Federal chief financial officers say fewer resources, more mandates and a shrinking workforce is a recipe for disaster.
A new survey by the Association of Government Accountants (AGA) and Grant Thornton finds federal CFOs and their staffs have only enough time, money and know-how to do the basics around financial management.
And because of a lack of resources and increasing requirements, CFOs are not taking advantage on a wide scale the potential of data to impact program and mission performance.
Relmond Van Daniker, the executive director of AGA, said it’s depressing to talk to agency CFOs because they are under such pressure. Van Daniker said CFOs are reaching a breaking point.
“We’re waiting for the crisis. We thought we had the crisis, and then we kicked the can down the road, and the crisis went with it,” he said. “I don’t know when we will get to that point, but it’s going to be the agency will not do it. It won’t be the agency head said, ‘I’m not going to do it,’ but it’s not going to get done. We talked about it in the states when do we get to the point where we have so much debt? Well, when you can’t pay it. What will happen is, you will know about it when you can’t pay it. Unfortunately, that is the way everything seems to work.”
Daniker’s frustration came out as part of the overall tenor of CFOs’ responses to the survey. They are frustrated and unsure how they will continue to make progress with financial management.
Data analytics suffering
AGA received more than 100 in-person CFO, deputy CFO and staff responses, and more than 180 online replies from federal financial management officials in field offices. Grant Thornton oversaw the development and results of the 18th annual survey.
CFOs who responded to the survey say they are unable to take advantage of the data and analytics to improve decision making across their agency. Respondents say the transparency and fiscal integrity required under the Recovery Act is not sustainable, mainly because it was as such a manual process for most agencies, and they don’t have the funds to automate it. And they say they are unable to improve performance through the Government Performance and Results Modernization Act because they lack the oversight and control of spending.
Of the more than 100 federal CFOs, deputy CFOs and staff interviewed in person, 25 percent say hiring and training the right people is their biggest challenge, while 23 percent say not having enough money to meet their requirements and 19 percent say technology were their biggest challenges.
The biggest surprise, however, was 28 percent say delivering services at the same rate or better than they are today is their biggest challenge. They say that challenge will only get more difficult over next five years.
In fact, this was the first year CFOs ranked their biggest challenge as delivering services, ahead of the other categories.
“The whole report paints an impressionist picture of the breaking point,” said Robert Shea, a principal at Grant Thornton. “We had a huge effort to comply with the requirements of the Recovery Act, but there’s not been a lot of lasting benefit from that and no real willingness to embrace the requirements of the DATA Act. Internal controls, while there appears to be a desire to move to a more enterprise risk management approach, it remains largely focused on financial controls and not having the potential it could. Managing costs is done across the board, and not in a more substantive or mature cost management way as you would want. And then the performance management, those activities have not produced a major change.”
He said with fewer resources and more requirements, something has got to give, and that likely will be how they serve their customers, including getting clean audit opinions.
Some progress is being made
The survey wasn’t all bad news.
One area where CFOs said there is success was around the senior leadership in implementing the government’s cost cutting program, whether the Obama administration’s Campaign to Cut Waste or sequestration. Almost three quarters of the CFOs say they were satisfied or very satisfied with senior leadership.
Denise Lippuner, a principal with Grant Thornton, said CFOs also pointed to certain things from the Office of Management and Budget and the Treasury Department that also are making a difference.
“You see OMB with the share first, cloud first initiative. You see the establishment of Treasury [Financial Innovation and Transformation],” she said. “All of these are pieces or parts to a great puzzle that needs to be resolved. But we do see that people understand that there needs to be standardization across the government. There needs to be sharing of infrastructure as ways to cope with these challenges. But there needs to be more that’s done, otherwise something has got to give.”
Shea added CFOs have high hopes for President Obama’s second term management agenda to help focus on a few priorities and address some of these long-standing challenges.
Shea said the second term agenda’s pillars — economy, people, effectiveness and efficiency — will help focus on a limited number of goals and demonstrate effectiveness.
“We really do think leaders need to help CFOs prioritize their areas of focus so they can invest their limited resources where they will do the most good,” he said. “We can help in all of these areas, but if CFOs are being asked to be everything to everybody, they won’t be able to have that positive impact.”
Changing the tone of the discussion
Obama and his management staff at OMB slowly have been detailing the second term management agenda, which, along with the four areas Shea mentioned, also includes law. But the administration hasn’t shed a lot of light on how implementation will work across government.
One reason for the slow roll out is OMB’s management team is incomplete. Beth Cobert, the nominee to be deputy director for management, cleared the Senate Homeland Security and Governmental Affairs Committee late Monday night and now is waiting for the full Senate confirmation vote.
AGA plans to present the survey’s findings several times over the next few weeks to try to inform the conversation.
Shea said the Senate Homeland Security and Governmental Affairs Committee invited AGA to provide a briefing for both the houses of Congress and multiple committees. But because of the shutdown, the briefing has been postponed.
Shea added AGA brief the federal CFO Council on Oct. 22 unless the government shutdown still is going on.
Lippuner said getting Congress and the administration to understand the situation CFOs face is important to change both expectations and provide them some relief. “One one hand you have the reduction of resources, your funding and your people. On the other hand, you have an increased need for accountability and transparency. This is evidenced as far as Improper Payments Elimination and Recovery Act, the new grants management policies and the new DATA Act that is under consideration right now,” she said. “You have two opposing forces. One is your reduced resources, and the other is increased performance requirements. Those two are pushing and pulling against each other, creating a situation where we are saying something has got to give.”
The big question is whether the lawmakers and senior administration officials will listen before something does give, which AGA’s Van Daniker said agencies will not know what has collapsed until it’s on top of them, whether it’s wasted money or an agency losing its clean audit or not having the internal talent to analyze data to improve decision making.