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The first step in improving performance is Performance Measurement. While Dr. Deming did not actually say “If you can’t measure it, you can’t manage it”, he strongly emphasized the importance of metrics whenever possible. The Association of Government Accountants(AGA) defines performance measurement as an expression of how well an entity has performed in relation to a baseline such as established goals. The Government Performance and Results Act (GPRA) of 1993 provides guidance and standards on evaluating and reporting performance. Private sector guidance and standards such as the Sarbanes-Oxley Act (SOX) of 2002, and its government sector equivalents – the Office of Management and Budget (OMB) requirements provide frameworks to meet accountability requirements and evaluate and report performance.
Government agencies and public services organizations performance measurements may not be the same as the profitability and productivity measurements used by for-profit private sector organizations. However, there are many ways for government and public services managers to demonstrate Stewardship and Accountability in the use of tax payer resources to provide critical services and report performance.
The AGA “Public Attitudes toward Government Accountability and Transparency 2008 to 2010” report exposed significant public concerns about lack of trust and transparency from the government such as: (1) An obligation to report and explain the sources and use of funds, and (2) Responsibility to the public for spending.
Government and public services financial managers have made significant improvements in accountability and transparency since 2010. Yet the perception remains that some organizations are not a good steward of public funds.
What changes in Stewardship and Accountability should tax payers expect from managers in the use of tax payer resources to provide critical services?
How do these managers adjust to the “new normal” – continuous budget cuts and provide improved accountability and transparency?
How can agency managers reconcile a focus on supporting their missions with improved financial management?
Private sector Chief Financial Officers (CFOs) and their Financial Management Teams (FMTs), work within an evolving “profit, cost and loss” environment as well as standards and guidance such as SOX that presents significant incentives to function in an efficient and effective manner. Lack of “profits” and in some rare-cases lack of “cost” objectives should not stop government and public services managers and their FMTs from going beyond the requirements of existing standards such as the CFO Act, GPRA and OMB to execute their missions and improve public trust through Accountability and Transparency.
Below are eight (8) performance improvement suggestions to consider:
- Alignment of policies and procedures with agency objectives and strategy: Unlike private-sector CFO’s, government and public services managers have minimal input to the policies mandated by congress through legislation. Even more challenging, these FMTs might have to deal with frequently changing policies that could conflict with their agencies mission and strategic objectives.
Within the Federal space, FMTs must comply with multiple, conflicting policies and voluminous Standard Operating Procedures (SOPs). The awareness, interpretation and application of all applicable Financial Management policies presents a daunting task. Below are some suggestions for government and public services managers to consider with every change in administration:
- Review universe of applicable policies to confirm relevance to mission and financial reporting.
- Update SOPs to reflect changes and ensure alignment with your strategic objectives, and proper interpretation and application throughout your agency.
- Solicit feedback and confirm understanding and acceptance from the agencies FMT. Communicate feedback to appropriate stakeholders, and proactively resolve any concerns.
- Maintain on-going monitoring through self-assessments to confirm appropriate interpretation and application.
- Keep it simple. Many Federal FMTs such as the Department of Defense (DoD) are tasked with supporting complex multi-faceted missions. These teams must execute well in supporting all aspects of their missions. Complex policies and SOPs will have a counter-productive effect given the complex nature of some of the agencies operations.
- Integrated governance, risk and compliance (GRC): Several standards and guidance documents exist to help government and public services managers and their FMTs operate in an efficient and effective manner, to execute missions and provide accountability and transparency to congress and tax payers. Government and public-sector FMTs must embrace performance expectations and a culture of accountability and make appropriate changes.
Accountability begins by keeping things simple with a focus on high-risk items that could significantly impact the agencies mission and operations, strategic objectives and, financial reporting and, prevent and detect fraud, waste and abuse.
Complex solutions, when applied to solve complex problems in the context of a complex operating environment often result in predictable and expensive failures. If sustainment, effectiveness and efficiency are important, solutions must be simple.
Private-sector organizations have learned how to integrate GRC strategies to drive performance results, minimize reporting errors and realize significant savings by not performing these tasks in organizational silos. What is stopping government and public services managers from modifying and applying these concepts in a similar manner within the framework of existing OMB standards?
- Changes to the tone-at-the-top (entity-level controls): For any organization to function in an effective and efficient manner, there needs to be a balance between personnel, processes, and systems. The tone-at-the-top brings this together as leadership makes critical decisions to ensure the following:
- People – the right personnel, with the right skills are available to get the job done right the first time and minimize waste through re-work.
- Processes – the combination of manual and automated processes has been properly designed and implemented to help the organization accomplish its objectives. Simplicity, functionality, acceptance and understanding by staff is critical for efficient and effective processes. On-going monitoring is critical to assure that changes are made appropriately and align with strategic objectives and missions.
- Technology – the systems and tools deployed by an organization are only as good as the ability of employees to utilize the technology in the context of the organizations processes, policies and procedures to accomplish objectives, in an effective and efficient manner, and report performance.
- Tone-at-the-top – government and public-sector organizations are expected to comply with multiple and complex and often conflicting policies; while relying on outdated processes and legacy systems. Management must institute a focus on effective and efficient processes and workflow improvements to maximize performance while operating in an environment of continuous budget cuts. Leadership must establish and enforce a culture of performance and accountability.
Tenures for commercial CFOs and executives are often longer than four (4) to eight (8) years, which means they have the time to develop and implement long-term sustainable solutions. Changes in administrations often result in turnover and gaps in key government and public services positions. The frequency of turnovers and delays in filling top positions presents challenges that impacts continuity, tone and the ability to implement long-term sustainable changes. The challenges should not stop government and public services managers from implementing the appropriate tone, delivering results within budget and, providing improved accountability and transparency.
- Independent and objective internal audit function: Can the Office of Inspector General (OIG) function like a true best-in-class private sector internal audit department to create and sustain value?
The Institute of Internal Auditors (IIA) in its guidance and standards outlines 16 steps for creating and sustaining an internal audit department. Examples of these steps include: Establishing authority for the internal audit function, identifying leadership and an independent audit committee and, understanding bench-marking needs. Private-sector organizations with best-in-class internal audit functions go beyond the traditional internal audit role of reporting findings to making recommendations to improve accountability and transparency. For private sector organizations profit, cost and loss objectives are the incentive to develop internal audit functions capable of creating and sustaining value in many ways.
Are the OIG departments within most Federal Agencies set-up to function within the frame-work of existing Federal guidance and standards and be the equivalent of a best-in-class internal audit function? If the answer is “no”, then the next obvious question is, why not?
A best-in-class OIG could be the reason to ensure a Federal Agency executes its mission and realize economy, efficiency and effectiveness of operations and accountability.
Could there be a benefit having a singular, uniform OIG and internal audit structure across all Federal Agencies? Achieving significant improvements requires identification of and consequences for continuous violations and non-compliance with policies and guidance.
- A best-in-class comptroller and CFO organization: Can the government and public-services sector agencies establish a best-in-class comptroller and CFO shop like those in the private-sector?
The U.S General Accounting Office (GAO) in its April 2000 Executive Guide series publication examined the reforms laid out by the CFO Act and subsequent related legislation, and described how they can be effectively implemented, to place Federal CFOs/FMTs on par with private sector corporations, as well as state and local governments that have already made investments in financial management.
According to this GAO report, the private sector, CFOs/FMTs roles previously centered on oversight and control, focusing on fiduciary responsibilities and with less attention to increasing the effectiveness of operating divisions. However, the evolving business environment created need for significant changes. Increased competition resulted in the requirement to find new ways to reduce administrative costs, add value, and provide a competitive advantage. At the same time, advances in information technology made it possible for CFOs/FMTs to shift from a paper-driven, labor intensive, clerical role to a more consultative role as advisor, strategist, analyst, and business partner. Government and public-services sector CFOs/FMTs face similar pressures to increase efficiency.
The list below outlines the recommendations from the GAO report:
- Build a foundation of control and accountability that supports external reporting and performance management.
- Provide clear, strong executive leadership.
- Use training to change the organizational culture and engage line management.
- Assess the finance organization’s current role in meeting mission objectives.
- Maximize the efficiency of day-to-day accounting activities.
- Organize finance to add value.
- Develop systems that support the partnership between finance and operations.
- Reengineer processes in conjunction with implementing new technology.
- Translate financial data into meaningful information.
- Develop a finance team with the right mix of skills and competencies.
- Build a finance organization that attracts and retains talent.
- Best-in-class Information Technology (IT) and Information Security (IS) operations: The availability, reliability and integrity of data is important to make timely and critical business decisions to help an organization accomplish objectives and provide accurate financial and performance reports. Within most organizations, the IT function plays a significant support and facilitation role to the CFO/FMT and other stakeholders. The ability of the IT/IS and CFO/FMT teams to speak a common language is a critical component for them to work as an integrated team to help the organization accomplish objectives while providing improved accountability and transparency.
Some government and public-services sector organizations have struggled achieving financial audit objectives due to challenges obtaining and providing adequate and complete “evidential matter” to support audits from key systems. For these agencies, the inability to obtain accurate, complete and reliable data impacts their ability to make critical business decisions which impacts performance.
While struggling to modernize their IT infrastructure, federal and public-sector agencies must also respond to increasing Cybersecurity threats. The recent experience with the City of Atlanta, GA (after a March 22, 2018 ransomware cyberattack affected multiple applications and client devices) highlights the need for heightened cybersecurity controls and processes. Best-in-class organizations realize the need to separate the IT support and facilitation role from the IS function.
- Human capital requirements: Investments in a skilled work force that can function within the dynamic nature of your organization’s operations is critical. Government and public-services sector CFOs/FMTs must begin by assessing areas for “skills” improvements within their respective organizations and be open to new ideas to accomplish results in an efficient and effective manner.
Pro-actively targeting, recruiting and retaining talent from best-in-class private sector organizations could be an alternative approach to diversify the skills within your respective teams. Look for accountants, auditors, risk management and information systems professionals with proven experience successfully applying accounting, auditing and IT principles and concepts across multiple industries. Such employees can successfully transition into the government and public-services sector space and drive performance results.
- Continuous monitoring: The evolving risks facing many government and public-services sector organizations remain an area of concern. Identifying, prioritizing and mitigating key risks impacting operations, performance and financial reporting must remain a top priority.
The questions raised, and issues discussed in this article are an attempt to explore simple solutions and facilitate conversations on ideas that could be implemented to improve performance measurements, reporting, accountability and transparency for government and public-services sector CFO’s/FMTs in the context of existing standards and guidance. Budget uncertainty and constraints and the need to-do-more-with-less are unfortunately the “new normal”. The pressures from congress and tax payers to drive effectiveness and, efficiency and, improve accountability and transparency will only increase.
Jonathan Ngah, CISA, CIA, CFE, CGFM, is a Principal at Synergy Integration Advisors, a consulting firm providing Audit, Governance Risk and Compliance (GRC) solutions to Federal Government Agencies, private-sector and not-for-profit organizations.
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