Financial Management: Providing a Foundation for Transition - AGA

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12• Better guidance and clearer rules fromOMB, which should provide better definitionsand information on such things as whatconstitutes a new start for a project, ratesettingformulas, flexibility, best practices andspend guidance.• Working capital funds/revolving fundsshould be created for entities that do not receivesignificant amounts from appropriations.Outside mandates for financial informationSome laws and regulations concerning financial managementcompliance activities:Before 2000• Chief Financial Officers Act (CFO Act)• Government Performance and Results Act (GPRA)• Federal Financial Management Improvement Act(FFMIA)• Federal Managers Financial Integrity Act (FMFIA)• Clinger-Cohen ActAfter 2000• Federal Information Security Management Act (FISMA)• Improper Payments Information Act (IPIA)• Accountability of Tax Dollars Act (ATDA)• Recovery Auditing Act (RAA)• DHS Financial Accountability Act (DHS FAA)• Federal Funding Accountability and Transparency Act(FFATA)• OMB Circular A-123, Management’s Responsibility forInternal Control, December 2004 revision (A-123)There are also Federal Accounting Standards AdvisoryBoard (FASAB) and other OMB circular requirements.Tactical actions. Here are ideas for managingCRs in an entity:• Planning. CFOs need to anticipate and planfor CRs, make them part of the 12-monthplanning process, assume 9 months of authorizedspending, set priorities for spending andmanage employee expectations.• Curbing discretionary spending. Deferpurchases such as training, long-term contractsand long-term obligations until later in thefiscal year and scale back on CFO initiatives.• Adjusting contracts. Change the length ofcontracts and restructure them so that they donot start during a continuing resolution.• Exceptions. Carve out or set aside funds forlarge systems acquisitions.Some survey respondents predict that FY2009 CRs will run through May 2009—a full8 months. Continuing resolutions may be agreat tool for the the Executive and LegislativeBranches, but are costly to taxpayers andharmful to government’s missions. Finding abetter way for the two branches to disagreewould benefit everyone.Compliance overloadAn overload of compliance work saps CFOresources from value-added activities needed toenhance entity missions, say executives. Thisposes a risk both to entities and to the relevanceof CFOs themselves. Here, government leadersface another fork in the road. The first branchis similar to the choice of direction for financialreporting: put entities under more and strictercompliance requirements, with the aim of gettingrid of all risks. It is impossible to achievezero risk and often costly to try, yet governmentsare prone to extreme risk aversion in mattersboth great and small.
13The other branch is to reduce work by consolidatingrequirements and the activities theygenerate and by using a more focused approachto compliance reporting and auditing.In the 2007 CFO Survey, 2 we called attentionto the major drain on CFO resources causedby complying with requirements of oversightgroups and Congress. These requirementsspring from the laws and rules shown in thebox “Outside mandates for financial information.”Many mandates springing from thoselaws and rules are unfunded, so the cost ofcompliance falls on already strained accountingand finance budgets. In the 2007 CFO Survey,executives estimated that they spent one-fourthof their resources in compliance activitiesneeded to meet outside mandates. About halftheir remaining resources went to stewardshipand transaction processing. This left less thanone-fourth of a CFO’s time and resources forhigh-value activities like supporting strategicand program decision making.In 2008, respondents gave us little reason tothink that the situation had changed. Somereported becoming more proficient in writingthe many reports needed to comply with outsiderequirements, ranging from the Performanceand Accountability Report, which includesannual financial statements and performancemeasures, to improper payments reports requiredby Congress. This saved some resources, but thesavings were consumed as oversight entities andauditors “raised the bar” on requirements.Says an executive, “There is a sense in the federalcommunity that CFOs are not relevant because2Scoring Financial Management & Oversight Efforts: the 2007Association of Government Accountants Annual CFO Survey,June 2007.“If compliance requirements are about things that are notimportant to running an entity and they consume a lot of time,then the system is broken.”—An executivethey are consumed with issues that have nothingto do with managing the mission of an entity.If compliance requirements are about thingsthat are not important to running an entity andthey consume a lot of time, then the system isbroken.” Another reports the effect of too muchcompliance work on morale: “As the amount ofcompliance work increases, the government losesone of its most attractive benefits to talentedprofessionals: knowing that you are helping thecountry survive and thrive. Many finance andaccounting professionals think that working oncompliance issues to satisfy outside regulatorsand oversight entities is not as meaningful ashelping to achieve entity missions and the goalsof government, so they leave their entity andsometimes the Federal Government.”Congress is rarely interested in the substantiveissues of accounting or in financial reports, sayseveral respondents, because those topics do notwin many votes from constituents. On the otherhand, according to one executive, governmentfinancial management is a handy political issue,and politics something is either good or bad,nothing in between. As a result, many federalfinancial management bills are not well thoughtout in terms of process, effect or cost/benefit.Executives in our survey had three basic categoriesof suggestions for reducing the risk thatoverwhelming compliance activities pose toentities and their CFO components: cost/benefitanalysis, consolidation and risk management.
Page 1: Association of Government Accountan
Page 4 and 5: 2Table of contentsAbout the Associa
Page 6 and 7: 4Road to transformationReviewing th
Page 8 and 9: 6government decision making. From t
Page 10 and 11: 8Positive opinions on A-123When the
Page 12 and 13: 10more likely to add value to opera
Page 16 and 17: 14Cost/benefit analysis and targete
Page 18 and 19: 16• Many executives say their peo
Page 20 and 21: 18Some CFOs report success in reduc
Page 22 and 23: 20SystemsSurvey respondents listed
Page 24 and 25: 22the top of those that they want c
Page 26 and 27: 24Financial statements and audits:
Page 28 and 29: 26IG office, as it is when the audi
Page 30 and 31: 28ConclusionDesign by www.sparkdesi
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Financial Management: Providing a Foundation for Transition - AGA

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