The AGA Weblog

Point, Click and Wow! Bringing the Power of Transparency to Federal Financial Statements

By: Andrew C. Lewis, CGFM, CPA 

Andrew C. Lewis, CGFM, CPA, is a senior manager with KPMG LLP’s government audit practice and a fellow of the KPMG Government Institute. In addition, he is an adjunct professor in the Masters of Accountancy program at The George Washington University.

I don’t know if you agree with me, but all of these new transparency websites are absolutely fascinating and are likely here to stay.

In support of the Obama administration’s open government initiative (specifically the Presidential Memorandum on Transparency and Open Government) and legislative mandates (especially the Federal Funding Accountability and Transparency Act of 2006 and the American Recovery and Reinvestment Act of 2009), federal agencies have been challenged to find ways to make government transparent, participatory and collaborative. And in a very short period of time, websites like Recovery.gov, USASpending.gov, and Data.gov have opened up volumes of government information for all to see.

Federal financial statements, though, have so far been relatively free from the requirements of these new transparency initiatives. Before being required to make our federal financial statements more transparent, what are some ways that we, as the federal accounting and auditing community, can help support this effort?

Here are some thoughts to consider:

·      How can the federal financial statements or the summary reports be made more interactive? The point-and-click interface of the transparency websites named above allow for a user to “drill down” and see detailed information based on a variety of parameters (for example, total contracts by each agency, and then the value of individual contracts by vendor). Could this same interface be applied to the federal financial statements or the summary reports? For example, imagine looking at an agency’s financial statements and being able to click on the account title for “Accounts Receivable, net” to see a listing of the largest customers making up that balance? Or, imagine clicking on the footnote table for “General Property, Plant, and Equipment, net” and seeing a listing of significant assets making up each type of property (for example, clicking on “Buildings” will bring up a listing of the most highly valued buildings owned by the agency).

·      What additional information should federal agencies include in the financial summary information section of management’s discussion and analysis (MD&A)?  The Federal Accounting Standards Advisory Board and the Office of Management and Budget currently require agencies to include the entity’s analysis of its financial statements, including such items as major changes in balances and key financial trends. The most common approach that agencies have adopted is to include pie charts or tables that summarize the financial statement line items—each of the key line items that make up total assets or total liabilities, etc.—and describe changes in total balances from year to year. Although useful, these “macro-level” descriptors may be perceived as falling short of the transparency initiatives’ expectation that even the most granular data be available for citizens to review. So, what else could be added to MD&A? What about comparison information like:

§       The agency’s largest contractors?

§       The agency’s largest grantees?

§       The agency’s customers representing the largest accounts receivable balances?

§       The agency’s largest accounts payables?

§       The largest IT system development projects?

§       The largest fixed assets or equipment acquisitions?

§       Expenses incurred by state or country?

§       Personnel employed by state or country?

·      Should federal agencies provide appropriation-level consolidating or combining statements online? Although too voluminous to include in the agencies’ Performance and Accountability Reports, should appropriation-level financial information be made available to the general public? Imagine being able to view not just an agency’s consolidated balances, but also being able to drill down to see expenses, revenues, assets, liabilities and budgetary information by each appropriation? 

·      Should federal agencies provide program and office-level reporting online? This is an area that’s also too voluminous to include in the agencies’ Performance and Accountability Reports. But, shouldn’t the general public be able to query the costs, revenues, assets, liabilities and budget authority by each accountable unit, organization or office within each agency? Again, picture an interactive database that allows a user to see costs by each reporting unit within the agency.

What do you think are other ways that federal agencies can make their financial statements more transparent? Do you think this “drill down” information is readily available from the standard books and records of your agency? Would this information have to be individually generated, or could it be located easily and made available? 

How else can the proven technology interfaces of the transparency websites be used to improve the reporting of federal financial statements?

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

Budgeteers and Accountants—Partners in Financial Management?

By: Thad Juszczak

Thad Juszczak is an AGA Past National Treasurer and a director with Grant Thornton LLP.

As a longtime federal budgeteer, I have always enjoyed repartee with my accountant friends. I would take Polish jokes and lawyer jokes and turn them into accountant jokes. They would kid me about rounding to millions; I would accuse them of rounding to pennies. I would talk about planning ahead; they would only discuss what had already happened.

As a budget officer, I never thought to join the Association of Government Accountants, though now I realize that it is an organization for all government accountability professionals.

I have always appreciated the mathematical clarity of accounting, but the art of budgeting has so many opportunities for stretching your imagination. While there are excellent textbooks on budgeting, budgeting is more about the convergence of public policy, analysis and numbers—situations that you have to experience. Budget “rules” are always changing. Heck, in the federal sector, you don’t even have to balance revenues and expenses!

Budgeteers clearly need a good knowledge of basic accounting concepts. It wouldn’t hurt accountants to know something about budgeting either. I still remember how some of my junior budget analysts one day announced the “shocking” news that the labor costs in our financial reports on the first day of the month were always less than on the last day of the preceding month. It was a good opportunity to teach them about month-end accruals and reversals.

Budgeteers and accountants see the world differently, but any organization clearly needs both to provide effective financial management.

So, you can imagine my indignation at the recent New Orleans PDC when I found a session titled, “Are Budget Professionals Financial Managers?” How dare they impugn us, I thought! 

Unfortunately, there is no law against discrimination based on federal job series, and this is part of the problem. When I worked for the Army, our comptroller wanted to have his budgeteers and accountants trade jobs for six months to gain a better appreciation for each other’s responsibilities. However, Human Resources (HR) killed the program because they could not “allow” people without accounting degrees to hold accounting positions for even six months. The message was clear:  Accountants were professionals; budgeteers were uneducated. The professional status of accountants is part of their justification for continuing education.

The federal Budget Formulation and Execution Line of Business (BFELOB) has looked at some HR issues, but not yet at establishing a new job series for budgeteers. Most of these folks are in the 560 or 345 series, neither of which requires even a high school diploma. While many budgeteers are liberal arts majors and many hold graduate degrees, there will be no professionalization or CPE requirements without a positive degree requirement in the budget series. (Incidentally, I know excellent budget analysts who do not have degrees. That is not the issue.)

What do you think? Maybe at the Orlando PDC we could have a session titled, “Are Accountants Financial Managers?” 

BTW, how many accountants does it take to change a light bulb? Answer: 1.00

Insight into the Social Security Administration’s Performance and Accountability Report

By: Mary Glenn-Croft

Mary Glenn-Croft is the Social Security’s Administration’s (SSA) Chief Financial Officer and Performance Improvement Officer and serves as the Deputy Commissioner for Budget, Finance and Management. The Certificate of Excellence in Accountability Reporting (CEAR) for SSA’s FY 2008 Performance and Accountability Report (PAR) marks the 11^th consecutive year the agency has won the award.

Winning the CEAR is a prestigious honor that represents a significant accomplishment for a federal agency and it is the highest form of recognition in federal financial reporting. SSA is honored to be recognized again this year. We prepare our PAR with the goal of enabling the president, Congress and the public to assess the effectiveness of our performance and stewardship of resources entrusted to us to effectively carry out our programs.

As an agency that has a significant role in improving the economic well-being of the nation as well as being the steward of the trust funds, the focus on accountability and performance information is of utmost importance. Creating a report that is both easy to access and readable by all audiences enables us to be fully transparent to the public. Our PAR has a wide audience that uses the report for multiple purposes. The president and Congress use the report to assess how well we are performing our mission with the resources provided. Agency management uses the information to effectively manage resources and make day-to-day decisions on workloads. In addition, the public uses the report to assess how well we are managing taxpayer dollars that have been entrusted to us to deliver the programs and services they deserve.

As many agencies can attest, winning the CEAR is no easy task. It takes a true team effort to produce a report that is not only compliant with the applicable laws and guidance, but that is easily understood and addresses the major issues we face. With the leadership and strong support of our commissioner, there are many components within SSA involved in the production of the PAR. We all work closely together throughout the year to ensure the process goes as smoothly as possible. SSA’s Office of the Inspector General contributes a great deal to the success of our report.

Each year we begin production of the PAR by examining our strengths and weaknesses from the past year, allowing us to refine our process and develop new approaches to make each report more useful and informative than the last. We use the performance results in the report to enhance the quality of program management and support policy and resources decisions, which ultimately improves our service to the American public. We also use the feedback from outside sources, including the AGA and Mercatus, to enhance our report. Each year we attempt to accommodate all the comments from AGA’s CEAR Review Panel.

In developing the PAR, we keep specific objectives in mind—linking performance to our strategic goals, integrating performance and financial information, and demonstrating SSA’s commitment to sound stewardship principles. Each year we establish performance goals in support of our Agency Strategic Plan to gauge our success in achieving our strategic objectives. The published results of our performance serve as a report card and trigger a process of continuous improvement.

Integrating performance and financial information so that users of the report can plainly see how we are using financial resources to achieve results is vital. Including a discussion of our financial statements and the independent auditor’s report on the financial statements provides that link between program performance and financial performance.

The PAR is our vehicle to communicate to the public SSA’s continued commitment to responsible stewardship by displaying how well we managed our finances, performed in administering our programs throughout the year, and how well we accomplished our mission. We have received 15 consecutive unqualified financial statement audit opinions, and we have received an unqualified opinion concerning our assertion about the effectiveness of the agency’s systems of accounting and internal control since FY 2005.

Achieving each of these objectives enables us to produce a report that is beneficial to many different audiences on many different levels. Being fully transparent and accountable to the public has never been more important than it is today. Accountability reporting is an evolving process and the standards for excellence will be continuously raised. Are you ready?

11th Annual Certificate of Excellence in Accountability Reporting (CEAR) Award Dinner Tonight

By: Eveanna Barry

Eveanna Barry is AGA’s director of performance reporting.

Has it really been 11 years since the first event for the CEAR award recipients? Tonight, AGA honors those agencies that will receive the 2009 CEAR award. It’s been quite a ride from two award recipients in 1999 (for FY98 reports) to the 17 we honor this year.

The first two award recipients were the National Aeronautics and Space Administration and the Social Security Administration. The awards ceremony in 1999 was held at the Library of Congress and representatives from those two agencies were honored at an afternoon reception. The event has grown from a few honorees to more than 250 who will attend a black tie affair at the National Press Club this evening. Yes, we’ve come a long way.

Our keynote speaker this evening is G. Edward DeSeve, currently the Special Advisor to the President, Assistant to the Vice President and Special Advisor to the U.S. Office of Management and Budget (OMB) Director for Implementation of the Recovery Act. In the late 1990s, Mr. DeSeve, who presided over the Chief Financial Officers Council, participated in the decision to establish a program in which AGA would review the then-new Agency Accountability Reports and acknowledge those that demonstrated accountability. Mr. DeSeve will spend a few minutes reminiscing about the inception of the program and perhaps share his ideas for the future of the program. I suspect he will touch on accountability and performance as they relate to the American Recovery and Reinvestment Act. AGA is delighted that he will be joining us to share in the celebration.

Since our CEAR program is voluntary, this year we received 21 performance and accountability reports (or the alternative pilot) to review. Of those that did not receive the award, all four of them came very close to achieving the goal of being an award recipient. Of those that did receive the award this year, the Social Security Administration has been a recipient for the 11^th consecutive year. Several have received the award at least eight times: the U.S. Department of Labor, U.S. Department of the Interior, U.S. Governmental Accountability Office and the U.S. Nuclear Regulatory Commission.

One new agency received the award this year—the Federal Housing Finance Agency (FHFA), an agency that was established by combining two agencies, the Federal Housing Finance Board and the Office of the Federal Housing Enterprise Oversight (OFHEO). OFHEO received its first CEAR award in 2008 and the OFHEO leadership moved to FHFA and produced an award-winning report there.

The award recipients for their FY08 reports are:  Federal Trade Commission, Peace Corps, U.S. Commodity Futures Trading Commission, U.S. Department of Education, U.S. Department of Energy, U.S. Department of Housing and Urban Development, U.S. Department of the Interior, U.S. Department of Labor, U.S. Federal Aviation Administration, U.S. Federal Housing Finance Agency, U.S. General Services Administration, U.S. Government Accountability Office, U.S. Nuclear Regulatory Commission, U.S. Patent and Trademark Office, U.S. Securities and Exchange Commission, U.S. Small Business Administration and U.S. Social Security Administration. Congratulations!

If you work at a federal agency or a component agency and want to learn more about the CEAR program and what our review process can do for your FY09 report, please contact Eveanna Barry at ebarry@agacgfm.org.

Won’t you take a few moments and learn more about our program and how your agency can receive individual recommendations to improve your report?

The Changing Bar for Government Accountability and Transparency

By: Jeff Steinhoff, CGFM, CPA, CFE

Jeff Steinhoff, CGFM, CPA, CFE, is an AGA Past National President and a director with KPMG LLP.

Federal financial managers and their state and local counterparts would be well-advised to begin contemplating the prospect that the accountability and transparency guidelines in the American Recovery and Reinvestment Act (Recovery Act) may eventually expand to cover all federal spending. Underlying the Recovery Act are five accountability and transparency objectives

• Funds are to be awarded and distributed in a prompt, fair and reasonable manner.
• The recipients and uses of all funds are to be transparent to the public, and the public benefit of this spending is to be reported clearly, accurately and in a timely manner.
• Funds are to be used for authorized purposes, and instances of fraud, waste, error and abuse are to be mitigated.
• Projects funded under the Recovery Act are to avoid unnecessary delays and cost overruns.
• Program goals are to be achieved, including specific program outcomes and improved results on broader economic indicators.

You might be asking, “Aren’t these objectives on their face just straightforward good fiduciary concepts?” “What is new here?” Yes, I would certainly agree that the five accountability and transparency objectives do represent basic good government concepts. I do not believe you would get much argument on that point. But what is being asked for is different in construct and focus, with the President of the United States leading the charge on the requirement for essentially real-time public reporting. 

In a April 3, 2009, memorandum, the second installment of government-wide guidance for carrying out the Recovery Act, OMB Director Peter Orszag expanded on the president’s commitment to accountability and transparency, in speaking about transparent, merit-based decision-making; long-term public benefits of Recovery Act spending by optimizing economic and programmatic results; and targeting assistance with other policy goals, such as support to small business.

The requirement for public reporting on Recovery.gov builds on the requirement for public reporting of grants and contracts at USAspending.gov under the Federal Financial Accountability and Transparency Ac,t for which then Senator Obama was a co-sponsor. Coupled with that is the more than $300 million set aside for oversight by the Recovery Act Accountability and Transparency Board, the federal inspectors feneral, and the Government Accountability Office (GAO). For example, GAO has a continuous audit presence in the field in 16 states, with bimonthly GAO status reports on state and local use of Recovery Act funds. 

The Recovery Act contains significant agency and program reporting requirements and the expectation of accessible and visible data that is complete, reliable and real time. The Recovery Act implementing guidance from OMB now totals more than 200 pages. The Recovery Act has potential impacts on government financial management systems, internal control and the administrative control of appropriations. Requirements include the need for meaningful performance measures and continuous performance monitoring. There is an expectation that fraud, waste and abuse is managed up front and mitigated.

The Recovery Act is intergovernmental in nature, given the large sums provided to state and local governments. Also, the Act reaches to the sub-recipient subcontractor levels. Under the Recovery Act, all levels of government receiving stimulus money should be prepared to publicly defend the prudence of projects. The vice president has made clear that anyone using stimulus money for wasteful projects will be publicly called out by the administration. 

A concern about what constitutes an acceptable project was voiced at a National Academy of Public Administration panel on “The Stimulus and Intergovernmental Management: Accountability on the Line,” which I participated in on March 31.  Participants were unanimous in calling for streamlined approval processes and clear guidelines about what projects are considered acceptable. State and local governments clearly don’t want to be left hanging, wondering if they are proceeding properly. Also, how does one weigh the need to get the money out quickly to stimulate the economy versus the need for prudence in project and program planning, contracting and internal control?

Over time, the answer to these and other questions should emerge. There will undoubtedly be some trial and error and a number of lessons learned. Program and financial managers at all levels of government will need to sort things out and to identify what works and what does not work and make refinements accordingly.

Have you considered the following questions with respect to your organization?

• Do you believe the Recovery Act’s requirements for accountability and transparency may eventually expand to all federal dollars so that details on all federal spending is similarly made available through a publicly accessible Web portal, and are you preparing for this possibility?
• If so, how do you envision this impacting state and local governments, grantees and contractors?
• What are your thoughts on the current capacity of the government financial management community to handle the accountability and transparency requirements of the Recovery Act in terms of processes, systems and people and what can be done to address any current shortfalls?

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

 

Economic Stimulus and Internal Controls

By: Robert Maitner 

Robert Maitner is a senior managing consultant with IBM.

In response to current economic challenges, we have seen major action on the part of our government, starting with the Troubled Asset Relief Program (TARP) in late 2008 and the American Recovery and Relief Act of 2009 (ARRA) this past February. These efforts have been designed to prop up the ailing banking system and stimulate economic growth nationwide. Both of these initiatives infused several hundred billion dollars into the American economy, ending up in the hands of both government entities and commercial enterprises alike.

In December of 2008, the Government Accountability Office (GAO) issued a finding that the Treasury had not developed adequate internal controls over the use of TARP funds. More recently, however, in March, the GAO reported that Treasury was making progress in the establishment of an internal controls program for TARP. What about the ARRA? A quick search of the final legislation reveals no direct reference to internal controls. What efforts are in place to ensure that an adequate internal controls program under the ARRA will be included with the enormous sums of money going to state and local governments as well as private businesses? This may be more difficult to assess given that much of the money will be used outside of direct control of the federal government.

In a Feb. 18, 2009, memorandum from the Office of Management and Budget (OMB), Director Peter Orszag issued initial implementing guidance for the ARRA of 2009. In particular, the memorandum discusses risk management requirements for agencies receiving ARRA funds, and indicates that risk mitigation actions must, at a minimum, address:

• Audits and investigation of Recovery Act funds to identify and prevent wasteful spending and minimize waste, fraud, and abuse;
• Qualified personnel overseeing Recovery Act funds;
• Competitive awards maximized;
• Timely award of dollars;
• Timely expenditure of dollars;
• Cost overruns minimized; and
• Improper payments minimized.

We know that at the state and local levels, entities receiving funds through the economic stimulus plan will need to develop accurate tracking and reporting mechanisms as well as internal controls procedures. The guidance from the OMB emphasizes that the stimulus package “will require sustained focus by managers throughout the federal government, particularly in planning, awarding, managing, and overseeing contracts and grants.” Agencies are going to be required to establish significant and effective internal controls, oversight mechanisms, and other approaches to meet the accountability objectives of the act. Agencies also need to review their internal controls in the area of proper authorization for expenditure disbursement. 

Local governments are beginning to establish internal control procedures for the proper oversight of ARRA funds. The state of Oregon, for example, has developed an internal controls “tool kit” to prevent instances of fraud, waste and abuse relative to the use of ARRA money. And the GAO issued guidance on sample controls that should be considered, and include:

• Validating data used in decision-making against other government or third party sources;
• Whenever possible inspecting information to confirm its validity prior to payment;
• Conducting system edit checks to identify problems before payments are made; and
• Training staff on fraud awareness. 

As the ARRA funds continue to be disbursed and begin to impact programs at all levels of government, there will no doubt continue to be increased scrutiny that these funds are being used for their intended purposes and that adequate oversight and control measures are in place.

What are your thoughts?

Transparency? Yes. Accountability? Heading in that Direction!

By: William W. Kilmartin, CGFM, and Mark H. Howard

William W. Kilmartin, CGFM, and Mark H. Howard are directors with Accenture.

With President Obama’s election has come a greater use of the phrases ‘transparency’ and ‘accountability’ in government performance. Those words have been thrown around even more as ARRA funding has been legislated and now distributed. But, what really do they mean and are we seeing it happen?

There has clearly been an explosion among state governments, in particular, of websites that say they offer both ‘transparency’ and ‘accountability.’ If you have not seen it, this is one of the best single jumping-off points to all of those sites that we’ve found : http://www.transparent-gov.com/Pages/default.aspx.

Most of these sites certainly offer a wealth of information, most of it focused on relatively simple questions such as expenditures by agencies, revenues by source, and what vendors have been awarded what contracts. However, in all that disclosure of detail exists a large question—we know where the money went, but what did we actually achieve with it? We call this the ‘so what?’ factor.

Don’t get us wrong—if you’re going to truly increase accountability to focus on performance and results, you have to start by demonstrating where the money has actually gone. So, the ‘transparency’ explosion we’re seeing is certainly an important step. This is a necessary but not sufficient condition for successfully accomplishing accountability.

We believe the time is now for U.S. governments to get serious about doing more than reporting who got paid what. It’s time to also say what that spending was supposed to deliver, in terms citizens care about, and report whether that’s actually happened. That type of reporting is truly ‘accountability.’

What are your thoughts?

Has the Federal Government Created an Embarrassment Waiting to Happen?

By: Harold I. Steinberg, CGFM, CPA

Harold I. Steinberg, CGFM, CPA, is the technical consultant for AGA’s Certificate of Excellence in Accountability Reporting Program.

I recently attended a meeting at the National Academy of Public Administration (NAPA) on the American Recovery and Reinvestment Act. The first speaker was an OMB staffer who explained the guidance OMB is providing the agencies for the distribution of the monies and the subsequent reporting of how the monies are spent. OMB appears to be requesting a ton of information, more for transparency than for control. What struck me was that, as to be suspected, the OMB staff person was bright, articulate and knowledgeable. But he was very young and relatively new to government. He also said he is the sole OMB staff working on the Act.

The next speakers were the heads of the Governors, State Budget Officers, County, City, and City and County Management associations. They discussed their principals’ needs, expectations, concerns, etc.  Some horror stories were told. For instance, although the goal is to have the monies spent as soon as practicable, a recent memo extolling “prudence” has the Federal Highway Administration (FHA) conducting reviews of state government proposals for the placement of highways, whereas heretofore the FHA basically accepted the states’ decisions.

The last speaker was the GAO staffer who is heading GAO’s effort, mandated in the Act, to review and report bi-monthly on the use of the funds by selected states and localities. In describing, in great detail, how the monitoring will be done, he mentioned discussions had already been held with the Recovery Accountability and Transparency Board (established by the Act to coordinate and conduct oversight of recovery funds to prevent fraud, waste and abuse), the inspector generals, the state auditors and the local government auditors. It struck me that there is already a network in place, that is, the inspector general community and the Intergovernmental Audit Forums, ready to conduct a robust oversight of the Act's implementation.

The bottom line is that in the desire to assure accountability (the companion to transparency), the government will have more persons auditing and investigating the functioning of the Act, than managing its implementation. The Act designated more than $250 million for the Government Accountability Office, Recovery Accountability and Transparency Board, and Offices of Inspector General to audit and investigate, yet hardly anything to manage the expenditure of the $787 billion.

The Act’s purposes are noble. But if the $787 billion is to be spent absent fraud, waste and abuse, and the public is to know that the Act’s the purposes have been met, certain things are needed. 

The first is accounting systems that process and record the disbursements efficiently, accurately and in a timely manner. The problem here is the capacity of the existing infrastructure to handle the huge increase in transactions, particularly since the personnel and systems are already bending under the weight of ever-increasing processing and reporting requirements. Think about the Department of Energy systems and personnel that currently process a budget of approximately $26 billion a year. The Recovery Act requires them to disburse an additional $40 billion without any increase in personnel. 

The second is controls, to assure the monies are used wisely and only for the purposes intended in the legislation. The major risk here is that in the desire to assure the money is used only to promote economic recovery and for investments that promote long-term economic benefits and increase economic efficiency, too many controls are injected.

The third is reporting, supposedly to assure transparency. Transparency, however, is not an end in itself. Transparency does not require a file dump. Transparency is a tool to assure accountability. The information required for transparency entails striking a balance between the value of the information and the risk of seeking too much.

The last, and maybe the most important thing, is determination of results. How effective were the programs on which the monies were spent?  Were they the best choice?  Answering these questions requires that people make decisions about the metrics and then specify, announce and use the metrics.

Two hundred and fifty million dollars is a lot of money for finding problems. Ironically, absent adequate attention to the four elements of accounting, controls, reporting and determining performance, $250 million won’t be needed. The scandals and misuses of funds will be as visible as the cherry blossoms around the Tidal Basin.

This administration’s mantras are “Don’t waste a crisis” and “Invest in the future.” Wouldn’t it have made more sense to take the $250 million and use the economic meltdown as the reason to build the management capacities to properly spend the Recovery Act monies, and then use those capacities to continue to serve the government’s management needs?

Transparency and Accountability: More Questions than Answers

By: Thomas J. Sadowski, CGFM, CPA

Thomas J. Sadowski, CGFM, CPA, a member of AGA’s Mid-Missouri Chapter, is the former director of accounting for the state of Missouri. An AGA Past National President, he has also served two terms as AGA National Treasurer.

I want to have a word with you about the prevalence of transparency and accountability in the media these days. It has taken over everything. That is all I see and hear. Transparency and Accountability. Transparency and Accountability. Transparency and Accountability. What? You have not heard about transparency and accountability?  Well, consider yourself lucky.

I got a preview of Art Hayes’ next column for the Journal of Government Financial Management. One of his points is that the stimulus will change things, probably in ways we have not anticipated and cannot anticipate—transparency, for one.

Usually when I blog here I give some background and then end with some questions. Well, I have a lot more questions than background so I’ll do some of the background as questions and maybe someone out there knows the answers. I’ll conclude with questions soliciting your comments and opinions.

How are we going to do transparency for the stimulus? I guess FFATA (Federal Funding Accountability and Transparency Act) could be a possibility but until recently it has been a no-show as far as I can tell. The website is http://ffata.org/ffata/. You tell me. The site's FFATA Information Center certainly suggests it could or should: “The portal offers free, instant access to contracts and grants awarded across the federal government via a user-friendly free text search and dynamic reporting tool. No login or registration is required—the public has instant access to federal spending information and the ability to create custom reports from that information.”

Does the FFATA Portal become the vehicle for showing us the stimulus or do we have a parallel track? The cynic in me says why use something you have when you can create anew.

So, what is the plan for transparency? Is it all federal? How do states, cities, counties, etc. figure in? Are they on their own to use existing means or do they create anew?

How do you link it all together?

Will it be in one place or 50 places for states and hundreds or thousands of places for all the other recipients?

If it is one place, what are the mechanisms for making that happen?

Who has the lead on this and how and when are they communicating to stakeholders?

If there is a transparency plan, is it realistic?

Is the transparency plan transparent and accountable?

Sorry for all the questions. I went a little Missouri on you—that show-me thing.  Of course, I was raised and educated in Florida so maybe it is a sunshine thing.

A brief commentary before the questions. I feel  awkward talking about the stimulus. I can’t really say it’s my tax dollars at work because it is all borrowed money. I guess I’ll say my kids’ and grandkids’ tax dollars are at work since they will pay the debt.

Do we know how to do transparency?

What is the benchmark?

What are your expectations for transparency?

Will the public think we are transparent?

Will they think they are getting the transparency they deserve?

Will they feel the love, that is, that their borrowed dollars are well spent?

Or will they consider the rhetoric about transparency like an accountability sundae—words with a bunch of numbers sprinkled on top of the whipped cream?

The New GAO Cost Estimating Manual

By: John J. Radford, CGFM, CIA, CFE

John J. Radford, CGFM, CIA, CFE is the Oregon state controller and has served under five Oregon governors. He is past president of the National Association of State Auditors, Controllers and Treasurers and currently serves on the AGA National Executive Committee.

Congratulations to Gene Dodaro, CGFM, Acting Comptroller General of the United States and the staff at the Government Accountability Office for the new GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs, issued March 2.

Fraud is an exploding industry across government, but it is insignificant compared to extraordinarily wasteful and fiscally abusive programs and initiatives undertaken and largely advanced by self-serving interests cloaked under the veil of public good. We have all been witness to legislatively reviewed programs and initiatives approved with incomplete or non-existent business cases, superficial cost estimates, and if vetted at all, by staff with neither the education nor experience to do so.

Wild guesses at costs and benefits unsubstantiated with factual evidence, expert analysis and objective conclusions are far too often the norm. Many projects are approved largely on political relationships, the need to do something because everyone else is doing it, or the potential for limelight or career advancement.    

Without accountability built into the system, without consequences for leading the government into failed projects and initiatives, and with an injection of new money as we speak, I fear governments of all sizes will not only continue, but expand the breadth and depth of failed investments and wasteful spending. (Unless, of course, the purpose is economic development; that is, creating jobs for the sake of jobs.)

Within the Northwest region, we’ve seen governments propping up failed investments with new money, trying to salvage what they can from past mistakes. We’ve seen audits that show very little gained from spending millions and millions of dollars that can be directly traced to poor business case planning and virtually non-existent cost/benefit analysis. In one case, the same management team that created a costly failed project in the first place, is now calling on approval for a new and better approach and will likely be rewarded with new money. In another case, the management team invested 1 million dollars working toward a new solution only to discover that the solution is cost prohibitive. That didn’t stop a new management team a few years later investing several more millions, plowing the same ground, only to eventually reach the same conclusion.      

I’m all for transparency, the bright lights of auditing acting as a disinfectant and all, but the change that is needed is found in demanding factual business cases, real cost estimating, and more rigorous management execution coupled with responsible accountability and consequences for poor performance.

The folks at the GAO should be commended for producing this guide and the elected officials from coast to coast should demand compliance from their management teams. What are your thoughts?