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Thursday, December 19, 2013

OMB Releases Federal Grant Reform Guidance

OMB and the Council on Financial Assistance Reform (COFAR) are pleased to inform you that today the Federal Register will file for online public inspection reforms to OMB Guidance entitled "Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards." The guidance will be published in the December 26th edition of the Federal Register.

Please join us on Friday, December 20, 2013, at 11:45 a.m. for a COFAR webcast on the new guidance. Please visit www.cfo.gov/cofar for more information and to register for the webcast. Questions may be submitted to COFAR@omb.eop.gov.


Monday, December 02, 2013

Financial management and freedom of choice

At a time when governments are increasingly looking to private-sector solutions to improve efficiency and solve complex challenges, the Treasury Department appears to be headed in the opposite direction when it comes to shared services, with potentially disastrous results.
In April, the CIO Council published the Federal Shared Services Implementation Guide, which establishes a strategy for moving agencies to shared-services environments for business areas such as budget formulation, human resources and, notably, financial management. Charged by the Obama administration with developing an implementation strategy, Treasury's Office of Financial Innovation and Transformation (FIT) developed a plan to streamline and consolidate financial management systems by tapping federal shared service providers (FSSPs) almost exclusively.
Although consolidation might be a good idea, major concerns exist about the viability of the chosen approach.
Representatives from the Software and Information Industry Association and its member companies met with Office of Management and Budget and FIT officials to understand how their effort would improve upon previous attempts, such as the Lines of Business initiative, which ultimately failed in 2006. So far, however, those conversations have led to more questions than answers, particularly concerning the role of commercial providers in the new shared-services arrangement.
Consolidation is a noble goal but not when it flies in the face of efficiency and rationality.
In fact, OMB and Treasury recently announced plans to "assign" all agencies to an existing FSSP, deviating from the April memo and leaving commercial providers completely out of the picture. That action makes little sense in theory and is not feasible in practice. It fails to recognize the complexity of the current federal financial management system environment.
Today only a handful of the agencies covered by the Chief Financial Officers Act receive their core financial management services from an FSSP, and most of those agencies are themselves FSSPs. Even Treasury, which is implementing the initiative and has its own shared-services center, does not host the core financial management systems of three of its largest bureaus. Presumably, those bureaus were deemed too large or complex to use Treasury’s center or another FSSP.
Most agencies are running their own financial management systems powered by commercial software, and those systems largely work as intended. And we know that commercial software has the right capabilities because even the FSSPs use commercial software as their backbone.

By virtue of their size, large federal agencies cannot simply pick up their financial systems and move them to an FSSP. If the Department of Homeland Security or Defense Department tried, the provider would be completely overwhelmed by the complexity and number of financial transactions generated on a daily basis. The cost of migration would far outweigh any projected cost savings.
Consolidation is a noble goal but not when it flies in the face of efficiency and rationality. The administration needs to wake up to the fact that an agency like DHS, with a $40 billion budget and 22 component agencies, is already operating at such a large and complex scale that moving it to a new FSSP would be an unwieldy, expensive mess.
Instead, the administration should take a step back and focus on its original objectives of boosting efficiency and saving money. To start, officials must determine whether there is any evidence that we are currently wasting significant money on our financial management systems. And because commercial software powers the federal government's financial systems -- even the FSSPs -- the private sector must be included in the reform process.
Ultimately, agencies need the freedom to choose the financial management solution that is best for them. They should not be bullied into switching to an FSSP that likely won't meet their needs.

-Mike Hettinger, FCW.com

Sunday, December 01, 2013

Viewpoint: A meaningful management agenda for CFOs

The Association of Government Accountants and Grant Thornton recently released their annual Federal Chief Financial Officer Survey. It explains how President Obama challenged his Cabinet to develop a new management agenda. This would entail a new CFO management agenda, part of which is suggested in the survey. Actually, the CFOs are in a position and capable of fulfilling a more meaningful management agenda.

First, however, one matter should be addressed. The survey states that “transparency and accountability are key elements in the Administration’s management agenda.” It then states that few program managers see value in audits. I would add that probably a few financial managers do not see value in financial audits. This is a real contradiction due, in part, to the fact that, based on their experience, many CFOs do not appreciate the importance of audited financial statements.

In every sector but the federal government, audited financial statements have been accepted as the norm. They are taken as a given, expressly to demonstrate accountability and the existence of reliable financial data. One could argue that financial audits in government are even more important because governments are spending money taken involuntarily from others. It is time to stop the debate about the value of audited financial statements. Clean audit opinions represent the basic blocking and tackling necessary for effective organizations.

The survey also says: “Effective program performance is an agency’s very reason for being, so this remains at the heart of the New CFO Management Agenda” and “More often than not, federal CFOs are charged with overseeing the entire performance management of the agency as a way to ensure that the organization’s results are measured and maximized.” But it also says that “almost two-thirds of CFOs interviewed do not believe that the recently passed Government Performance and Results Act (GPRA) Modernization Act has had an impact on their agency.” This dichotomy signifies what the CFO management agenda should be.

Many CFOs also have the performance improvement portfolio. Even if the CFO does not have the performance improvement officer designation, he or she can be a catalyst for advancement of sound performance management activities. As CFOs quoted in the survey stated: “Program offices pay more attention when it comes directly from the CFO, who controls the budget” and “CFOs can validate costs and cost savings.”

The first CFO Council, established in 1992 by the CFO Act, developed a vision for CFOs. It believed the CFO position should focus on more than processing financial transactions and assuring compliance. It postulated that better CFOs would be advisers to senior management; establish partnerships with program managers; and be major players in improving the management of resources. At the risk of generalizing, this expanded role is no longer universally fulfilled.

I propose that the CFO management agenda entail giving CFOs a proactive role in determining, improving and assuring program performance. Doing so would not require more time, only a change in perspective and approach. The Government Performance and Results Act, as amended, already requires the detail work of defining performance measures, determining and reporting performance results, and using performance information to drive performance improvement.

Therefore, CFOs should move beyond a silo whose primary objectives are reducing administrative costs and processing data that assure auditable financial statements. The CFO management agenda should involve CFOs in:

■ Working with their agency’s program managers to establish meaningful outcome and output measures for all programs.

■ Establishing and maintaining the systems that enable performance data to be collected for all measures.

■ Using the data to drive performance improvement, i.e., the already-defined role for the PIO.

■ Complementing the use of Performance.gov to demonstrate accountability for performance results with the use of Agency Financial Reports/Performance and Accountability Reports to show the relationship between performance results and the financial resources expended to achieve those results.

There is another element that should be included in the CFO management agenda. The ability to continue to deliver services in the face of shrinking budgets will require that programs be as cost-effective as possible.

Many CFOs have the budget development function in their agencies. As budget officers, they should demand that program managers specify the costs of producing the outputs for each program in order that preference can be given to the most cost-effective alternatives. I suspect that many program managers cannot provide that information. Hence, another element for the agenda is that CFOs, as the accounting officers, should build the cost accounting systems with which those costs can be ascertained and the budget officers’ requests be met.

None of these pieces for a new CFO management agenda are short-term. Nor will they furnish the low-hanging fruit that makes for good press releases. But they are the kind of CFO management agenda items that can produce major, meaningful and long-lasting results.

-Hal Steinberg, FederalTimes.com

Hal Steinberg is technical director for the Association of Government Accountants’ Certificate of Excellence in Accountability Reporting program. He previously was acting controller and deputy controller of the Office of Federal Financial Management and associate director for management in the Office of Management and Budget.