The AGA Weblog

Think Big! Act Courageously! Make a Difference!—Are YOU Stimulated?

By: William Morehead, Ph.D., CGFM

William Morehead, Ph.D., CGFM, a member of AGA’s Jackson Chapter, is the chair of Accountancy, Computer Information Systems and Finance at Delta State University in Cleveland, MS. He is AGA’s National President-Elect.

In the past two weeks, our Congress passed and our President signed into law the American Recovery and Reinvestment Act of 2009. State and local governments are anxious to receive their share of these monies to help alleviate their budget woes and jumpstart the construction of numerous infrastructure projects. Now, after the stimulus bills of 2008 and 2009, our country has a record deficit and record debt. As we say in Mississippi, we are in debt up to our eyeballs!

Does this get you stimulated? Angry? Excited? Concerned? Sure, I was glad to receive my stimulus check in 2008; and I look forward to any personal benefit I might receive as a result of the 2009 Act, but at what cost? I do not have any children or grandchildren to pass this debt onto, but I do have a niece and nephew—and most of you have young ones—who will inherit this debt. Much is being discussed about ways to reduce this debt and perhaps we will soon see some improvement.

Nevertheless, as government financial management accountability professionals, we owe it to our children and grandchildren, as well as every citizen and ourselves, to rise up and assume our positions—that of accountability professionals who are being “called to active duty” to help secure our country as it manages the hundreds of billions of dollars in stimulus money. I believe the monies authorized in the 2008 and 2009 stimulus bills, as well as those expended for the wars in Iraq and Afghanistan and Hurricanes Katrina, Rita, Gustav and Ike, will ensure we government financial management accountability professionals have job security for the next 20 to 30 years as monies are distributed, reported and audited.

Let’s use our positions wisely. Let’s exercise great leadership at this time in our nation’s history. AGA can, and as well we should, lead the way. Let’s “Think Big! Act Courageously! Make a Difference!”

Grants Management: Is Effective Management Possible?

By: Anna D. Gowans Miller, MBA, CPA

Anna D. Gowans Miller, MBA, CPA, is AGA’s Director of Research.

The AGA Corporate Partner Advisory Group (CPAG) Research Program chooses projects that are likely to provide helpful guidance to all levels of government—federal, state and local. One of our recent research efforts, conducted by AGA in-house with support from Corporate Partner BearingPoint, Grants Management: How XBRL Can Help, described the current state of grants management. Here is a quote from the conclusion of the report:

“Grants are a major conduit whereby the federal government provides funds to states and other recipients. The situation today is difficult for recipients because they have to manage multiple requirements, often for very similar grant programs, and there is no streamlined process for reporting the progress to the federal agency or agencies…. Too often, agencies focus on getting the money out and put less priority on the back-office work of promptly reconciling grantee reported data with agency records, ensuring that grantee performance is adequate and properly reported, that grants are closed out properly and that any unspent money is returned to the Treasury and [made] available for other use.”

And now we have the American Reinvestment and Recovery Act of 2009, signed into law on Feb. 17, that is going to push more money out to recipients, most of it through grant mechanisms, than ever before and do this as fast as possible. If the process was strained before, imagine what it will be like for both recipients and grantors, with more reporting requirements and more almost real-time transparency requirements than ever before. If they could not do well before, are they even going to be able to cope now?

States, local communities and other grantees are going to experience a torrential influx of funds. And these funds come with onerous reporting requirements. The American Reinvestment and Recovery Act requires reporting on amounts received, projects or activities for which the funds are to be used, estimated numbers of jobs created or retained and information regarding subcontracts and subgrants. With such a plethora of reporting requirements, grantors and grantees will have to try to use recent technological developments to help them keep up. 

One of these, described in the AGA Research Report mentioned above and available online, is XBRL— Extensible Business Reporting Language. Based on XML and HTML, XBRL is a way of tagging data with relevant associated information that stay with the data as they move up the grants reporting supply chain. The data and associated information can then be sliced and diced in any number of analytic ways. Program performance can be analyzed over different geographic regions (even congressional districts). Comparisons can be made across programs. And the data retains its integrity, making verification and validation much easier. It would seem to be the way to go to make life easier for everyone involved in the grants-making process, for grantors and grantees alike. 

Why are we not doing it? Let us hear what you think. Tell us your opinions on XBRL, or give us an alternative solution.

2009 AGA Government Finance Case Challenge Results

By: Jennifer I. Curtin, MPA

Jennifer I. Curtin, MPA, is AGA’s Director of Public Affairs.

AGA would like to congratulate The University of North Carolina at Pembroke as the top award recipient in AGA’s Second Government Finance Case Challenge. The Pembroke team, along with the other finalist, the University of Nebraska at Omaha, made 25-minute presentations last week at the National Leadership Conference on designing a Citizen-Centric Report for a fictitious city in North Carolina. A panel of judges chose team members Brenda Eldridge, Sean Deruntz and Jeremiah Wyler as making an outstanding presentation. They receive a free one-year membership to AGA and cash prizes.

The best undergraduate accounting/financial management/business students in the country were invited to compete in the challenge beginning in October 2008. Student teams collaboratively analyzed and constructed a four-page, Citizen-Centric Report. Members of the two highest-scoring teams received a scholarship to attend AGA's National Leadership Conference (NLC), held last Thursday and Friday in Washington, D.C.

The experience challenged students' moral reasoning, raised their awareness of the importance of government accountability and may have opened their minds to a future career in government. Since only a handful of colleges and universities in the U.S. offer governmental accounting courses that aren’t confined to just one chapter of a book, AGA wanted to find a way to reach out to students. Seventeen schools registered and submitted responses to the case this year and a dozen other schools asked if the case could be used as a teaching example.

Federal, state and local governments are facing enormous challenges. The students from the two finalist teams were able to learn about the government financial management community’s responsibilities and challenges while attending the NLC. It was also refreshing to witness the students from the two teams demonstrate their newfound knowledge about performance reporting. They learned that it is not always about the numbers. It is about communicating the meaning of the numbers to the populous.

Using AGA’s citizen-centric reporting template, the teams went outside of their accounting comfort zone to take a body of financial information and present it in a four-page template that the average taxpayer would understand. Members of both teams remarked that they learned a lot and that they have a newfound respect for the enormity of the tasks that government financial managers must perform.

The timing of the case finals was remarkable because President Obama had just signed the American Recovery and Investment Act. As a result, the students were able to see and hear from a variety of federal, state and local government leaders, who must now figure out how to monitor, distribute and report on $575 billion quickly.

AGA’s Case Challenge continues to receive positive feedback from educators and student participants. We have partnered with the honors accounting society, Beta Alpha Psi, to promote the competition, but we’re always looking for additional ways to spread the word to schools across the country. Do you have any suggestions for AGA? This challenge has the potential to make new connections between accounting students and the government financial management community. How should we move forward?

AGA's National Leadership Conference Concludes

By: Jennifer I. Curtin, MPA

Day two at the NLC began with a panel discussion that included the executive director of the Concord Coalition, Robert Bixby, and the executive director of AGA, Relmond Van Daniker. They offered commentary about citizens’ perspectives on governmental reporting. “There is no ‘big bang’ theory involved in the momentum of the growing federal deficit,” stated, Bixby. “We created the debt and we cannot just walk away from it.”

The Coalition estimates that we currently have a $1.186 trillion deficit in the federal government with $1.3 trillion spent on Medicare, Medicaid and social security program costs.  In fact, since 1968 the percentage of mandatory spending has grown to 53 percent of the budget in 2008.

“The current economic weakness has led to a decline in interest rates, providing the federal government with an opportunity to finance new borrowing at lower initial cost. Over time, however, the huge buildup in debt combined with rising interest rates will bring interest payments on the national debt up to around three-quarters of a trillion dollars ($772 billion in 2019), or 3.5 percent of GDP, under Concord’s plausible baseline,” stated Bixby.

The Coalition has joined with a variety of others to sponsor the ‘Fiscal Wake-Up Tour’. The tour’s mission is to cut through the usual partisan rhetoric and stimulate a more realistic public dialogue on what we want our nation’s future to look like, along with the required trade-offs. Elected leaders in Washington know there is a problem, but they are unlikely to act unless their constituents — we the people — demand it.

Bixby concluded, “This is not about numbers. It is a moral issue.”

Van Daniker painted a picture for the attendees about trust in government. In January 2008, AGA commissioned a study by leading market research firm Harris Interactive^® to conduct the first in a series of surveys on public attitudes toward government transparency and accountability. “The survey overwhelming showed that government at all levels is failing to meet the needs of its citizens with regard to financial management reporting, “ he said. “This expectations gap is quite large.”

Poor performance on financial management reporting has created a problem with trust between citizens and their governments in regards to spending practices. Van Daniker continued, “Rather than say ‘ain’t it awful’, we need to pull together to report information timely and in a manner that is short and understandable to the common taxpayer.”

He suggested a four-page reporting template called a ‘citizen-centric report’. The reports are easily adaptable for all governments. AGA offers guidelines for content, a design template and completed reports for governments to review at www.agacgfm.org/citizen.

AGA’s initiative is steadily expanding. The U.S. Departments of the Interior and Defense as well as the U.S. Coast Guard have produced reports at the federal level. The states of Oregon, Nevada, South Carolina, Tennessee and Washington as well as cities and counties such as Saco, ME, Tallahassee, FL, Portland, OR, and Blount County, TN, have produced Citizen-Centric Reports to the benefit of their citizens.

Owen Barwell, Deputy Chief Financial Officer, U.S. Department of Energy; Sheila Conley, Deputy Chief Financial Officer, U.S. Department of Health and Human Services; Lee J. Lofthus, Chief Financial Officer, U.S. Department of Justice

A panel of chief financial officers and deputy chief financial officers joined together to discuss the challenges and opportunities for the financial management community of today. All three panelists acknowledged that there are two awesome tasks that their agencies face right now: aiding and assisting the new Obama administration in their transition and figuring out the best way to monitor, organize and handle the financial management responsibilities attached to the new American Recovery and Investment Act.

“We are taking an enormously sized bill and monitoring it and delving out the dollars accordingly,” stated, Sheila Conley. “This is our time to shine.”

The two main focuses of the bill are: accountability and transparency. In fact, the first obligation reports for the bill are due within the next two weeks. The bill puts the government financial management community in the spotlight because of the transparency needs. Conley reported that $575 billion of the money from the bill will be distributed to federal agencies. The U.S. Department of Health and Human Services (HHS) is responsible for $135 billion of that pot of money. The U.S. Office of Management and Budget (OMB) have already provided a 68-page guide to help move agencies forward with the enactment of the bill.  

Each agency has a number of obstacles that need to be handled immediately. They include gaining and working with newly-appointed CFOs, having enough qualified staff to manage report on and distribute the funds from the new bill and speed. President Obama wants the money to be distributed now and as a result it will be sending a surge through the structure within each agency. “The current infrastructure of systems and employees may not be as in place as needed right now to assist and we have to report out the information very quickly,” stated Owen Barwell.

“I don’t want to lose my clean audit opinion during the enactment of this new bill, so it is a primary concern for the U.S. Department of Justice to keep financial management practices in place,” commented Lee Lofthus. His agency will be receiving an unprecedented $4 billion in grants. “Without government financial managers, this recovery act won’t move an inch.”

During normal times, Barwell offered that his agency uses $24 billion. With the signing of the bill, they will be receiving an addition $40 billion to move ‘shovel-ready’ projects out. As a result, they are building a risk management program for the next 30|60|90 days, six months and one year. “We need to accurately report on how we are executing these programs.”

The panelists also noted that intergovernmental cooperation will be vital in the coming days. So far, the interaction with states, local and federal agencies has not occurred. Part of operationalizing this bill will involve talking with state and local government recipients.

View more information about the NLC at www.agacgfm.org/nlc.

AGA's National Leadership Conference Under Way in Washington

By: Jennifer I. Curtin, MPA

AGA’s Seventh Annual National Leadership Conference began with Gene Dodaro, CGFM, Acting Comptroller General, U.S. Government Accountability Office (GAO). He focused on the challenges facing the new administration and the 111^th Congress. He told attendees that GAO has a unique responsibility as a resource to its primary client, Congress.

In preparation for the incoming Obama administration, on Nov. 6, GAO published a new section to their website that proactively lists distilled reports to help triage the issues facing the U.S. The new site is available 24/7 in different formats. It conveniently sets up the urgent issues for the Obama administration. You can view the information by federal department or in a government-wide format. Dodaro's team constructed a list of suggested cost-saving opportunities for the administration to review.

GAO also identified urgent issues that include: financial regulatory markets and institutions and modernizing the federal regulatory system. Since the current regulatory system is ill-suited to meet U.S. needs, Dodaro suggested goals to solve the issues: reform has to be set in clear regulatory goals; we need to deal with the gaps in the system; offer a system-wide focus; manage risk proactively and offer consumer protection.

GAO has ongoing responsibilities to provide onsite monitoring of the Emergency Economic Stabilization Act of 2009 which created the Troubled Asset Relief Program (TARP). As a result, they have already made nine recommendations to increase accountability and transparency. Dodaro also offered a list of the urgent issues that need to be prioritized within congress and the Obama administration: updating strategies for all missions attached to Iraq, Afghanistan and Pakistan; homeland security; fragmented food safety; improving the U.S. image abroad and the transition to digital television.

An alarming figure that Dodaro offered involved an estimated $72 billion in current improper payments in government. He stressed that the government needs to stop those payments from occurring. In general, cost information needs to be in better shape before handing it over to Congress for review. "We are at a critical juncture in the U.S. and I look forward to working with this government financial management community moving forward to help improve our nation.”

James B. Lockhart III, Director, Federal Housing Finance Agency

On Feb. 18, President Barack Obama threw a $75 billion lifeline to millions of Americans on the brink of foreclosure, declaring an urgent need for drastic action—not only to save their homes but to keep the housing crisis "from wreaking even greater havoc" on the broader national economy.

The lending plan, a full $25 billion bigger than the administration had been suggesting, aims to prevent as many as 9 million homeowners from being evicted and to stabilize housing markets that are at the center of the ever-worsening U.S. recession.

Government support pledged to mortgage giants Fannie Mae and Freddie Mac is being doubled as well, to $400 billion, as part of an effort to encourage them to refinance loans that are "under water" — those in which homes' market values have sunk below the amount the owners still owe. As a result of this information, Lockhart offered timely remarks to attendees.

“It is very important to have sound financial systems,” he stated. “You are the heart of the government.” The key to managing financial programs is to conduct a root-cause analysis. The key way to reduce risk is to have strong oversight and the biggest challenge that the U.S. faces is the stabilization of the market.

Fannie Mae and Freddie Mac must exist to support the housing market. They have a majority of the market share. They buy mortgages, package them, protect them and offer them back to the public. Ashworth told President Bush during his final days in office that the Housing and Economic Recovery Act that was signed on July 30, 2008 was two years too late. Fannie and Freddie financed or guaranteed nearly three quarters of new home loans last year.

They were seized by the government in September and put under the conservatorship of their regulator. At the time, the Treasury pledged to prop up the companies with up to $100 billion each to keep them solvent.

Lockhart realizes that the big question on the minds of most is "how did we get here?" Following the 2001 recession, low interest rates flooded the mortgage industry encouraging a boom in new and existing home sales. The three main vulnerabilities were: prices of homes rose, builders built too much; risk was mis-priced across the market (interest-only loans, adjustable arm mortgages, etc.);  and there was a total failure of due diligence from bond insurers.

Currently, Lockhart estimates that there are 55 million mortgages. Out of those 55 million, 30 million are guaranteed by Fannie or Freddie. More than 90,000 letters have been sent out encouraging people to modify their loans. Lockhart’s organization understands the human tragedy behind foreclosures and will all that it can to prevent those from occurring. The $75 billion offered earlier this week to home owners should show signs of significant reductions in foreclosures by March.

Rep. Jim Moran (D-VA) and Tom Davis, Director, Federal Government Relations, Deloitte

Panelists Jim Moran and Tom Davis offered a candid and frank discussion about a variety of current issues. “Partisanship stops after election day in local and state government, but at the federal level it never ends,” commented Davis. The issues and politics facing our country are very difficult now and we need to be inclusive and walk across the aisle to get them fixed.

Both pointed out that there is a lot of energy to make a transformative administration and agenda in Washington right now. “Republicans aren’t rooting for the economy to collapse, but they like to tell you 'I told you so’,” stated Davis.

Moran suggested that Congress needs to focus on: a change to Medicare, national energy distribution (wind, sun), entitlement reform is critical, human capital and they must figure out a way to provide health care for every child. “We need members that can make tough votes, there is nothing wrong with losing office for the right reasons,” said Davis. “We need to get rid of Potomac fever.”

Ernest Almonte, CGFM, CPA, CFE, Auditor General, State of Rhode Island; Chairman, American Institute of Certified Public Accountants

Almonte offered his suggestions for leadership in the accounting profession to attendees. “I believe in a system of core values that serve as a contract between me and you,” he stated. His values: integrity, reliability, independence and accountability, are written on the back of his business cards as a reminder of what he is about. He believes that financial managers have an important responsibility to help people understand the current fiscal problem and to help find a solution.

“Our job is to educate, communicate and to help leverage a solution,” he stated. We are all in a life-long learning process and as a result each individual needs to find their voice and get their message across.

As the new chairman of the AICPA, Almonte wants to focus on building leaders in the organization. As a result, he will convene a new leadership academy. His team will select 25 certified public accountants within the first three to eight years of working to be matched with a current or former AICPA board member or chair. This group will attend a summit to learn to ‘think differently as leaders’.  

 More to come from the second day of AGA's NLC. Check back later.

The Dilemma of Auto Demand

By: Sunil Datt, MBA, CGFM, PMP

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

The January 30, 2009 issue of USA Today says: “Gyrating gas prices are playing havoc on auto industry planners, who've been adding small cars to their lineups, even as customers are showing more interest again in bigger vehicles… In May (2008), 56 percent of the vehicles sold were cars, not trucks. By last month (January 2009), the share of cars had fallen to 47 percent, according to Autodata.” Gas prices are averaging $1.85 a gallon at the pump now, less than half their summer 2008 peak of $4.114.

So while American car makers scramble to submit plans for fuel-sipping small autos to a get a government bailout, the market has already turned the other way! How do they deal with this volatility? Here is a range of options:

1. Have a range of cars of every kind to respond to every 50 cent differential in the price of oil.
2. Manufacture just one kind of vehicle, small fuel-efficient, or large fuel-inefficient. Stay open in times of high demand, and close down in times of low demand. Employ low paid temporary workers.
3. Merge with your counterpart a la Chrysler and Fiat, even though the earliest resulting product would hit the American market two years from now, at which time you may find that everybody has shifted to public transport and bicycles.

But let me not be facetious. What I am saying is the answer lies in stabilizing the prices of oil, rather than the auto industry dancing to meet fickle oil prices. The Gas Tax, yes. The ‘Great Economic Stimulus’ bill has been passed, and signed into law, agreed. But, Mr. President, in economics disincentives are as important as incentives. Putting more money in the pockets of folks will lead them to buy what, if the choice is only between trucks and cars, and the price of gas is $1.85 per gallon? Trucks, right? So what is the incentive for auto makers to manufacture fuel-sipping little wonders? I am harking back to just step one of what I had mentioned in my weblog of December 12, 2008.  

The policy of doing the palatable things first is smart politics. But the unpalatable ones will have to be done sooner or later; sooner the better. That’s good economics. The gas tax can at least be begun with a small increment like 10 cents per gallon. And then as the economy improves, it can be raised to ensure that the price of gas remains at a level just unattractive enough to deter the buying of trucks when a car can do the job just as well.

There are tons of precedents. All of Europe charges gas taxes, in some cases taxes make up as much as 75 percent of the cost of a gallon of gas. Of course, comparing gas prices across nations is always difficult. For starters, one would have to take into account different income levels and different exchange rates. And then there's the varying distances people drive, the public transportation options available, and the different services people get in exchange for high gas prices. For example, Europe's stronger social safety net, including cheaper health care and higher education, is paid for partly through gas taxes. Sounds like a good solution for us, too.

There is some evidence Europe's high gas taxes have capped its oil consumption. Oil use in the United Kingdom has basically stayed flat from 1980 to now, while in France it's dropped 17 percent, according to figures from the Energy Information Administration. In the United States, meanwhile, oil use is up 21 percent over the same period, although the country has added more people and seen its economy grow slightly faster.

Americans have taken advantage of cheap gas prices to do other things—like buy bigger cars and bigger houses further away from city centers. On a per capita basis, Americans use three times more oil than Europeans. That means Americans are more exposed to rising gas prices than their counterparts across the Atlantic. Five-thousand square feet in the suburbs, that's much rarer in Europe. We dug our own hole. Let’s get out of it fast!

The American Recovery and Reinvestment Act of 2009—New Provisions Covering Government Accountability and Transparency

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, is a director with KPMG LLP. He is an AGA Past National President and retired last year as managing director, Financial Management and Assurance, U.S. Government Accountability Office (GAO).

The American Recovery Act and Reinvestment Act of 2009 (Recovery Act) covers new ground, not just in the breadth of the economic recovery spending proposals but with its accountability and transparency provisions. These provisions, part of a legislative trend that’s been building in recent years in Congress, are explicit—not buried in the legislation, but featured immediately after the summary of the bill. It is clear from this legislation and President Obama’s pledge to be accountable to the American public that the federal government may be embarking on the dawn of a new day with respect to accountability and transparency. To quote from the President’s 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.”

Recovery Act’s Accountability and Transparency Provisions 

The accountability and transparency provisions in the Recovery Act will require federal agencies to implement additional systems, controls, reporting regimens and oversight mechanisms. State and local governments will face the same challenges to address compliance with the new accountability provisions.

Under the legislation:

• A special website would be created by the president on which would be posted how recovery funds are spent; announcements of contract and grant competitions and awards; formula grant allocations; and the names of program managers so the public knows who to hold accountable.
• Public notification on the website must include a description of the investment being funded, the purpose, the total cost and a justification as to why the activity should be funded with recovery dollars.
• Where state and local funding is involved, governors, mayors or others making funding decisions must certify the appropriateness of the use of recovery funds, which will also be posted to the website.
• A Recovery Act Accountability and Transparency Board will be created to review management of the recovery funds. The seven-person board, composed of federal inspectors general (IGs) and deputy cabinet secretaries, is also charged with providing early warnings of any problems.
• The Government Accountability Office and the IGs are tasked with carrying out specific oversight roles and reporting requirements.
• Whistleblower protections are included.

Parallels to the Federal Funding Accountability and Transparency Act

The website requirement in the Recovery Act is similar in concept to the Federal Funding Accountability and Transparency Act (FFATA), which has a goal of providing transparency by giving the public the ability to look at contracts, grants, loans and other types of spending across federal agencies. President Obama was one of the architects of FFATA, so the Recovery Act continues what could become a recurrent theme of increased accountability and transparency over the expenditure of public money. The Office of Management and Budget (OMB) has issued guidance for reporting under FFATA, including metrics for performance, targeted on completeness, accuracy and timeliness. 

Final Thoughts and Questions

Adding the provisions in the Recovery Act and President Obama’s pledge of accountability on top of the FFATA requirements, the priority on accountability and transparency should rise appreciably.

What do you think about the accountability and transparency provisions in the Recovery Act?

Do they represent the dawn of a new day in government accountability and transparency?

Whether at the federal, state or the local level, will governments be able to effectively and efficiently implement the accountability and transparency provisions at this time without heroic ad hoc data collection efforts?

If your organization is already reporting information under FFATA or a similar state or local government requirement, is the information reported reliable and timely and readily determined based on your existing financial management systems?

What will it take to be successful and provide the level of accountability and transparency the president has pledged to the American public?

This essay represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.

 

 

 

The Accountability Challenge: A Defining Moment

By: David M. Zavada, CPA

David M. Zavada, CPA, a member of AGA’s Northern Virginia Chapter, is a partner with Kearney & Co. and a former federal executive with the Office of Management and Budget and Department of Homeland Security. He is also chair of AGA's Emerging Issues Committee.

As the federal government prepares to spend close to $1 trillion to address the nation’s economic crisis, the size and accelerated schedule of anticipated spending presents a significant management and accountability challenge to federal agencies. The rush to spend money in a crisis situation places at risk the intent of many of the program and financial management reforms of the past two decades. While implementation of management initiatives has sometimes been criticized for lack of strategic perspective and being incomplete, these reforms nonetheless have helped to transform the federal financial focus from one of simply obtaining and spending resources to one in which strategic planning, financial accountability, internal controls and performance measurement are of increasing importance.

Recent history offers a number of examples in which program expediency has won out over adequate planning and internal controls. These examples illustrate that poorly managed programs result in wasteful situations. The haste with which the Department of Homeland Security was created led to a situation in which neither acquisition nor financial management functions were adequately staffed. As a result, contracts were poorly written and inadequately monitored.  Similarly, the volume and pace of spending associated with the response to Hurricane Katrina resulted in significant internal control breakdowns and lack of assurance that resources were directed as intended.

With the nation’s economy on the line, the risk of waste resulting from inadequate control and lack of planning is even higher. The amount of spending involved and the accelerated schedule under which funds will be obligated and outlayed places federal programs at increased risk of fraud, waste and abuse. A recent Federal Times article stated:

“…the challenge that agencies face is the speed with which they’ll need to spend their money. All spending must be done over the next two years, with much of it starting within the next six months.”

Agencies face a financial management challenge to effectively leverage and build upon the management and accountability framework that has evolved. Accountability means more than simply meeting obligation or outlay targets. In his Inaugural Address, President Obama articulated the importance of financial accountability, stating:

“Those of us who manage the public's dollars will be held to account—to spend wisely, reform bad habits, and do our business in the light of day—because only then can we restore the vital trust between a people and their government.”

From an operational standpoint, this means ensuring that strategic objectives are defined, adequate internal controls are in place, program monitoring plans are developed, reporting is accurate and reliable, and that management and auditing functions are adequately funded. It also means setting a “tone at the top” of every agency that management and accountability matter as much as expediency. 

Management reform laws such as the Chief Financial Officers Act, the Government Management Reform Act, the Government Performance and Results Act, the Federal Managers Financial Integrity Act, Improper Payments Information Act and the Single Audit Act have defined a management and accountability framework for the federal government. These statutory requirements have been supplemented by accounting standards developed by the Federal Accounting Standards Advisory Board. The intent of these management reforms and the focus of the financial management community for the past almost two decades has been to establish processes, systems and controls to ensure resources are spent as intended and that government programs are accountable to the American public.

Regulatory requirements, such as accelerated audited financial statements and management assurances regarding the effectiveness of internal control, have intensified the focus on improving financial processes and internal controls within the federal government. These requirements have been accompanied by increasingly intensive oversight by the Office of Management and Budget, the General Accountability Office, agency inspectors general and independent Certified Public Accountants. Standard measures of financial accountability, such as clean audit opinions and internal control weaknesses, and newer measures, such as improper payment rates, are monitored and reported in agency accountability reports. 

These are the tools we have invested in over the past 20 years. The financial crisis and the government’s response challenge federal agencies to utilize and innovatively adapt the elements of the management and accountability framework to maintain financial accountability, integrity and credibility. At this defining moment in our nation’s economic history, we must exercise a thoughtful approach as we build upon this foundation to develop and report useful and reliable information to support the programs upon which the successful reform of our economy rest.

Questions

How might internal control assessments and monitoring programs change to gain greater confidence that resources are being used as intended and spent wisely? 

How might existing initiatives be integrated to produce reliable information in other venues such as usaspending.gov, recovery.gov, or in “flash” reporting to the Congress or panels charged with oversight of these programs?

How might audited financial reports be better focused to more transparently report program and financial results?

Bailouts, Transparency, and is the Easter Bunny Next?

By: Joseph L. Kull, CGFM, CPA

Joseph L. Kull, CGFM, CPA, a member of AGA’s Washington, D.C. Chapter, is a director in the Washington Federal Practice for PricewaterhouseCoopers LLC. He is AGA’s National Treasurer-Elect Designate.

I am amazed. Here we have the government talking about performance and results, dribbling all over themselves about accountability, and then the more recent surge in the word 'transparency.' All this time, of course, some (including yours truly) have been pointing to the long-term fiscal crisis the country faces, as eloquently described by former Comptroller General of the United States David Walker in his I.O.U.S.A movie and presentation.

Then the economy goes south. We hurriedly 'find' $700 billion—yes, that's 'b' as in billions, not 'm' as in millions. And now, there’s a stimulus package that's even bigger, and some say that's not even big enough. All this, mind you, to jump-start the economy. They call it a bailout. “Bail out” according to my dictionary is “to parachute from an aircraft,” like when it’s going to crash, or “to abandon a project or enterprise.” Both great analogies.

Now for the transparency piece. For the first pieces of the $700B that have gone out, we, the citizens demand to know, 'where did it go?'. Dunno they say. How do you not know what you did with several hundred billion dollars, handled by Treasury no less, which is supposedly responsible for our money. Misplace the keys, forget to buy milk, OK. But couple hundred big ones? No way. That's scary. And then the little we do find out is that it went for bonuses. Read again the dictionary definition of “bail out.”

I am beginning to think that they know and don't want to tell us. As sad as that might sound, it is probably more plausible. Why? Because it didn't do what it was supposed to do, and to question the first $700B would surely bring more scrutiny on the next big tranche and more questions about whether it would accomplish what was intended.

Thankfully, some have begun to question the next package and take out some of the pork but even so, folks, this is a fat pig. It's still going to be a big price tag, and there's still going to be the nagging questions of where it is going and is it doing what it is supposed to do. Meanwhile, of course, the U.S. is just going more and more in debt.

I am not questioning the wisdom the bailout and stimulus package. I'll leave that for others to debate. What we have a right to is information, real transparency and accountability. Who is getting it and why, and what should we expect to see as a result them having it. We have a right to know that, and an accountable and transparent government has a responsibility to provide it. Ironically, the government's ability to provide that information to its citizens is probably the least costly way to restore trust in our system.

And what, you say, is the Easter bunny piece? Didn't the Easter eggs always show up when you were a kid? It was the Easter bunny, like magic. You couldn't see him (or her, to be PC) but you knew it was real because the eggs were there. You could count on the Easter bunny to deliver. There was trust, built by results. Maybe we need more Easter bunnies.

Thoughts on Teaching and Learning

By: Thomas J. Sadowski, MPA, CGFM, CPA

Thomas J. Sadowski, MPA, CGFM, CPA, is the former director of accounting, State of Missouri, and an AGA Past National President and Past National Treasurer.

This semester I am teaching public budgeting and taxation in the Master’s of Public Administration (MPA) program for The Truman School of Public Affairs at the University of Missouri.

First, the class is held in Jefferson City, not Columbia, where the main campus is and where most of the classes are taught. I don’t know when MU started holding classes in Jefferson City, but my guess is it has been 30 years or more. This reflects the longstanding relationship between the state and the university. 

The education comes to the student, not the other way around.

Second, many MPA grads are like me, career state government employees who got their MPA degree without taking a course on campus. The MPA is the MBA for government and nonprofit.  There is a difference between government and business and it is significant. To really appreciate the difference, read the Governmental Accounting Standards Board’s White Paper: Why Governmental Accounting and Financial Reporting Is—and Should Be—Different.

Public administration courses target what you need to know and understand when you work in the government/nonprofit arena.

Third, while some are traditional degree-seeking students, many are going back to get an advanced degree or a graduate certificate. There is a richness you get in these classes that is often missing in traditional classes. It is the experience students bring to class. When I was an accounting undergrad at the University of South Florida in Tampa, I often attended night classes because these were the classes with working people, there on their own dime and their own time. Though the students brought much richness and diversity to the class, the biggest difference I noticed was in the professors. They seemed much more energized and engaged, probably because their students were more energized and engaged.

Did I mention these classes are 5 – 9 p.m.? After working all day, I am amazed how invigorated I feel spending four hours in the classroom. It takes a while to wind down.

Education needs to engage and energize the students and draw on the knowledge and skills they bring to the classroom.

Fourth, while I am using three traditional texts, the best readings are the vast resources available through AGA and the Web. I also have guest speakers for six of the nine class sessions. These are invaluable in translating theory to reality.

Education should use a mix of theory and reality to best facilitate the learning process.

Fifth, I don’t have a teaching philosophy but I do have a learning philosophy. I organize the resources and the learning process but the rest is up to the students. I don’t teach. The student learns. I asked the first group of students what letter was most important to this class (with a 1-in-26 chance, no one got it. The answer is in my second question).

Training and education should start and end with what the student is responsible for.

What do you think? Do you agree or disagree and Y (the most important letter)?