The AGA Weblog

Performance-Based Budget Cutting: Smarter Government, Better Results

By: William Aaron

William Aaron is the chief of Consulting Services and Innovation at Weidner, Inc. 

To say these are uncertain times seems an epic understatement. The economy is in grim shape, and no one can say when, or if, it will improve. State and local governments are facing huge budget cuts now and bracing for worse.

It feels like we’ve entered unchartered territory, like those dark, unknown areas on the old, old maps where the mapmakers would just write, “Here Be Monsters.” 

But the challenges we face, no matter how daunting, can be effectively met using a smart, performance-focused approach. Indeed, many local governments have been doing so for years.

One example: the Department of Job and Family Services of Franklin County, OH, which had a big problem several years ago. In 2000 the state of Ohio moved millions of dollars in welfare reform funds out to county governments. Franklin County put $25 million into 43 contracts with 30 different community and public sector organizations to deliver services.

The next year, those funds were cut. And not just cut—eviscerated. Nearly $18 million, or about 70 percent, vanished. More than half the grantees saw their funding cut substantially or eliminated.

But when the cuts were made, what was notable was what did not happen. Instead of political fighting over dollars, there was just one call of complaint. Instead of wailing and gnashing of teeth, grantees called to commiserate. And instead of universal suffering, in many cases the organizations actually became more successful.

What “secret” had Franklin County’s Job and Family Services uncovered? 

Mary Lou Langenhop was the director of Job and Family Services for Franklin County from 1998 to 2003. To her, their success was due to their relentless focus on three factors: results for customers, setting priorities and using performance data.

Results for Customers. In 2000 a focus on results for customers in government was not common—this came shortly before Franklin County implemented a county-wide managing for results system—but Langenhop knew the value of using outcome-based contracts.

“We were clear from the start about our approach,” Langenhop said. “We structured the contracts so grantees were not only paid based on things like enrollment in training classes and the number of trainees completing class, but also on the number of trainees who got jobs and the number of trainees who kept their jobs six months.”

In many cases, this shift in thinking had huge benefits that made the grantees more successful—even after their funds were cut. One agency raised significant new private funds using their demonstrated impact on their customers; others began benchmarking and reallocating internal resources to improve their performance.

“One organization’s board was so excited they could clearly see the success of their program that they reorganized to ensure the continued delivery of those services using their own funds,” Langenhop said. “They could measure it in terms of impact on the customer for the very first time.”

Setting Priorities. Faced with cutting 70 percent, Langenhop knew they could not use the lazy tactic that too often passes for government budgeting: cut everyone equally and hope for the best. They knew they needed to set priorities—to decide what was most important and fund as much of that as possible.

“We had to ask ourselves, what were the most critical activities and outcomes we were paying for?” she said. Job and Family Services chose to focus on two priorities: people getting jobs and outcomes for youth.

“Some grantees were performing very well, but they were not part of these two critical areas,” Langenhop said. “So they got cut.”

Using Performance Data. The grantees delivering results in support of the selected priorities were then assessed using a powerful tool: the performance information they themselves had provided.

“We based the continuation of all contracts on performance. For example, had the agency been meeting its job placement targets? If not, their funding was cut back or eliminated,” Langenhop said.

“We gave the county commissioners spreadsheets with the performance information, presented by agency,” she said. “I met with each commissioner individually, shared all of the performance information, and presented how the funding decisions were made. As one of them told me, ‘I don’t see how anybody can question this.’ ”

“We went through that reduction with only one call complaining to the commissioners,” Langenhop said.

So as the public sector heads into what may seem to be unchartered territory, it’s worth remembering that, in fact, we know very well how to vanquish the monsters. A focus on results for customers, on setting priorities, and on using performance data to inform decisions will serve our citizens well, regardless of the challenge.

Think Big! Act Courageously! Make a Difference!—There's No Place Like Home

By: William A. Morehead, Ph.D., CGFM, CPA

William A. Morehead, Ph.D., CGFM, CPA, is Chair of Accountancy, CIS & Finance, Delta State University; AGA National President, AGA Past National Treasurer and Member, AGA National Executive Committee

Over the past eight weeks, I have been fortunate to have been on three continents visiting family and friends, and presenting training for AGA chapters and events. This has been an exhausting time, but oh so very rewarding. AGA should be very proud of what the chapters are doing and contributing to the greater government accountability profession.

Traveling outside of the United States always reminds me of several things:

1.     How very thankful I am for the men and women who have and continue to dedicate their lives in military service to protect our country so we can live here and travel abroad with certain freedoms.

2.     How thankful I am for the many Americans who live abroad providing various forms of civil service to further the patriotic ideals of our country.

3.     How much responsibility I have as a government financial management professional to the individuals mentioned in #1 and #2 above as well as to the citizens of my government.

4.     How blessed I am to live in the United States.

5.     How thankful I am to come “home” after each trip.

We, in the U.S., have just celebrated the Thanksgiving season with family and friends and we are now heading into the Christmas season. As we face this time with uncertainty in our economy, I can honestly say it is wonderful to be back in the U.S. after eight weeks of travel. “There’s No Place Like Home.”

Leverage Technology—Don't Worry About TBTF

By: Sunil Datt, MS, MBA, MA, CGFM, PMP

Sunil Datt, MS, MBA, MA, CGFM, PMP, is Senior Managing Consultant, IBM Global Business Services.

When acronyms begin to appear, you know a debate has gone on for too long. So when I saw TBTF (Too Big To Fail) in an article, I knew the time for discussion was over, and it was time to act. Of course, in spite of my advice to the contrary, Mervyn King took the hatchet and sliced up a couple of banks in the U.K. Never mind, he took action! At least he got the banks scared for some time. But here, back home, the debate is festering, and some smart cookies have already proposed Jamie Dimon (CEO of JP Morgan Chase) as the next Treasury Secretary.

Jamie, of course, is quick to act. He already wrote in the Washington Post of Nov. 13, 2009, that the term TBTF should be banished from our vocabulary. Instead, he proposes an orderly winding down of an institution, no matter how large. Easier said than done. Remember, Lehman’s demise was catastrophic not because of its size, but because of the number of counterparties it put at risk globally. And the systemic risk arises not just from actual losses, but from the vaporization of confidence in even the largest or most respected players in the system. Markets seize up, and that starts the domino effect.

Anyway, the issue is why are we thinking like undertakers, and not like preventive care physicians? As I wrote in my previous weblog, “The real issue is the interconnectedness and the tight integration of global financial markets in today’s world. The dominos don’t stand individually and get knocked down one by one. They hold hands and dance together. And they infect each other virally. From that perspective, ‘smart’ regulation lies in a combination of better reporting requirements from all major financial players, highly automated processing of submitted data, and sharp quick analysis to detect seeds of systemic risk. Stress testing all new financial instruments would be part of such a regime.”

So the question arises, is this possible? Is it humanly possible to collect such vast amounts of data and process it meaningfully, and point out incipient symptoms of sickness? The answer is yes, because we have the technology. We have the Web for filing of information, we have super computers like IBM’s Blue Gene for processing at super speeds, and we have tons of software for storing, aggregating and analyzing data. In fact, it is possible to collect risk parameterized data from every financial institution in the nation, and process and analyze it in pretty short time frames. But that will not be necessary. Collecting data from all financial entities that have assets of say, over a billion, should serve the purpose.

As a matter of fact, on a smaller scale the Federal Deposit Insurance Corporation (FDIC) has been doing this for the Federal Financial Institutions Examination Council (FFIEC), that consists of FDIC, the Federal Reserve and the Office of the Controller of the Currency, since 2006. Using the XBRL (Extensible Business Reporting Language) standard, FDIC collects quarterly call report data from 8,200 banks in a highly automated environment, and then shares it with the other members of the FFIEC. As compared to earlier methods, this automated environment has resulted in the following improvements:

1. Cleaner data—95 percent compliant with definitions as compared to 66 percent previously.
2. More accurate data—100 percent mathematical requirements met as against 70 percent prior.
3. Faster data inflow—Data received within one day of quarter close as against weeks in the previous system.
4. Increased productivity—Each analyst could now handle up to 600 banks as against 450 banks previously.
5. Faster analysis—Analyst workload completed 15 percent faster.

Now, the Securities and Exchange Commission (SEC) has mandated a phased program of filing annual and quarterly reports in XBRL by reporting firms, starting June 2009, and then of risk-return statements by mutual funds. The data will be available not just to analysts but to the public in general.

The FDIC and SEC are, however, still collecting data in the traditional formats for the traditional regulatory functions viz. capital requirements. As the Basel II type requirements have been proven to be insufficient for containing systemic risk, the parameters for risk measurement have to be revised. In any case, the massive disintermediation away from banks requires fresh thinking in this area, clearly requiring regulation of large non-banks. It is instructive that between 1977 and 2007, the assets of all depository institutions plunged from 56.3 percent to 23.7 percent of total financial sector assets. Meanwhile, the assets of pension funds and mutual funds rose from 21.0 percent to 37.8 percent, as these institutional investment pools came to provide the dominant channels for household saving and investment flows. At year end 2007, the financial assets of pension funds and mutual funds totaled $21.9 trillion, as compared to $13.7 trillion for banks. Talking of TBTF!

 

Odds Are Fraud Is an Issue in Your Organization

By: Jeffrey C. Steinhoff, CGFM, CPA, CFE

Jeff Steinhoff is a Past AGA National President and the Executive Director of the KPMG Government Institute.

Ask the average person who they feel is responsible for ferreting out fraud in government programs, the most common answer might be state and local auditors, federal inspectors general, and the Government Accountability Office. But it is really management that should be the first line of defense against fraud. Rather than finding fraud after the fact as auditors sometimes do, a better approach is to mitigate fraud up front through implementation of comprehensive fraud risk programs. Several of my earlier AGA essays[1] and a 2008 AGA Journal article[2] have talked about the importance of management’s responsibility for internal control and having the lead in protecting against fraud. Also, research conducted by the KPMG Government Institute[3] has shown that high-performing federal finance organizations are catalysts for establishing comprehensive fraud programs and in supporting program managers in carrying out their responsibility to address the risk of program fraud.

Now why do I raise this again? KPMG’s recently released Fraud Survey 2009[4] provides a sobering perspective of how senior executives in the private and public sectors currently view the risk of fraud. The survey was conducted against a backdrop of the current economic downturn, where we have seen vast sums of market capitalization wiped out and several trillion dollars of taxpayer money committed to stabilizing financial institutions, injecting liquidity into the capital markets, and jump-starting the economy through infrastructure spending programs and other stimulus actions.

As the Fraud Survey 2009 report concluded, “Aside from questioning where yesterday’s money went, many remain concerned about where tomorrow’s money is going. To be sure, record levels of government spending may usher in record levels of fraud, waste and abuse.” This gets right to the accountability and transparency provisions in the American Recovery and Reinvestment Act and the president’s statement in his inaugural address: “Those of us who manage the public’s dollars will be held to account—to spend wisely, reform bad habits and do our business the right way—because only then can we restore the vital trust between a people and their government.”

What were the perceptions of senior executives as they considered the nature of fraud and misconduct risks in their organizations, and the challenges they confront in their efforts to prevent, detect and respond to such risks? About 15 percent of the respondents were from government/public sector, with the remainder from publicly traded and privately held companies.

Among the key findings of the Fraud Survey 2009:

• Roughly one-third of respondents (32 percent) said at least one of three categories of fraud (misappropriation of assets, fraudulent financial reporting, and other illegal or unethical acts) was going to increase during the next 12 months in their organization.
• Government/public sector respondents ranked other illegal or unethical acts as their most significant risk at 39 percent, while asset misappropriation ranked second at 23 percent. Fraudulent financial reporting came in at 19 percent, while the remaining 19 percent of government respondents said that all three categories of risk were an equal threat.
• The majority of executives cited fraud and misconduct as posing significant risks today. Nearly two-thirds of executives (65 percent) reported that fraud and misconduct is a significant risk. If such wrongdoing were to be experienced, the greatest concern for over two-thirds of executives (71 percent) is the potential for a loss of public trust when public and market confidence is at a premium.
• Executives expect the threat of fraud to remain steady or rise in the coming year. About three out of four executives believed that fraud and misconduct risks, such as misappropriation of assets and fraudulent financial reporting, will either stay the same or increase over the next 12 months (85 percent and 74 percent, respectively).
• Inadequate internal controls or compliance programs heighten the risks of fraud and misconduct. Two-thirds of executives (66 percent) reported that inadequate internal controls or compliance programs at their organizations enable fraud and misconduct to go unchecked.
• Gaps exist in plans to address allegations of wrongdoing. Roughly a quarter of respondents (27 percent) said they lack effective protocols on how investigations should be conducted and at what point the board of directors (translated for government into the city council/state legislature/U.S. Congress, top elected officials and the public) should be alerted to potential concerns. Likewise, roughly a third (33 percent) lacked protocols on how to remedy control breakdowns.
• Executives acknowledged room for improvement across most elements of their antifraud efforts. The areas cited as most in need of improvement include employee communication and training, technology-driven continuous auditing and monitoring techniques (such as the use of forensic tools), and fraud and misconduct risk assessment, with 67 percent, 65 percent and 60 percent of respondents, respectively, identifying at least moderate improvements needed.

Succeeding in these turbulent times requires government leadership to ensure internal controls are up to the challenge of confronting the fraud and misconduct risks in today’s environment. Those in government that take up the challenge and see themselves as the first line of defense against fraud will be equipped to shine their own light brightly on a way forward and “restore the vital trust between a people and their government” the president spoke about in his inaugural address.

My questions to you:

• What is the fraud prevention and detection culture in your agency?
• Does management view fraud prevention as everyone’s responsibility?
• Does management ultimately hold itself accountable for ensuring adequate internal control is in place to reasonably avoid fraud?
• Has a comprehensive fraud risk program been established to help mitigate risk and prevent fraud and to effectively detect and deal with fraud when it arises?
• Are forensic tools (continuous auditing and monitoring techniques) routinely used by management to help mitigate and manage fraud risk and to help management be the first line of defense against fraud?

The views in this essay are those of the author only, and do not necessarily represent the views or professional advice of KPMG LLP.

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[1] Forensic Auditing—A Window to Identifying and Combating Fraud, Waste and Abuse, June 3, 2008; Are You Prepared to Protect the Integrity of Recovery Act Spending, May 27, 2009; Is Your Finance Organization A Leader in Supporting Acquisition and Contract Management, August 31, 2009; and Check It—What Gets Checked Gets Done, September 25, 2009

[2] Forensic Auditing—A Window to Identifying and Combating Fraud, Waste and Abuse, Journal of Government Financial Management, Summer 2008, Vol. 57, No. 2

[3] The KPMG Executive Guide to High Performance in Federal Financial Management, June 2009

[4] Fraud Survey 2009, KPMG Forensic Advisory, September 2009

Now That The Audit Is Over, The Hard Work Begins!

By: Andrew Lewis, CGFM, CPA

Andrew Lewis is a senior manager with KPMG LLP’s government audit practice and a Fellow of the KPMG Government Institute. In addition, Andrew is president-elect of the Montgomery/Prince George’s Counties Chapter, and is an adjunct professor in the Masters of Accountancy program at The George Washington University.

For those involved in federal financial reporting, you’ve just recently or will soon complete your agency’s FY 2009 financial statement audit. And for those who perform  state and local government financial reporting, your agency’s Comprehensive Annual Financial Report (CAFR) audit and Single Audit are already in full swing or nearing completion. While many might think that the hard part is getting through the audit, they may find that the hardest part is after it is completed, when corrective actions need to be adopted.

Office of Management and Budget (OMB) Circular No. A-50, Audit Followup, provides guidance to federal employees as they’re resolving findings and implementing corrective action for most audits. Key steps for implementing corrective action required by this Circular include:

Establishing a System for Audit Follow-up:  Agencies “shall establish systems to assure the prompt and proper resolution and implementation of audit recommendations.  These systems shall provide for a complete record of action taken on both monetary and non-monetary findings and recommendations.” (Section 5)

Involving Senior Leadership of the Agency:  Agencies should designate “a top management official to oversee audit follow-up, including resolution and corrective action” and assure “that management officials throughout the agency understand the value of the audit process and are responsive to audit recommendations.” (Section 7.a)

Implementing Prompt Resolution:  Agencies shall “require prompt resolution and corrective actions on audit recommendations. Resolution shall be made within a maximum of six months . . .” (Section 8.a.2)

Looking for Trends in Audit Findings:  Agencies shall “provide for periodic analysis of audit recommendations, resolution and corrective action, to determine trends and system-wide problems, and to recommend solutions.” (Section 8.a.9)

Holding People Accountable:  Agencies shall “assure that performance appraisals of appropriate officials reflect effectiveness in resolving and implementing audit recommendations.” (Section 8.a.10)

Beyond the guidance in OMB Circular No. A-50, I would make several other recommendations: 

Hold the Process Owners Accountable:  Agencies should evaluate whether they’re holding the process owners responsible for implementing the corrective action.  For example, I’ve seen several instances in which the accountants designate themselves as the officials responsible for resolving the audit findings even though they don’t have the knowledge, authority or experience to resolve the issue. They are really serving as the liaison with the process owners, who are the only ones that can resolve the problem. Agencies should be sure to hold the process owners directly accountable for implementing corrective action.

Meet Frequently:  Frequent meetings with all of the people involved in implementing corrective actions keeps momentum going and helps ensure the right resources are focused on meeting deadlines in the agency’s corrective action plan.

Factor In Time For Training:  Sometimes agencies adopt a policy change to address a corrective action without factoring in the time it takes to train all the personnel involved in carrying out the new policy. Unfortunately, this can mean that the actual implementation of a corrective action occurs long after the policy change has been adopted. It’s better to factor in training time at the start.

Brief the Auditors Periodically:  Agencies should consider holding a forum with the auditors to explain how the agency is implementing changes to respond to the auditor’s recommendations. This would give the auditors an opportunity to explain their recommendations more fully—especially if the agency has interpreted a recommendation that differs from the auditors’ intent. 

Monitor the Effectiveness of Corrective Action Through the Agency’s OMB Circular No. A-123 Process:  OMB Circular No. A-123, Management’s Responsibility for Internal Controls, requires testing and monitoring of the operating effectiveness of the agency’s key controls. This testing and monitoring effort provides an excellent opportunity for the agency to determine whether the corrective action has been properly implemented and has effectively addressed the weakness. 

Questions for Discussion:  What other techniques do you use in your agency or have you witnessed that are effective in resolving audit findings? What are additional elements of a corrective action plan that you find effective? 

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International. KPMG International’s member firms have 137,000 professionals, including more than 7,600 partners, in 144 countries.

This views in this essay are those of the author only, and do not necessarily represent the views or professional advice of KPMG LLP. 

American Recovery and Reinvestment Act: Successes and Challenges

By: Robert Maitner Jr., CGFM, PMP

Robert Maitner Jr., CGFM, PMP, is a senior managing consultant with IBM Public Sector Financial Management.

The American Recovery and Reinvestment Act (Recovery Act) of 2009 set into motion the largest government intervention into the economy since the Great Depression. The Recovery Act (public law 111-5) was passed in February of 2009, the result of the new administration’s initiative to stimulate the economy with $787 billion worth of additional government spending. The package includes spending on health care, education, expansion of unemployment benefits, investments in infrastructure and energy programs. By the end of August 2009, about 20 percent of Recovery Act funds had been expended on to tax reductions to both citizens and businesses.

Initial assessments of the effects of the Recovery Act were mixed, with some economists predicting in March 2009 that more would be needed (upwards of $500 billion) to see positive results and economic growth, while others questioned the need for the stimulus at all. The bipartisan Congressional Budget Office (CBO) concluded that while the Recovery Act would increase economic output and employment in the short term (with an increase in the Gross Domestic Product, or GDP, between 1.4 and 3.8 percent by the end of 2009), the GDP would actually realize a net decrease by 2019 between 0.1 and 0.3 percent. 

As we near the end of 2009 and approach almost one full year of both the new administration and the passage of the Recovery Act, it is natural to stop and assess the true impact of the stimulus package as well as challenges associated with its implementation nationwide. And we can be assured that government officials and politicians on both sides of the aisle will mark the occasion to make arguments both in favor and against this unprecedented level of government involvement in the economy?

On Friday, Oct. 30, the Obama administration reported through its Recovery.gov public site that the stimulus generated or saved 640,000 jobs nationwide.

It makes sense to take a moment and look at what the Recovery Act has meant to those directly involved in implementing its programs. 

For example, what has the Recovery Act meant to both federal as well as state and local agencies overseeing programs being funded by the Recovery Act? How are the funds administered, and what are some of the challenges associated with accepting and using Recovery Act money? And what about oversight and accountability? 

American taxpayers not only want to see a return on their investment, but also want to be assured that the funds are being spent appropriately and are subject to a full accounting for each dollar.

Tennessee's ARRA Audit Efforts

By: Kathy Anderson, CGFM

Kathy Anderson is assistant director for communication and coordination for the Division of State Audit, Comptroller of the Treasury, State of Tennessee.

As I’m sure is the same in other audit organizations, we in the state of Tennessee have recognized the need to jump in and help ensure accountability regarding ARRA money. Now, not later. And on an ongoing basis. The expectation, not only from the federal government, but also from the citizens and from our own general assembly, is that the auditors will take extra care to ensure that internal controls are in place, ARRA funds are not misspent and that problems identified are reported immediately.

After Gov. Phil Bredesen set up the Office of Tennessee Recovery Act Management and established a czar, Comptroller Justin Wilson appointed a liaison from our office. This liaison has been largely responsible for keeping up with the centralized ARRA efforts and for updating the auditors on decisions made by the office. 

Education and Assistance

To help with accountability, the Office of the Comptroller of the Treasury is taking two approaches. We recognize the increased risks of noncompliance in the smaller governments. So we have increased our efforts to educate and assist those governments with ARRA grants to ensure the rules and expectations regarding these monies are reinforced. This educational effort has included coordination with local government assistance organizations, letters to local governments explaining expectations and available guidance, presentations, meetings and website links to appropriate guidance. 

We have continuing concerns about the money sent on to the municipal level. Our office does not directly perform the audits for municipalities. We would like to see some additional audit work and assistance at that level, but to require additional, real-time audit work from the CPA firms would inevitably result in increased audit fees—audit fees these municipalities can not afford. So we continue to strategize and to at least provide some educational assistance to the extent we have resources available.

Detection and Deterrence

Of course, nothing assists more with accountability than efforts to detect and deter. We quickly dispatched some small audit teams to look at expenditures on multiple levels. Auditors have done some quick reviews at the state level, the county level and the subrecipient level. These small audit teams are being “noisy” in their work. We want all Tennessee recipients to be on notice that we are out there looking to make sure these funds are spent appropriately and that they could be next up for a review.

These extra reviews, focused on ARRA funds, are in addition to our efforts to review internal controls and start examining compliance, largely in conjunction with the Single Audit work.  We have a very ARRA-centric approach to that work as well.

Questions

My point here is that we are pushing forward in our auditing efforts. The citizens are relying on us to do this right. The state of Tennessee is committed to compliance, and we think it is important to do what we can to assist in that effort.  And I know there is much more to be done. So my questions are:

To the government auditors—What steps are you taking to audit ARRA funds? 

To those charged to look over local governments—What steps are you taking to ensure proper accountability at the local level?

To all accountability professionals—Where are the biggest risks, in your opinion, or areas where you have already seen problems with ARRA funds? What are you doing to mitigate those risks?   

AGA’s Performance Management Conference Recap

By: Evie Barry

Evie Barry is director of performance reporting, AGA 

Last Thursday and Friday, AGA’s Fifth Annual Performance Management Conference was held in Seattle. The conference, attended by 160 federal, state and local performance management gurus and newbies, was all that was advertised—sessions on managing with performance measures, Citizen Centric reporting, getting the public engaged in government and performance…the whole shebang. My only disappointment was that I couldn’t be at two sessions at once!  

A sentence or two about the history of the Performance Management Conference—AGA has received funding from the Alfred P. Sloan Foundation to support the Certificate of Achievement in Service Efforts and Accomplishments (SEA) Report Review Program. Part of the Foundation mandate was to hold a conference that promotes not only AGA’s program but performance measurement and management in general. If you’d like to learn more about our SEA program and how you can participate, visit www.agacgfm.org/performance/sea/.

One of my favorite sessions was hearing from representatives from Bellevue, WA; Oklahoma Health Care Authority; Palo Alto, CA; San Jose, CA; and Saco, Maine. These governments received the GOLD Certificate of Achievement in SEA Reporting for their performance (SEA) report this past year. All of the representatives indicated that receiving the award heightened their awareness of gathering and reporting performance data, but little has been done to use the data when guiding budget decisions. Community reactions have been mixed—from no media recognition to Saco, Maine receiving a letter from Senator Susan Collins congratulating them on their accomplishment. But all did state that the report process has been institutionalized in their governments and they expect to continue to educate the public, media and their own governing bodies about the importance of reporting governments’ accountability successes as well as failures.

Another session, Performance at Risk: What You Should Know about Cyber Attacks, featured Tim Young, former deputy for e-Gov and Information Technology at the U.S. Office of Management, and Budget and David Martinez, King County, WA, chief information officer. Each identified the technology most at risk for cyber attacks, including e-mail to electronic payments to public records. Cyber threat-related activities including spam, network accessibility and e-mail viruses that also increase the vulnerability of electronic systems. Governments at each level are taking steps to protect critical infrastructure, but the cost is significant and older systems are more apt to be targeted and compromised.

Harold Steinberg, CGFM, CPA, was the principal researcher for report No. 23 in AGA’s CPAG Research Series, State and Local Governments’ Use of Performance Measures to Improve Service Delivery. His session highlighted his interviews with five jurisdictions that operate systems to improve delivery of programs and services by using data from the performance measures. Steinberg’s presentation also included the results of an online survey from 175 respondents, primarily from states or state agencies. These respondents indicated that they use performance measures to evaluate the effectiveness of government programs and services and improve service delivery. CPAG 23 will be up on the website in about two weeks but to learn more about AGA’s other research, visit www.agacgfm.org/research/publications/default.aspx.

Finally, conference attendees were treated to Jon Desenberg’s Performance 2.0: From Measurement to Management. Jon shared his thoughts on how performance management and measurement is changing in the federal government. With his vast experience and knowledge, Jon was able explain the history and future of federal performance reporting in a context that was understandable and interesting.

And finally if you haven’t had an opportunity to read Chris Camara’s blogs about the conference keynote speakers, visit http://aga.typepad.com/aga/2009/11/agas-performance-management-conference-under-way-in-seattle.html and http://aga.typepad.com/aga/2009/11/update-from-the-pmcs-final-day.html. If you would like more information about the PMC speakers’ presentations, visit www.agacgfm.org/pmc_2009/presentations.htm.

So how do you see your government moving forward in the area of performance reporting? How passionate about reporting to the public are your public leaders? And what strategies can be adopted to encourage the media to move from only exposing the governments’ dirty laundry to explaining the government services that work and more importantly the dedication of its workers?

Unfortunately I don’t remember who said this phrase at the conference, but it has resonated in my head these past few days, “Those who do not look back from where they come from, will not reach their destination.” In these challenging times, I think that says it all.

DoD Is Saving Millions With BAM; Your Agency Can, Too

By: Patrick Taylor, President & CEO, Oversight Systems

Whether the Government Accountability Office (GAO) or the media are asking questions about your controls, practices and audits, it’s never a pleasant process.  Transaction monitoring software for the public sector can oversee the accounting demands of your government agency—and then some. Instead of sampling a small percent of the transactions in an audit, 100-percent are reviewed, exceptions are highlighted and process for resolution started. The ability to nip problems in the bud, before they go out the door, is not only a best practice, but also a business value found in continuous transaction monitoring (CTM).

Over the past year, some agencies within the U.S. Department of Defense (DoD) have instituted Business Activity Monitoring (BAM). The results have been staggering with more than $600 million in potential improper payments thwarted. From shovel-ready to operational in just four months, the funds transparency and accountability program saved taxpayers, in the first year, more than $300 million in potential improper payments. The best part is that the mistakes were discovered before the checks were cut. It’s much easier to recover dollars that never left your account.

The DoD’s BAM program is driven by Oversight Systems’ technology making it possible to efficiently inspect 100-percent of its transactions. Oversight’s Integrity Checks™ incorporate a rich library of accounting operations and budget execution principles to substantiate and legitimize each individual financial transaction associated with each specific government program. These continuously monitored transactions and controls are then cross-referenced against agency metrics ensuring progress towards recovery goals.

By aligning performance data with budget execution data, agencies can now effectively conduct real-time program assessments. Oversight facilitates performance resolution and process improvement through workflow-enabled investigation, reconciliation and compliance. The management dashboard empowers managers to effectively use available resources to improve results. Luckily, this is the answer to the Improper Payments Information Act of 2002 (IPIA) and Recovery Auditing Act requiring federal agencies to review programs and activities that might be susceptible to erroneous payments.

In addition to preventing improper payments, CTM identifies waste, fraud and abuse. As prescribed by laws implemented through the Office of Management and Budget (OMB), Oversight identifies real-time fraud, misuse and abuse in transactions for some of the most complex business processes including: grants management oversight and reconciliation; vendor, payroll, purchase card and travel payments; and accounts payable management. 

As agencies are called upon to be more transparent, it’s a challenge when different systems look at data in different ways. Most agencies have to match data that crosses a wide variety of financial systems to reconcile Fund Balance with Treasury (FBwT). Each of these systems looks at data differently with different definitions and ways of presenting Line of Accounting (LOA), fund, control and activity information, among other data elements. Normalizing these data points from the various systems is the key to efficient reconciliation.

Transaction monitoring software automates this process, extracting data from the various source systems, normalizing the data definitions and deriving missing fields by aggregating available data. Disbursement and collection transactions are compared, and any unmatched items are automatically assigned to specific problem categories determining and addressing the root causes. Reconciliation reports of unmatched transactions are immediately available.

For one agency, this automated process decreased the amount of time spent on unmatched disbursements from an entire month to two days—saving 19 work years per month in labor.  The return on one’s investment is immediately seen impacting the number of manual resources to manage FBwT and in reducing the amount of time adhering to the Treasury’s Financial Management Service requirements. 

As transparency is touted by everyone from President Obama to Aneesh Chopra to Neil Barofsky, CTM is the now, not just the future, in accounting.  If you’re looking at your budget and trying to cut costs, Oversight ensures savings with a money-back guarantee on top of headline-making success stories like the DoD’s.   

Update from the PMC's Final Day

The final day of AGA’s Fifth Annual Performance Management Conference opened Friday with a lively panel discussion on the relationship between chief information officers and chief executive officers, and how the partnership can drive innovation in government.

The panelists, who brought various perspectives to the issue of performance management, were Bajinder Paul, chief information officer of the U.S. Office of the Comptroller of the Currency, PK Agarwal, chief technology office for the state of California’s Department of Technology Services, and Rohit Verma, chief financial officer and head of strategy, Zurich North America.

The panelists talked about using information technology as a transformational force to improve government services. However, many organizations are spending too much time gathering data, or correcting data they receive, than analyzing the information.

Verma said deriving insights from data is “the next frontier.” Paul said 8,000 banks report data to his office quarterly. Prior to establishing standards for data collection, including XBRL, his financial examiners were spending 80 percent of their time validating the accuracy of the information. By the time the problems were resolved, the information was stale. Now, he said, they spend only about 20 percent of their time validating the information. “This is a real tangible example in the regulatory environment.”

The panelists were also asked to address those who work in organizations that have not achieved the kinds of successes being discussed. Where should they begin to make big changes?

Paul said, “It’s really about building trust and achieving a level of confidence.” He said he has a strong relationship with his chief financial officer, which was built over time by learning about his perspective on the agency. Agarwal said two things need to happen first: a clear sense of business goals and an understanding of how to measure success. He added that keeping the goals simple is important. He recalled discussing performance management with a pilot while he was on a flight. The pilot said his metrics are very simple: “Make sure the number of takeoffs match the number of landings.” 

Jonathan Walters, Governing magazine reporter and a local government official, gave attendees of  AGA’s Performance Management Conference tips on how to communicate effectively with the media.

He encouraged attendees to develop a media strategy. Think about what you’d like to accomplish: For example, is it moving a particular agenda, selling an idea or getting publicity for a key player in government? He told them that it’s part of their jobs to do some homework about which media outlets to target, and the most appropriate reporters and editors to contact. If you do that homework, he said, you can target your message.

“Do not run away from reporters,” he said. “Seek them out.” In fact, he went so far as to say that government officials should be the ones to tell reporters about negative stories. Walters, who is chairman of the planning board in Ghent, NY, and a volunteer firefighter there, said he told the local newspaper reporter that the planning board was being sued for approving a gravel mine in his rural community. Why? “It allowed me to get my side of the story out first.”

He said he had made regular, informed and direct contact with the reporter, who had become a friend. No story involving the planning board appeared in the paper without Walters knowing about it beforehand. When it comes to bad news, he said, “Break it yourself. Don’t wait for them to dig it up.”

Walters urged the government officials to allow all their employees to talk to the media. He said government officials should resist the temptation to control what is said about their agency. If you trust employees to work for you, you should trust them to talk to the press, he said.

He also encouraged government officials to avoid jargon and acronyms and to apply what he calls the “explaining it to mom” rule. Government officials should tell a story.

“You’ll have a shot at shaping the news.”

—Christina M. Camara