All week long, as part of the Federal News Radio special report, “Rise of the Money People,” we’ve tracked best practices, key personalities and new policies in the financial-management realm.
Today, we turn to the future, examining the three emerging trends that could help federal agencies and their chief financial officers get a better grip on improving their financial systems and the two significant hurdles that stand in their way.
Too often, as agencies went about updating their accounting systems, their plans to build costly new programs from the ground up ran over-budget and behind schedule. OMB paused many agencies’ modernization initiatives in the summer of 2010
The earlier approach simply isn’t working, said Peggy Sherry, the CFO of the Homeland Security Department.
“They take too long; they’re too expensive. … At the end of the day, they often lead to results that are not what you intended especially as it relates to cost, quality and performance,” she said.
Sherry knows firsthand difficulties in modernization efforts.
Over the past few years, DHS twice tried and failed to consolidate 13 different accounting systems into a single, all-encompassing system.
DHS has now opted for more incremental improvements to its financial- management structure. Shared services is a “key element” of the agency’s approach, Sherry said.
“It really allows agencies to focus on our core competencies and missions, ultimately creating value with taxpayer dollars where it was intended to be,” she said.
Still, some challenges persist.
When OMB first started recommending shared services, there was pushback in some quarters from CFOs worried about losing their grip on their agency’s portfolio.
But Sherry said attitudes are changing.
“Thinking has evolved,” she said. “The way we really need to look at this is that you’re just purchasing the IT piece of it as a service.”
For CFOs, high-quality data is vital, akin to “dial tone,” said Clarence Crawford, leader of Deloitte’s Federal Financial Management Solutions Center and former CFO of the Office of Personnel Management.
A smartphone that can’t make a call, even if it’s outfitted with all the bells and whistles, is of little value, he said.
“Having the high-quality data is a first step, and I think a lot of agencies are moving in that direction,” he added.
“We spend an awful lot of money in the government, but we don’t necessarily have a way to be able to look across the portfolio at what that information is,” Sherry said. “We don’t necessarily collect the data in a consistent manner. So, it’s challenging to be able to get quality information and then to be able to do apples-to-apples comparisons.”
Even within a single agency, there’s often no easy way to find out what various components or regions are paying for a particular service, she said.
The Office of Management and Budget is attempting to combat that lack of awareness with what it calls the “prices-paid portal.”
“It’s a data warehouse for federal agencies to understand what we’re paying for stuff and what our colleagues are paying across government,” said OMB Controller Danny Werfel in a keynote address at the Association of Government Accountants summit in February. “It’s putting into a single platform information so that we can be smarter about what goods and services to the government cost.”
Getting a handle on that basic information will help power a broader inventory of data about what the government owns, what it pays for services, and where agencies can share resources and services, he explained.
“That’s powerful information,” Sherry said. “If we’re able to figure out: What are we paying within the agency? What are we paying across the government for the same type of service? It then allows us to drive efficiency.”
From green eyeshade accountants to “master data analyzers,” the role of the CFO has evolved since the CFO Act codified the role in 1990.
Part of that transformation has been driven by an increasing cooperation and stronger relationship between agency CFOs and their counterparts on the technology side of the agency — the chief information officer.
The CIO community talks a lot about governance and best practice, Sherry said, two key themes that CFOs can also take to heart.
The emerging reality is that “we are not going to be successful as a financial- management community working in a vacuum,” Werfel said in his AGA speech. “We have to take a very integrative approach to managing our organizations and to being successful.”
But the CFO role is also broadening in and of itself, moving away from nuts-and- bolts issues.
“If the head of the agency only gets numbers from you — the only thing you can talk about are clean opinions and things of that nature — the agency may be paying a little too much for the CFO,” Crawford said he often tells agency CFOs, only half jokingly.
The CFO role of the future is about high-level decision-making rooted in high- quality data, he said.
The biggest stormcloud on the horizon, as any CFO would say, remains the budget.
Each year, budget pressures seem to grow more acute, Werfel said in his AGA keynote address. “Obviously, this year, the budget uncertainty that we face is no longer amorphous, it’s become tangible and real,” he said.
In an exclusive Federal News Radio survey of CFOs and deputy CFOs, sequestration (and the need to find efficiencies to comply with the steep across-the-board cuts) ranked as CFOs’ top priority.
And financial-systems modernization, which is exceedingly complex and expensive, is vulnerable to the budget pressure.
“Nowadays, in the sequester environment … the ability to invest money in some of these projects — that you know will save you money in the long run — can also become a challenge for an agency,” Sherry said.
For medium-sized agencies, the modernization effort could run them into the tens of millions of dollars and take a year or more to actually implement, Crawford said.
“I don’t think there’s going to be a lot of appetite on the Hill for funding a lot of these initiatives,” he said. “So I think they’ll have to be a lot smarter about what they do and how they do it.”
As budgets are squeezed, federal employees are asked to take on ever greater responsibility even as waves of retirements and early-outs have reduced staff sizes.
Agency CFOs face particular challenges in growing and cultivating their workforces.
Hiring and retaining the workforce and providing more training are top of mind for CFOs, ranking second and third on a list of their top 2013 priorities, according to the survey.
Fortunately, despite these pressures, those emerging trends in financial management — shared services, data-driven decision-making and others — can offer CFOs some solace.
But agency money people will also need to apply some old-fashioned leadership. There are no cure-alls in the CFO toolbox.
Despite the difficulties, it is in just this type of budget environment that CFOs can shine, by leveraging both new technologies and time-tested best practices.
“It’s a very challenging time but there’s no better time for the CFO community to really demonstrate its true value add to the agencies, to the administration and to the taxpayers of the nation,” Crawford said.