for the Federal CIO and agency CIOs, namely requiring them to create inventories of high-risk IT systems used across the government. The Federal CIO would be required to use those to create a priority list of systems most needed in modernization and report them to Congress.

Connolly said in an emailed comment that the bill is a “welcomed” demonstration of support for the Modernizing Government Technology (MGT) Act and the fund.

“It follows the critical $1 billion appropriation Congress provided the TMF as part of the American Rescue Plan, which I was proud to fight for,” Connolly said. 

The Committee on Oversight and Accountability is expected to meet Wednesday morning for a markup of the bill.

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In a letter sent Wednesday, the tech industry group said that such a move would give every agency across government greater flexibility to undertake bigger, enterprisewide projects IT projects.

“ADI appreciates the flexibility given to several agencies to leverage their working capital funds as part of the FY 2022 omnibus. We encourage the committee to continue these efforts and allow all agencies to leverage their working capital funds for technology modernization as the committee finalizes the FY 2023 appropriations bills,” the trade group said.

Working capital funds were authorized for CFO Act agencies in 2017. The Modernizing Government Technology Act allows appropriations committees to give agencies greater flexibility to set aside unused funds for future projects and to provide multi-year funding.

Advocates for the funding structure say it can help promote long-term thinking within federal IT procurement by providing a degree of isolation from multi-year appropriation cycles.

In its letter setting out the group’s priorities for fiscal 2023, ADI reiterated previous calls for Congress to meet or exceed President Biden’s request for an additional $300 million for the Technology Modernization Fund.

ADI added also that it would support an increase in the amount and cap of the Federal Citizen Services Fund, which supports some of the biggest programs driving innovation and security compliance.

“The administration has requested $116 million for the fund, which is more than double its current budget. ADI supports this request and encourages the committee to meet or exceed that number,” it added.

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The Office of Personnel Management, General Services Administration and the departments of Homeland Security and Education will receive support for new proposals through the distribution, which in total hands out $311 million to agencies for projects largely focused on addressing cybersecurity, data privacy concerns and the move to zero trust. The board did not reveal the repayment terms for each project.

It is the seventh funding round since the TMF was established and responds directly to the Biden administration’s cybersecurity executive order, which mandated federal agencies to make rapid improvements in digital security.

OPM will receive $9.9 million in support for a zero-trust networking project, which is focused on protecting the privacy of two million civilian federal employees whose data is housed at the agency.

GSA has received a total of $231.4 million for three separate projects. The agency has been given $29.8 million to improve its zero-trust architecture, and $187.1 million to improve digital security at federal government authentication service Login.gov. It will also receive $14.5 million to support the rollout of interagency collaboration site Max.gov.

DHS will receive $50 million in support for a technology integration program intended to “more efficiently, effectively, and humanely process noncitizens encountered at our Southwest Border.”

The Department of Education has been awarded $20 million to assist with the adoption of zero-trust architecture, which the department says will help to protect the data of over 100 million students and borrowers that it supports.

The TMF board has also selected one classified project, for which no further funding details were available.

Commenting on the awards, Federal CIO Clare Martorana said: “The $1 billion for the Technology Modernization Fund was provided in the American Rescue Plan for essential emergency relief, and is a vital part of the administration’s response to the COVID-19 pandemic and the significant cybersecurity incidents impacting federal operations.”

“The administration is maximizing the flexibility of the TMF to modernize high-priority systems, elevate the foundational security of federal agencies, accelerate the growth of public-facing digital services, and scale cross-government collaboration and shared services. These first ARP awards represent a set of strategic investments to improve technology at scale across all of these areas,” she added.

The TMF in March received $1 billion through the American Rescue Act — the largest injection of funds since it was established in 2017. The additional infusion was intended to boost support for projects where service upgrades could be shared across agencies, that address immediate security gaps, or would improve the public’s ability to access government services.

After receiving the additional $1 billion, the TMF board introduced a prioritization process for funding certain projects and introduced a new degree of repayment flexibility.

The TMF has historically operated under a full repayment model, meaning that agencies are expected to adhere to a repayment plan, where projects are expected to yield financial savings that the agencies pay back within five years. However, the TMF board is now able to consider projects where partial repayment or minimal repayment is likely, based on assessments of the scope of projects.

Funding for the latest project awards will be distributed incrementally and will be tied to performance targets and delivery milestones. The selected projects will be reviewed quarterly by the TMF board to ensure they are on schedule and milestones are met.

TMF projects are proposed in a two-phase process, and agencies in the second step – the full project proposal – are expected to provide detailed financial information, and if necessary, make the argument why repayment flexibility should be extended.

Prior to the additional $1 billion injection earlier this year, the TMF in total had received $175 million in funding. The fund was created by the Modernizing Government Technology Act, signed by then-President Donald Trump.

Editor’s note: This story was updated to include a per-project breakdown of new funding awards.

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The Subcommittee on Government Operations he chairs may open up a policy dialogue with those agencies and their counsels, but more likely a legislative fix is needed, Connolly said.

Only three out of 24 agencies graded received “As” in implementing the MGT Act on the last FITARA scorecard in December, in part, because their lawyers continue to tell leaders they lack transfer authority to put appropriated money in IT working capital funds.

“[I]n some cases they’ve formed the funds,” Connolly said, during a MITRE event. “In some other cases they have not because they’ve been advised legally they don’t have the authority, even though the law we passed says you do.”

A jurisdictional “turf battle” between the House Oversight and Appropriations committees could ensue over the working capital funds — designed to bank unused IT dollars until agencies are ready to invest them in long-term modernization projects — unless they work together, Connolly said.

Agencies must also be required to produce plans for the use of their IT working capital funds, he said.

“From my point of view, it’s just critical every agency has a working capital fund so that they can stay abreast of changes in technology, implement the latest encryption programs and measures to protect the assets in the databases and proprietary information, and retire those legacy systems,” Connolly said.

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Tasks should be done in parallel rather than sequentially when possible, and paper-based processes should not only be digitalized but done in real-time, Casey Coleman told FedScoop.

The federal Cloud First strategy prioritized cloud migration, while the Cloud Smart strategy directed agencies to take advantage of as-a-service offerings. Ensuring adoption of the agile method is a logical next step and a recommendation ACT-IAC made to the Biden administration during the presidential transition.

“If you think about how work gets done on the ground in departments and agencies, we still have old waterfall processes,” said Coleman, now senior vice president with Salesforce. “There’s an opportunity now to think about what we’ve learned in the pandemic and to change the way we operate to Agile First.”

The COVID-19 pandemic proved out everything from digital signatures to telehealth, she added.

Coleman’s comments come days after she testified before the Senate Emerging Threats and Spending Oversight Subcommittee, which held the first in a series of hearings on the need to modernize legacy IT systems in government. Subsequent hearings will explore innovative solutions to the problem.

The government will spend more than $100 billion on IT this fiscal year, when last fiscal year about $29 billion of that went toward maintaining legacy systems. And that number doesn’t take into account those systems’ negative fiscal impact on security, service delivery and customer experience, said Sen. Maggie Hassan, D-N.H., who chairs the subcommittee.

Hassan noted the IRS’s delays in processing tax returns and economic impact payments was due, in part, to its aging system that relies on paper and not digital records.

“The American people pay the price of failing to modernize legacy IT systems,” Hassan said. “Over the past year in particular, my office has received hundreds of messages from constituents struggling to access passports and visas, unemployment benefits, economic stimulus payments, benefits information from the Department of Veterans Affairs, and information on filing taxes.”

The 10 most critical legacy IT systems in government as of June 2019 ranged from eight to 51 years in age and cost $337 million to maintain. Several systems operated with known security vulnerabilities, and the departments of Education, Health and Human Services, and Transportation had no plans for modernization, according to a Government Accountability Office report released in late April.

Only the departments of Defense and the Interior had modernization plans that included milestones, a description of the work needed and the intended disposition of the system in question. The rest — the departments of Homeland Security and the Treasury, Office of Personnel Management, Small Business Administration, and Social Security Administration — only had partial plans.

“[T]he agencies’ modernization initiatives will have an increased likelihood of cost overruns, schedule delays, and overall project failure,” reads the report. “Project failure would be particularly detrimental in these 10 cases, not only because of wasted resources, but also because it would prolong the lifespan of increasingly vulnerable and obsolete systems, exposing the agency and system clients to security threats and potentially significant performance
issues.”

And yet Coleman has never been more optimistic about the “generational opportunity” for agencies to migrate to the cloud thanks to the emergency of commercially operated, always-on, hardened and upgraded platforms.

For instance, COVID-19 contact tracing began as a paper-based process before migrating to cloud-based platforms. “The COVID pandemic has forced and pushed all of us into modernizing in weeks or months what otherwise would have taken years,” Coleman said. “And from the innovation that has emerged from the tragedy of the pandemic, we’ve seen that governments are able to move quickly and be able to respond in no time to pressing needs of their communities.”

Outside of the $1 billion injected into the Technology Modernization Fund in March, Coleman said she’d like to see agencies use working capital funds “more advantageously.” The funds created by the Modernizing Government Technology Act roll over money not used the previous fiscal year and give agencies more control over IT project timelines and continuity.

Government IT legislation is also in need of an update, even if technology does naturally evolve at a faster pace.

“If you look at the legislation that is in place,” Coleman said. “Some of it is generations behind where we are with technology.”

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In a letter sent to the Office of Management and Budget, General Services Administration, and TMF Board, the lawmakers encourage the organizations to use the “flexibility” of the Modernizing Government Technology Act to quickly replace outdated systems and improve cybersecurity.

Congress appropriated $1 billion to the TMF in the American Rescue Plan Act passed in March, but the tech industry soon raised concerns the project approval process would need to be streamlined to meet the demands of the COVID-19 pandemic.

“It is widely acknowledged that our federal government needs to make significant and urgent investments in replacing outdated and insecure legacy IT systems,” reads the letter, sent by Sens. Mark Warner, Va., Chris Van Hollen, Md., and Gary Peters, Mich. “Over the past year of the pandemic however, in which we’ve seen more than 565,000 deaths in the U.S. and devastating degrees of economic hardship, added demands have at times overwhelmed our government’s ability to continue providing effective customer service and critical benefits to Americans.”

The Pandemic Response Accountability Committee reported IT infrastructure is a “top challenge” in February, given the government’s increased reliance on telework and the subsequent broadening of agencies’ cyberattack surfaces. Services like the processing of pandemic relief applications have suffered as a result.

TMF Board cyber, financial management and acquisition experts can “rapidly” evaluate TMF project proposals by bolstering their ranks and prioritizing the most critical, cost-saving ones, according to the letter.

The reimbursement requirement of agencies may also need to be reduced or discarded in the short term.

“We encourage you to take steps to ensure that agencies are able to rapidly and effectively respond to pressing needs, including by significantly adjusting or removing reimbursement requirements for portions of the funding,” reads the letter. “We continue to believe that repayment of funds to the TMF helps ensure its long-term viability, but the magnitude of the current challenges presents an urgent need.”

The lawmakers stressed the need for “clear and transparent guidance” from OMB, GSA and the TMF Board on selection criteria and repayment for the benefit of agencies and Congress.

The TMF Board has awarded more than $125 million to 11 modernization projects to date addressing program operability and cybersecurity.

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Rep. Gerry Connolly, D-Va., said Friday “we’re going to continue to fight” for TMF funding, but admitted that it’s a struggle to have meaningful conversations about tech within Congress because most lawmakers just don’t understand it or care about it.

“The problem is a lack of awareness and knowledge,” Connolly said at an event hosted by Brightspot. “You start talking about these issues and many of my colleagues… their eyes glaze over and they want to talk about anything else.”

The Tech Modernization Fund, created by the Modernizing Government Technology Act in December 2017, is a tool to give agencies small chunks of capital to jump-start important modernization projects. They then repay that money to the fund after a number of years.

In fiscal 2018 the TMF received $100 million, and in fiscal 2019 it got an additional $25 million — not a lot of money relative to the nearly $100 billion the federal government spends on IT each year, with upwards of 80 percent of that going to maintenance of legacy systems. And now, it appears the Senate doesn’t want to fund TMF in fiscal 2020 appropriations, which are still being negotiated in both houses.

Connolly said his colleagues aren’t willing to spend more money to ultimately create savings and IT efficiencies in the long-term because they don’t understand the business case.

“Believe it or not, to get a manager to agree to prioritize retiring those legacy systems and investing in a new system requires capital because the capital that looks like it’s there is actually maintaining the legacy systems,” he said. And if you’re pressed for budgetary priorities and staffing and mission and all kinds of other things, retiring a legacy system is a multi-year, multi-billion-dollar thing in your budget, and you’ve got to commit to it…So our goal was to incentivize them by creating this fund. And that was a hard sell for many of my colleagues because it’s counterintuitive. ‘What do you mean? We spend $96 billion a year. You want more? You think they need more to retire legacy systems?’ And so that’s an educational process.”

Tony Scott, a former federal CIO during the final years of the Obama administration, commiserated with Connolly’s experiences.

“We would go talk to people on the Hill, and a lot of them their eyes would just glaze over,” Scott said during a panel with Connolly. “Tens of millions of other things seemed to be more important… I think in order to make real progress on that, we’re going to have to get broader awareness and knowledge and then that will spur the right priorities in the agencies.”

He said it’s important to have more people in government who can clearly communicate the business case of modernization to leaders at agencies and appropriators.

“I think in the federal government, we need to exercise that muscle more of having people who have the skill sets and capabilities to do the business case analysis,” Scott said. “And that’s what part of MGT is, developing the business case for doing those things…”

Connolly took a partisan shot at the Trump administration, criticizing tech leaders in the White House‘s Office of American Innovation, Jared Kushner and Chris Liddell, for not pushing for more awareness of the federal government’s tech needs on Capitol Hill.

“I think we also need an administration that cares about these things…” Connolly said. “We’re going backward in a lot of things instead of making progress. We need an administration that is really committed to the mission. Congress takes its cues from that. If I can sense that they haven’t made this a priority, why should I? I’m busy. I’ve got a million other things I’m doing,” he said characterizing the mindset of his colleagues. “I think that’s a handicap. It’s not a topic of conversation in the halls of Congress.”

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This is now the seventh modernization project to receive TMF funding, bringing the grand total awarded to $90 million of the $100 million appropriated for the fund in fiscal 2018.

NewPay is a cloud-based payroll and personnel system to be used governmentwide as a shared service. GSA announced the program in 2018 and issued a $2.5 billion blanket purchase agreement to a pair of teams providing different solutions: The first team consists of Carahsoft Technology Corporation, Immix Technology and Deloitte Consulting LLP, and will provide Kronos and SAP solutions; and the second team, led by Grant Thornton with The Arcanum Group, Inc. and CGI Federal, will provide services from Infor.

According to the project’s description on the TMF website: “Without this funding, GSA would need to delay establishing the cloud-enabled SaaS solution until a future year when dedicated upfront funding could be secured from the current user base or other sources instead of paying for the investment over a period of years. However, with the support from the TMF the project can be conducted in FY 2019 as a single effort to stand up the initial payroll and [work schedule and leave management] capabilities with current customers, with completion in two years.”

TMF Board Chairwoman and Federal CIO Suzette Kent touted NewPay’s function as a shared service as a reason for its selection.

“As the last proposal accepted in 2018, the Board believes the NewPay proposal is a critical step forward to transform an antiquated technical and operational process,” Kent said. “The TMF was created to invest in modern commercial solutions and drive faster adoption of shared services.  We are pleased to support a project that will accelerate the journey to make available modern payroll services for all agencies and drive efficiency across government.”

In a release, OMB says it the TMF Board “continues to accept and evaluate high impact, high return on investment projects from agencies.”

However, the program faces a critical juncture. With this latest award, only $10 million remains to fund any additional rounds of projects.

Meanwhile, Congress hasn’t yet finalized TMF appropriations for fiscal 2019, as the bill that funds the initiative is held up in the ongoing impasse on Capitol Hill centered around securing the U.S.’s southern border.

But even before the political feud that led to a 35-day shutdown, and now a continuing resolution that expires later this week, the TMF was at risk of being zeroed out in 2019.

There is hope though. One of the latest House appropriations bills, which was never passed, would have appropriated $25 million to the TMF.

Rep. Will Hurd, R-Texas, who authored the Modernizing Government Technology Act, which gave life to the TMF, said last year he is confident Congress will fund the program in 2019.

GSA’s NewPay is the largest TMF award yet. The board issued a total of $45 million to modernization projects in June 2018 at the departments of Agriculture, Energy and Housing and Urban Development in its first round of awards. Then, last October, it awarded $23.5 million to projects at the Department of Labor, Department of Agriculture and the General Services Administration.

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