The AGA Weblog

Transforming Bureaucratic Cultures

By: Warren Master

Warren Master is Editor-in-Chief & Board Chairman, The Public Manager (www.thepublicmanager.org)

Over the past decade or so, government at all levels has begun requiring short- and long-term plans, including strategic goals, measurable objectives, a system for assessing outcomes and periodic reporting on results. Beginning with the federal CFO Act of 1990, followed by related measures such as the Government Performance and Results Act of 1993 (GPRA), Government Management Reform Act of 1994 (GMRA) and the IT Management Reform Act of 1996 (ITMRA or Clinger-Cohen), among others, pressure has mounted to achieve greater accountability. More recently, decision makers have attempted to tie budget and other resource decisions to agency performance.

Ironically, this shift to a more results-oriented management system hasn’t yet made a noticeable dent in public sector organizational culture. This observation is warranted because, for such a transformation to have occurred would have surely nudged most culture-bearers out of their bureaucratic silos and stovepipes. For example, in a post-silo organizational culture, budget and financial management analysts would be regularly collaborating with technologists, acquisition specialists, agency planners, HR counterparts and others to assure that co-lateral strategies support agency budget priorities.

Major Transformational Challenges

So what are the most challenging “haystacks” we face at this time—15 years after passage of GPRA?

Performance
Starting with the performance challenge itself, to what extent have the various team elements planned, resourced and orchestrated initiatives to foster a performance culture? How have they assured that all contributors understand the link between the procurement process and vendor performance? Between setting budget priorities that help guide agency investment decisions and justifying and reporting on the measurable outcomes of agency training efforts? To set standards, hold organizations accountable and consider changes to HR law, personnel policies and systems, and other innovative ideas in pursuit of a performance-based culture?

Accountability
Moving to accountability challenges, how have agency strategic emphases shifted to address priority oversight needs? Performance measurement aside, what pressing demands need to be addressed in the area of ethics? What is being planned to assure basic performance measurement acumen and distribute responsibility appropriately in a multi-sector workforce? How have new technologies given agencies more effective tools and techniques to assess and mitigate risks and assure proper internal controls? Moreover, how have organizations raised the bar on managing and sharing costs and employing more results-oriented budgeting techniques?

Human Capital
As for human capital, how have workplace learning efforts focused on measuring performance and linking pay and performance (where applicable)? Given the complex, wide variety and pressing nature of the transformative challenges facing today’s government organizations, what are agencies doing to prepare their current and future leaders and managers to drive this change over the next several decades?

Technology
How do agency strategies assure that the organization will keep pace with new technologies and rising E-governance expectations among all relevant users—citizens, the business community AND a younger more Web-savvy work force? Also, the public sector has slowly made increasing use of telework and other flexible workplace arrangements. What are agencies doing to become “telework-ready” to ensure continuity of government operations in the event of a significant work stoppage?

Communication
How are government organizations balancing the need for internal controls and confidentiality with the demand for increased freedom of information? Given the volume, pace and complexity of policy formulation activities, how are government agencies engaging citizens today—particularly in the context of new communication technologies? Given the inter-dependent nature of today’s public sector challenges and solutions, government agencies and occupational groupings will need to go outside their own vertically integrated comfort zones and interact with other bureaucratic sub-cultures to achieve priority outcomes. How are agencies reaching out across traditional boundaries, and how are basic organization assumptions and behaviors changing with respect to sharing information and collaboration in planning, sourcing and managing efforts of common importance?

Governance
Going beyond inter-institutional communication, how have bureaucratic cultures evolved to share responsibility for achieving results? What are different levels of government doing to prepare for and respond more collaboratively to catastrophic disasters, and how are lessons learned institutionally shared with others? Moreover, more and more government work requirements have been sourced to private contractors. Given the need to measure and report on the performance of all parties, how are organizations communicating oversight and accountability roles and responsibilities in such a demanding, resource-stretched environment? In this regard, how have government organizations successfully engaged the private sector, achieving high performance while remaining faithful to their missions and code of ethics and protecting the proprietary needs of their business community counterparts?

MONDAY: Eric Berman, Deputy Comptroller, Commonwealth of Massachusetts; AGA GASAC Representative

Transitioning into Transparency

By: Joseph L. Kull, CGFM

Joseph L. Kull, CGFM, a member of AGA’s Washington, D.C. Chapter, is a director in the Washington Federal Practice for PricewaterhouseCoopers LLC.

I'm told that the AGA Blog is read by more than 1,000 people per week. Wow, that's a lot of people to share ideas with. The whole idea of blogging, You Tubing, My Facing, and the gazillion other things you do/search/find/dive into on the Internet also leads very nicely into the subject du jour.

First the transition. Everyone in Washington seems to be offering the next administration their ideas on management issues and priorities for the next President’s Management Agenda. Regardless of who gets elected, the government's management problems are not going to go away. It's just a matter of what we call them and which ones get the attention.

I'm not going to venture out into the transition advice quagmire. I just hope the next administration builds on the progress made to date, and since this is the AGA Blog, let's take financial management. In 2009, we can really talk about better financial management [and all that goes with] rather than untimely and often unreliable financial reporting as we did back in 2000. Whatever agenda is established, there should be clear priorities, adequate resources and authority, and reasonable time frames to get things done.

The big unknown is the impact this interconnected 'flat world' is going to have on what we need to do and how we do it. And both will be driven largely by our customers, the taxpayers, as it should be. With their laptops, cell phones, Blackberrys, the world literally at their fingertips—the 'infrastructure' of our connected world—they will drive what information and services they want, and will expect them to get the information and service when they want it, not when we can provide it.

In our financial management world, some states and cities are already opening up their books so the taxpayers can see how their money is being spent. USAspending.gov already provides some information on grants and contracts, and people better start paying attention to the Obama-sponsored Federal Financial Accountability and Transparency Act of 2006, which requires grant and contact information down to the sub-recipient level.

Program and financial information should be available to the taxpayer. The 'can't' answer just won't fly much longer. Times are tight, and people will start asking questions. Can you provide the answers? When others can and do, how will an organization that is unwilling or unable fare?

Is your agency, department, ready for this kind of transparency? If not, why not? And wouldn't you rather give people the information rather than have them cobble it together themselves, subject to their own spin and bias?

TOMORROW: Warren Master, Editor-in-Chief, The Public Manager on "Transforming Bureaucratic Cultures"

What Effect Will the Move to IFSR Have on Public Sector Accounting?

By: Anthony Rainey

Anthony Rainey is a member of AGA’s Washington D.C. Chapter, the Emerging Issues Committee and the Steering Committee Partnership for Intergovernmental Management and Accountability. He is the Agency Fiscal Officer for the Office of the Chief Technology Officer, District of Columbia. He has also held financial management positions at District of Columbia Courts (federal), City of Norfolk, Virginia, City of Gresham, Oregon, and City of Seattle, Washington.

It will be interesting to see what the effect of the move to International Financial Reporting Standards (IFSR) will be on public sector accounting (federal, state and municipal entities) that currently follows Federal Accounting Standards Advisory Board (FASAB) and Governmental Accounting Standards Board (GASB) pronouncements. The private sector's Financial Accounting Standards Board (FASB) is in the process of reviewing the impact of a transition to IFSR. As there are public sector accounting standards throughout the world, there does not seem to be much press about how the public sector accounting is preparing for this transition to IFSR or what some of the IFSR implications may impact public sector accounting.

For example, public sector agencies responsible for loans may be receiving IFSR compliant financial statements. Public sector agencies in acquisitions that require audited financial statements may begin to receive IFSR compliant financial statements. Public sector agencies that provide financial, social, health or educational services to individuals or provide transfer payments to individuals as a pre-condition may begin to see IFSR compliant financials.

ORIGINS: Just as the North American Free Trade Agreement (NAFTA), emulating European trade agreements making it easier to engage in commerce between transnational borders, lead to the modification of the United States’ “Standard Industrial Classification” (SIC) codes to the “North American Industry Classification System” (NAICS) that enabled 'comparability' in assessing the financial results of firms in North America, so will the accounting systems. The reason is simple—as firms trade, invest, borrow, employ and transfer capital, assets and debt between borders (electronically), the private sector wants to make sure that the Generally Accepted Accounting Principles (GAAP) among the forms is the same.

Why have we not seen governmental accounting standards begin some kind of transition toward the IFSR for public sector accounting?

Will such a transition impact trade and be used in foreign aid and foreign assistance legislation when transferring resources between countries? What are the impacts on national, state and municipal governments?

As the U.S. federal government does not have an audited financial statement but each state and municipal government does, and as state and local government in the U.S. get bond ratings, how will Moody's, Fitch, and Standard and Poor's address the new IFSR?

Is the GASB and public finance professional organizations in the U.S. going to prepare the transition to the IFSR if the FASB moves to "world GAAP" standards?

TOMORROW: Joseph L. Kull, CGFM, Director, PricewaterhouseCoopers LLP

Four Keys to Completing the CGFM

By: Amy Abbott, CGFM, CFE

Amy Abbott, CGFM, CFE, a member of AGA’s Nashville Chapter, is a Legislative Performance Auditor, Office of the Comptroller of the Treasury, State of Tennessee

I was very happy to complete the CGFM examination process last year. Hopefully, some thoughts from my experience will help you to complete the process as well.

Commitment
The first and foremost requirement to pass the exam is commitment—this process will take a commitment on your part. The best way I found to make that commitment was to schedule a test for a future date, giving myself a goal to work toward. I decided to schedule all three exams over a period of four months; this gave me a target to work toward for each exam. For me, finding a place to study was also very crucial. If I am at home, there are too many things that serve as a distraction. I made the commitment to spend time studying at the library and I found it easier to concentrate and focus in that type of environment. Setting aside a designated time each week to study may also help you make a commitment that you can live with. The bottom line is find a time and place that work for you, come up with a schedule, and stick to it!

Guide
The study guides that have been developed by AGA are very helpful. However, for my own personal learning, I developed outlines that helped me focus on the main topics and principles described in the study guides. I found that if I spent too much time on the examples and case studies in the study guides, I might lose focus on the main principles. If you understand the main concepts and principles in the guide, you should be able to apply that to any situation given on the exam. I also highly recommend using the chapter review quizzes that are at the end of each section; these will help you apply the principles and concepts that are in the text in a way you will have to do for the actual exam. Exams 1 and 3 also offer a true/false test, which I found to be another helpful study tool. The glossary in the back of each study guide will help you learn the terminology and are great to review before taking the exam. I also recommend highlighting main topics and concepts in the study guide—this will be helpful when you review the material and will help you focus on the main ideas rather than re-reading the entire text. Everyone learns differently so there are lots of different approaches. Find the way that works best for you. If outlines are helpful to you, I would definitely recommend developing one—or contact me and I’ll be glad to share mine with you.

Focus
I studied and took the exams in numerical order. I found this helpful because some of the information on Exam 1 was repeated on Exam 2 and some information on Exam 2 helped me understand material on Exam 3. I don’t think taking the exams in numerical order is necessary for success. If there is an area you feel particularly strong in, maybe you will want to take that exam first to build your confidence. The main point is to decide on an order that will work best for you and focus your attention on taking the tests in that order. Concentrating on one exam at a time will help you focus your efforts on the material that is necessary to pass that exam. Developing a study guide will also help you focus your attention on the material that you need to understand and know for each exam.

Motivation
Everyone has a reason for wanting to take this certification. You have to find what will motivate you to start and complete the process. Maybe your office offers a salary increase for certifications or maybe you will be more likely to receive a promotion with a certification—or maybe you want to have the certification for your own personal development. Whatever your reason, find out what motivates you and use it to help you successfully complete the process.

I hope these thoughts will help you be successful in obtaining the CGFM. If I can be of any help, please feel free to contact me at amy.abbott@state.tn.us.

TOMORROW: Anthony Rainey, Agency Fiscal Officer for the Office of the Chief Technology Officer, District of Columbia, on "What Effect Will the Move to IFSR Have on Public Sector Accounting?"

Congratulations Sam McCall, Robert W. King Memorial Award Recipient

Past National President Sam McCall "Truly Honored" by King Award

Distinguished, honorable and a consummate Southern gentleman were just a few of the phrases used by his peers to describe AGA Past National President Sam M. McCall, CGFM, CPA, CIA, CGAP, the recipient of this year’s Robert W. King Memorial Award.

The award, named for the Association’s founding father, is AGA’s highest honor. It is bestowed in the form of a gold medallion for extraordinary service that enhances AGA’s national prestige and stature.

As AGA’s 56th National President in 2005–2006, McCall embraced the theme of “Accountability Reporting with a Citizen Focus.” He placed his attention on the advancement of AGA’s Certificates of Excellence in Accountability (CEAR) and Services Efforts and Accomplishments (SEA) Reporting as well as the then-fledgling Citizen-Centric Reporting effort.

Upon notification that he would be receiving this year’s King Award, McCall said, “I was very honored, given the many AGA members who are deserving of such recognition.”

McCall is known throughout the Association for his quiet demeanor—until he has something important to say.

“When Sam speaks up, you know it’s about something significant,” said AGA Executive Director Relmond Van Daniker, DBA, CPA. “He was an insightful leader during his year as President and throughout his term on the National Executive Committee. I know I speak for the entire staff when I say we are delighted to see Sam honored with AGA’s top award.”

Immediate Past National President Jeffrey Hart, CGFM, agrees. “There is no one any more deserving of the Robert W. King Memorial Award than Sam McCall. Sam has had an amazing career, and he continues to make major contributions to AGA and the profession. One only has to look at his career to be inspired. More than anything, when I think of Sam, I think of the consummate Southern gentleman. At the same time, he can be direct and to the point when that is exactly what’s needed, and he never ceases to amaze me with his wonderful sense of humor.”

An AGA member since 1984 and a founding member of the Tallahassee Chapter, McCall has served on the Professional Certification Board since its inception in 1994 and as a member of the Audit Committee. McCall, 61, spent more than 30 years working for the Florida Auditor General—13 of them as deputy auditor general—before leaving the state nine years ago to become the city auditor of Tallahassee.

AGA Past National President Jullin Renthrope, CGFM, CPA, CFE, CGFO, said he was very pleased to hear that McCall will be honored with the King Award. “It is always a pleasure to communicate with Sam, on a professional as well as social level,” Renthrope said. “Sam's sincere professional commitment and many years of dedication and service in government financial management distinguishes him as most deserving of such recognition. I admire and appreciate his professional integrity and accomplishments, particularly his dedication and service to AGA.”

Looking back at his tenure as National President, several memories stand out for McCall. “My favorite moments as National President included greeting PDC attendees who took the time to stop by the President's suite in San Diego, speaking to attendees at the luncheon on the last day of the conference (with my wife and two of my staff present), and feeling welcome and appreciated by all of the AGA chapters I visited, especially the AGA Baton Rouge and New Orleans Chapters after Hurricane Katrina. I know those chapter members were dealing with many important work and family priorities, but they still took the time to come to the meeting during my visit. That meant a lot to me.”

When asked what accomplishment he is most proud of from his year as President, McCall listed the reprioritizing the National Executive Committee (NEC) agenda to focus on chapter and member needs; the establishment of the Academy for Government Accountability; and having the support of the National Board of Directors to recognize the Professional Certification Board chair and the Corporate Partner Advisory Group chair as necessary, contributing members of the NEC.

Going forward, he hopes to see AGA continue to focus on “advancing government accountability” and providing information that engages citizens in the operation and financial sustainability of their government. “We should treat citizens not as ‘customers’ of the government, but as its owners, having every right to demand and receive information on federal, state and local government performance,” McCall said. “The fiscal issues facing each level of government are too important to assume they will correct themselves without our involvement.”

He added, “AGA is very fortunate to have an extremely qualified executive director and a dedicated and professional National Office staff. With their help, and the continued support of our members, AGA is positioned to have a significant impact on government accountability activities into the future.”

AGA Field Representative and Past National President Bobby A. Derrick, CGFM, said McCall’s outstanding reputation is well known throughout the Association. “I can tell you one of my highlights with AGA was the opportunity and privilege of not only meeting Sam, but being able to work with him,” Derrick said. “I quickly learned, like anyone else who has ever met Sam, that he is a distinguished, honorable and consummate professional with strong family values and a great sense of humor.”

McCall and his wife Anita, a retired second grade teacher, reside in Quincy, FL. They have a son, daughter-in-law and three grandchildren.

“I am truly honored to receive this recognition,” McCall concluded. “Somehow saying ‘thank you’ does not seem to adequately express my gratitude to those AGA members who have allowed me to be part of this organization.”

Hart said, “Sam has been a great mentor and advisor to me, and someone I am proud to call a friend. I wish him the heartiest congratulations on receiving this prestigious award!”

We suspect that Bob King would concur.

—By: Marie S. Force

TOMORROW: Amy Abbott, CGFM, State of Tennessee, on "The Four Keys to CGFM"

Are We Doing Enough to Develop Future AGA Leaders?

By: Kelly Stefanko, CPA

Kelly Stefanko, CPA, is the Deputy City Auditor, City of Norfolk, VA. She chairs AGA’s National Emerging Leaders Focus Group and serves as a member of the National Executive Committee.

AGA’s challenge to recruit, develop, motivate and retain key talent to meet its leadership needs is never ending. As younger leaders take over, their generationally-shaped workplace habits, attitudes and values will reshape the organization. In this second blog installment on what AGA is doing to help ensure we have a well-stocked legion of leaders, we pose the question—are we doing enough?

Believing in the value of its professional development conferences to develop loyalty and a sense of engagement, AGA has made a substantial investment in making it possible for more emerging leaders to attend through the PDC hotel scholarship offered to every AGA chapter. Scholarship awardees are expected to attend the Emerging Leaders Session on Sunday, July 27, at 1 p.m. All PDC attendees are welcome. The first hour of the session will allow for introductions and a great opportunity for a participative brainstorming and feedback session of the Emerging Leaders focus group.

The Emerging Leaders focus group is AGA’s national sounding board for generation x and y thinking. Usually, the group holds a conference call on the first Wednesday of the month to offer opinions and insight for an hour on a specific topic near and dear to AGA. If you belong to generation x or y and it sounds like something you want to participate in, simply e-mail Jessica Jones at jjones@agacgfm.org. Fresh voices and ideas are always welcomed!

Today, there’s a bonus way for your voice to be heard—simply add your comments to this blog!

The AGA Blog is a great example of a potential topic of a focus group discussion for generation x and y members

• Has the AGA Blog become or do you foresee it becoming part of your daily routine? Why/why not?

• Do you have friends or coworkers in your generation that read blogs dealing with their profession daily?

Similarly, we’re curious what are generation x and y members perceptions of the CGFM—is it something you’re interested in?

Knowing why or why not, which can be different from one generation to another, can have a huge impact on the how AGA markets its products and services.

Past focus group meetings have solicited innovative ideas on:

• How to better recruit/retain Early Career members and how AGA can build loyalty with them

• AGA opportunities for mentoring

• AGA’s investment in recruiting full-time college students

Ideas generated in focus group discussions have already started to take action. For instance, in response to the desire for more informal mentoring opportunities at large conferences, AGA is arranging to have reserved tables at the PDC’s Monday luncheon, which will give those on emerging leaders hotel scholarship the opportunity to meet, talk with and learn from AGA leaders, such as National Executive Committee members and Past National Presidents and Treasurers.

So, what do you think about all of this focus on developing “emerging leaders”? Is AGA on the right path or is there a different avenue we should be taking?

Can you suggest an alternative way of referring to AGA’s current and future leaders who are in their 20s and 30s?

Is “emerging leaders” too similar and therefore cause confusion with the AGA label “early careers”?

AGA is YOUR organization. I’m looking forward to hearing what YOU think!

If You Think $4 a Gallon is Bad, You’ve Seen Nothing Yet!

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

Jeffrey C. Steinhoff, CGFM, CPA, CFE, a member of AGA’s Northern Virginia and Washington, D.C. Chapters, retired earlier this year after 40 years of government service. His most recent position was managing director, Financial Management and Assurance, U.S. Government Accountability Office (GAO). He is an AGA Past National President and is known in the Association as the “father” of the Certified Government Financial Manager (CGFM) Program.

We have seen the price of crude oil rise almost daily and the price at the pump explode to well over $4 in cities across the country. We have heard the public cries from inside and outside the Beltway as people spend $75 to $100 to fill up the tank. We are also seeing the trickle down ramifications as inflation is rising across the spectrum of the economy. Of course, there is finger pointing and the “solution of the day,” neither of which will provide any relief to the current pain at the pump. But if the public thinks the price of gas is bad, they’ve seen nothing yet.

Acting Comptroller General of the United States, Gene Dodaro, CGFM, a long-time AGA member, testified before the Senate Finance Committee on June 17, 2008, about the federal government’s unsustainable long-term fiscal path. The message per se is nothing new from GAO. But the situation continues to get bleaker and bleaker every day that goes by without action being taken to stop digging and start filing the fiscal hole. I do strongly recommend that all AGA members and their families read the testimony cover to cover, even if they have read it before, and share it with your family and friends—especially anyone who thinks the price at the pump is a burden.

Now let’s quickly look at some of the numbers. GAO found that closing the fiscal gap would require spending cuts or tax increases equal to 6.7 percent over the entire economy over the next 75 years. GAO put it in simple terms. To close the gap would require an increase in today’s federal tax revenues of more than one-third (which translates into an increase in individual income taxes of more than 78 percent!) or an equivalent decrease in all federal spending (except for interest on debt to the public, which cannot be directly controlled). Waiting 10 years would increase the revenue number to 45 percent and the spending number to 40 percent.

What do you think will happen in the short term? It is not too promising, is it? Better yet, what will happen in the next 10 years, short of sticker shock at the government’s fiscal pump? Most importantly, what can you, the financial management leaders at all levels of government, do on a continuing basis to drive home the seriousness of this problem?

Former Comptroller General David Walker, in his new role as President and CEO of the Peter G. Peterson Foundation, will undoubtedly make a big difference. No one is better able to make the case for action than David Walker. In the end, it will take a groundswell of demand from the public for elected officials to muster up the mountains of political courage that will be required, which is not manifest in today’s political dialogue. I watched all of the political talk shows this Sunday. None of the pundits were talking about the possibility of reducing government spending by one-third or raising individual income taxes by 78 percent as something of concern to the public. It was simply not on their radar screen. Yes, the economy was a concern (gas prices, foreclosures, inflation, etc) but not the nation’s burgeoning fiscal crisis.

AGA has been a leader in calling for action and was one of the early participants in the Fiscal Wake-Up Tour. We should be most proud of the leadership that our Association has provided. We need to continue what we are doing and expand our efforts by mobilizing as many AGAers (and their families and friends) as possible to drive home the seriousness of the problem and the need for action NOW to stop digging and start filling the fiscal hole.

My questions to the bloggers:

What ideas do you have for AGA to expand on its leadership role in addressing our nation’s fiscal outlook and avoiding a longer-term crisis? Feel free to think out of the box.

What can we do to increase the understanding of the public about the seriousness of the problem?

How can we help move the discussion from rhetoric to action by our elected officials and decisionmakers?

What can we do to support the work of the Peter G. Peterson Foundation?

TOMORROW: Kelly Stefanko, Deputy City Auditor, City of Norfolk, VA, Chair, AGA Emerging Leaders Task Force, on "Mentoring Opportunities at the PDC"

Successful Large Scale Federal Financial Systems Modernization Using the Big Bang Approach and Enterprise Architecture

By: Anna Dixon

Anna Dixon, a member of AGA’s Northern Virginia Chapter and the Emerging Issues Committee, is a Senior Managing Consultant for IBM. She also is a retired federal executive where she held federal financial management positions at OMB, DoD, DHS, Treasury and HHS.

In today’s environment many federal financial managers are working diligently to consolidate and modernize disparate systems that often contain data redundancy and inaccuracies. This state of play compromises an agency’s ability to provide reliable, useful and timely financial data that is needed to manage day-to-day operations efficiently and effectively. In turn, achieving the “clean” unqualified financial statement often becomes increasingly elusive.

This is frequently due to:
• non-integrated financial management systems;
• inadequate reconciliation procedures;
• lack of accurate and timely reporting; and /or
• non-compliance with the standard general ledger.

Over the past five years, several agencies boldly moved forward to modernize their financial management systems. These modernization efforts range from large undertakings like the eclectic and complex establishment of the Department of Homeland Security (DHS) or the Department of Defense (DoD) to homogenous consolidations like the Department of Transportation. Regardless of the size or complexity of an agency, the consolidation into a single integrated application software involves core financials (i.e., budgetary resources, receivables, payables, general ledger, cost and funds balance with Treasury) and the host of feeder systems. Also, in the current federal enterprise architecture environment, federal agencies must develop “as-is” and “to be” architecture, business processes, and detail transition strategies.

According to the former Secretary of Education, Richard Riley the top 10 jobs that will be in demand in 2010 did not exist in 2004. Moreover, the amount of new technical information is doubling every two years. A close colleague, Glenn Davis, having worked in the IT industry for over 17 years, just started his second master’s in the management of IT through the University of Virginia within four years of achieving his first master’s in business administration. He appreciates the rapid changes in technology and the close tie that must exist to enterprise business processes for those technology implementations to be successful. His staff ranges from a brilliant chief architect who speaks in parables to new hires who established and maintained their own websites when they were pre-teens.

Similarly, federal financial managers must understand how employing robust technology will help enable transformation to succeed in today’s rapidly changing and dynamic environment. It not just the chief information officer’s (CIO) job. The federal financial manager must understand the key aspects of technology and the benefits it will provide. The financial manager can leave the understanding of the technical architecture (hardware and the network) to the CIO, but financial managers must understand the key capabilities of application software and the role it plays in solving agencies many financial challenges. Application software is critical to transforming existing business processes, data structures, the organization, and ultimately the ability of the chief financial officer to manage the agency’s finances. GAO recently reported OMB and federal agencies have identified approximately 227 IT projects—totaling at least $10.4 billion in expenditures for fiscal year 2008—as being poorly planned (on the Management Watch List), poorly performing (on the High Risk List with performance shortfalls), or both.

Long-term phased implementation strategies involve module-by-module implementation of financial management modernization and they tend to be costly and vulnerable to becoming obsolete prior to full implementation. The fact some agencies encountered financial modernization mishaps when they chose the “big bang” approach to implementing a financial management modernization project should not immobilize, or unduly hamper, others from proceeding similarly when planning financial modernization transformation. Loosely speaking, the “big bang” implementation encompasses virtually all functionality for virtually all users at the same time. (Phased implementation could be a “mini-bang,” functional, or process form of enterprise resource planning solution.) In all instances, the cost and risk associated with financial management modernization are enormous. Today’s federal financial managers, however, have the benefits of lessons learned, proven best practices, templates for developing business processes, and most important, a sea change of new technological capabilities. The “big bang” implementation strategy is comprehensive and complex and it generates significant returns on investment earlier. In this context, the “big bang” involves corporate or enterprise-wide development of business processes that will become the basis for the enterprise architecture and the resultant IT solution. The development would be incremental (spiral) and the financial mangers would be involved through out the development phase—perhaps even “teamed” with the developer to ensure close integration of IT and business.

Successful enterprise-wide solutions generally drive down the total cost of ownership while gaining the ability to have one source of real time online data that is available when needed. Cost avoidances range from elimination of software licenses and maintenance for a single user to access multiple applications to elimination of data redundancy and inaccuracy or the avoidance of building and maintaining the integration between multiple applications.
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Federal financial managers must keep pace with the accelerating rate of technological change and harness the capabilities. It is not easy…but it is doable. The traditional challenges of enterprise vs. mission organizational orientation, program aligned funding processes, constraining and/or inflexible budgetary cycles and process, will continue but the full use and application of enterprise architecture will help agencies rapidly reconfigure their business and more easily position IT resources to serve it. An enterprise architecture, or modernization blueprint, provides a clear and comprehensive picture of an entity, whether it is an organization (federal department or agency) or a functional or mission area that cuts across more than one organization (financial management). This picture consists of snapshots of the enterprise’s current “as is” operational and technological environment and its target or “to be” environment, and contains a capital investment road map for transitioning from the current to the target environment. The architecture also includes a transition or sequencing plan, which is based on an analysis of the gaps between the “as is” and “to be” environments. This plan provides a road map for moving between the two environments, and it incorporates such considerations as technology opportunities, marketplace trends, fiscal and budgetary constraints, institutional system development and acquisition capabilities, legacy and new system dependencies and life expectancies. The failure comes when we build solutions for business processes that are not well understood.

So, let’s move forward smartly but boldly applying the big bang approach when implementing enterprise-wide financial management software solutions.

TOMORROW: Jeff Steinhoff, CGFM, CPA, CFE, on "If You Think $4 a Gallon is Bad, You Haven't Seen Anything Yet"

A Study of the 50 States’ Budget Processes

By: Sheila A. Weinberg

Sheila A. Weinberg is the founder & CEO, Institute for Truth in Accounting

Later this summer the Institute for Truth in Accounting will be issuing our survey of state governments’ deficits and balanced budget requirements. As a part of this research, funded by the Searle Freedom Trust, the Institute is studying each of the 50 state’s budget process and the results reported on their financial statements.

We believe that transparency is in each state’s budget process is critical because this process is the principal vehicle through which the state legislature and governor annually allocate resources generated through identified and regulated revenue streams. The budget document and process should be the cornerstone of government accountability. The research that we have done so far indicates two key problems with the current budgeting and accounting systems. First, the same accounting rules are not being used for budget calculations and financial reporting. Second, the audited Comprehensive Annual Financial Reports (CAFRs) are not being issued in time for legislatures or governors to meaningfully review the results before planning the next year’s budget. Our survey of the 50 states will determine what state budget processes, if any, are showing leadership in transparency and accountability to their citizens.

To the first problem, when states calculate their budgeted revenues and expenses, elected officials and their staff are using “modified” “cash basis” accounting. Only current cash inflows and outflows are included in “cash basis” accounting. Therefore budget calculations do not include liabilities incurred in the fiscal year that will be paid in future years. Our experience in Illinois shows that ‘modified’ seems to means that the elected officials can modify the budgeted amounts in almost any manner that they want, so they can claim a “balanced” budget. Another troubling trend the Institute researchers have noticed in Illinois is the lack of accounting for hundreds of millions of dollars of pension and other retirement benefit funding that were incurred but not funded in previous fiscal years.

The CAFRs are prepared in accordance with Generally Accepted Accounting Principles (GAAP). GAAP accounting gives a more complete picture of each state’s financial condition, including a clearer view of the state’s liabilities. The lack of consistency between the budget calculations and financial reporting results in an “apples and oranges” scenario, where the budget numbers have no bearing or relevance to the CAFR numbers. Public accountability is nearly impossible because there is no way for the public to compare the amounts included in the “balanced” budget to what was actually spent. For legislators, “cash basis” budgeting seems to work out very well: they only need to focus on expected cash flow in the coming fiscal year, without having to include amounts promised in future years. Unfortunately for the taxpayers, it creates a growing problem of having to pay for guaranteed liabilities that only loom larger every day they are not adequately addressed.

Initial Findings
Three states show the scale of the problem: California, Illinois and Vermont.

In California, the legislature and governor do not even include an estimate for anticipated revenues in the budget—it’s a “$0” entry. Only expected expenditures are included. The FY07 CAFR showed a net deficit of $1.083 billion and recent words of reform from the Sunshine State makes us worry. True transparency and accountability begins with a budget process that gives the taxpayers a clear and concise report of where their money is proposed to be spent. California hasn’t even begun.

In Illinois, where the budget does include both anticipated revenues and expenditures, the growing difference between the budgeted amounts and the CAFR amounts is staggering. In FY07, Illinois’ CAFR reported an accumulated net deficit of more than $20 billion. Yet in spite of this evidence, the legislature and governor are not close to bringing about meaningful change to the current procedures. This year’s budget process is showing signs of being as cantankerous as last years, where frustrated legislators were sequestered in Springfield until mid-August. When the governor claimed that the legislature was not working for a truly balanced budget, the state comptroller weighed in by advising that the last four budgets the governor had signed were not balanced. Illinois consistently ranks among the worst and most dire when it comes to budgeting and funding.

The Institute has found some promising results in Vermont, which is showing the way to budget transparency and accountability. Vermont is carrying a positive net operating balance and its budget tracks its CAFR comparatively well. Informed with such information, Vermont taxpayers, legislators and even the media have a more true depiction of the state’s financial condition, and therefore can participate more meaningfully in the planning for the next fiscal year, and beyond.

We will issue our 50-state survey of state government deficits and balanced budget requirements in late summer. Until then you can find more information on their websites at: www.truthinaccounting.org and www.truthin2008.org

TOMORROW: Anna Dixon, IBM Global Business Services, "Successful Large Scale Federal Financial Systems Modernization Using the Big Bang Approach and Enterprise Architecture"

Can Government Employees Be Know-It-Alls?

By: Julie Brenman

Julie Brenman is Director of Strategic Initiatives, city of Durham, NC

I work for the city of Durham, North Carolina. When people find out where I work, they expect me to know everything that goes on in the city. Why did you cut off my water? Why do you let my neighbor’s grass grow so long? Why is Durham’s tax rate so high? What are the plans for that vacant piece of land down the street from my house? When will my street be paved? I do my best to keep up with the latest news in Durham and the happenings in all city departments. Even though my job duties do not require that I be able to answer all of the questions posed above, I am fortunate to be in a position in the city government where I can often respond intelligently to questions I am asked about most city services. When I don’t know the answer, I promise to follow-up and get back to them. I also let people know about Durham One Call, our central call center, all the time.

Sometimes the questions I get are a little more far-flung. Why does Duke Power cut down our beautiful street trees? Why are you spending my tax dollars in Iraq? Why does the School Board fight? Why doesn’t my mail come on time? The common theme in all of these questions (and yes, I really have been asked all of these) is that they are not questions about city government. Nonetheless, as a city employee, there is an expectation that I know the answers to all of these.

If I wanted to call Sears to see if they had a particular shoe I was looking for, I would not expect the employee in the automotive section to be able to answer my question. Nor would I expect someone at Macy’s be able to tell me if Sears carried the shoes. Yet many of our citizens expect all city employees to be able to answer any question about any service provided by the city or any other level of government. They get frustrated when their calls get transferred and occasionally irate if we are unable to answer the questions.

I do not expect a street maintenance worker to know the crime rate. But I would like for all Durham employees to know that the information on crime rates is collected and used by our police department. And by the same token, I would like our police officers to know that we report on the condition of our streets on a regular basis.

Government employees at all levels need to develop better ways to communicate with citizens about what we do and how well we do it. Regular publication of performance reports that are easily understandable and accessible to the public will help promote a better understanding of government services. The use of 3-1-1 and other central call centers helps citizens navigate through some of the confusion. Involving citizens in determining what is important for them to know also improves the government’s ability to meet citizen expectations.

While we must do better at educating our own employees about our performance and helping people understand who to call for different services, it wouldn’t hurt if our citizens also reflected on their own expectations and realized that it is not realistic to expect government employees to be know-it-alls.

Oh, and in case you are interested, I’d be happy to answer any of the questions the citizens’ posed to me.

TOMORROW: Sheila Weinberg, Founder and CEO, The Institute for Truth in Accounting, on “A Study of Our 50 States”