AGA's 52nd Annual PDC, Big Success
Chicago Is Our Kind of Town...
More than 1,100 accountability professionals
from federal, state and local governments across the country came
together in Chicago for AGA's 52nd Annual Professional Development
Conference & Exposition. “Managing $marter for the Future” offered
26 CPE hours, covering the latest developments in the field. Whether
it is “Getting to
Green” on the President’s Management Agenda,
accelerated reporting deadlines or implementation of GASB 34, the
PDC offered something for everyone.
The conference began with a keynote address
from Comptroller General of the United States David M. Walker, CPA.
He discussed the importance of strategic
planning, pointing to the U.S. General Accounting Office’s strategic
framework. Walker also praised the efforts of the International
Organization of Supreme Audit Agencies (INTOSAI), which now has a
strategic plan for the first time in 50 years.
Walker talked about the changes under way in
the public accounting profession, saying “we can’t forget what the P
stands for in CPA.” He praised the recent reform efforts brought
about by last year’s landmark Sarbanes-Oxley Act, but said the
reforms represent the floor and not the ceiling. “We need to aim
higher,” he said, pointing to the example of Arthur Andersen, where
he was a partner for nine years.
“Andersen went from gold standard to gone, like
that,” he said snapping his fingers. “Trust is hard to earn and easy
to lose.”
Walker said the new Independence Standard
promulgated by GAO is an important step toward better
accountability. “You can’t put a price tag on your reputation. Some
people have learned that the hard way recently.”
He discussed ongoing efforts to develop
national indicators to determine position and progress—”where we are
and where we are going.”
Walker concluded his remarks by saying, “Our
profession has gone through a major shock in recent years and our
nation faces major challenges. We all have an important role to play
in the government’s transformation. I know I can count on you to do
your best in your respective organizations—we are not doing it for
ourselves, but for our children and grandchildren.”
Accountability Panel
Walker joined John R. “Jack” Miller, CGFM, CPA,
vice chair, Health Care & Public Sector, KPMG LLP, and Nell Minow,
editor/co-founder, The Corporate Library, for an interesting panel
discussion on the issue of corporate governance and accountability.
Minow said that she expects Sarbanes-Oxley to be just the beginning
of the reforms the profession can expect to endure. Five years from
now, she expects a “tsunami” coming from the market in reaction to
reforms. She added that insurance companies won’t back companies
that don’t have qualified people sitting on their audit committees.
Miller agreed, saying that Sarbanes-Oxley
launched a process. “Everybody is taking this very seriously and
acting accordingly,” he said. “We work with management but we work
for the audit committee.”
Walker said that only time will tell if we have
gone far enough with Sarbanes-Oxley. The auditors, he said, must
work for adequate, informed boards of directors. And, he said it is
time to deal with the corporate governance model because, “I believe
it is broken.”
Moderator Jeffrey C. Steinhoff, CGFM, CPA,
asked the panel if corporations can reform their character and earn
back the public trust.
Miller said he doesn’t think character is the
issue. “What we lost,” he said, “is our reputation.” It is now
incumbent upon everyone in the profession to “take on the rebuilding
of public accountability as our No. 1 challenge.” He added, “It took
100 years to build the trust we had two years ago and it’s going to
take more than two years to get it back.”
Walker said that events exposed systemic
problems within the profession. There used to be giants in the
profession and there don’t seem to be as many now. The economy
changed, he said, firms lost their accounting focus and ventured
more into consulting. All told, these changes have had an enormous
effect.
Minow said accountants have to stop saying
‘we’re not here to uncover fraud.’ “If you want to earn our trust,
that’s exactly what you have to do,” she said. “If you want to close
that expectations gap, you have to live up to the expectations, not
try to change them.”
Steinhoff then asked the panel to discuss what
the primary drivers will be to ensure investor protection.
Minow said that all checks and balances have to
be examined with more work done on the “demand” side of corporate
governance. Shareholders, she said, have been enablers for a lot of
bad behavior. They need to “stop voting in favor of outrageous
policies and reelecting celebrities to boards.”
Walker agreed. The chair of a corporate board
has enormous power, but the boards need to be independent and
adequately resourced. They need to “focus more on the public
interest rather than their personal interest.”
Miller said a corporate board’s culture is
critical and they must ensure that management’s actions reflect the
board’s culture. “The tone of the organization begins with the tone
of the board,” he said.
Steinhoff next raised the issue of corporate
compensation.
“It’s out of control,” Walker said. Minow
added, “It’s the key symptom in the war.”
Minow’s organization, The Corporate Library,
rates corporate boards on a scale of AAA to junk, just like bond
ratings. “The first thing we look at is the pay package of the CEO,”
she said. “If it is out of control, there is no independence. Boards
that can’t get that right, can’t get anything right and they always
get a junk rating from me.” The comment received thunderous applause
from the audience.
She said her motto is that CEOs should always
have the same disclosure requirements as mutual funds do. “Past
performance is not an indicator of future performance,” she said.
Miller agreed, “Rather than doing what was
right, we were searching for ways to prove it wasn’t wrong.”
OMB Update
Linda Springer, confirmed four months ago as
the controller, Office of Federal Financial Management, U.S. Office
of Management and Budget (OMB), said she is finding it is an
exciting time to be the OMB controller.
She is working hard with her team to produce
reliable financial information that will be useful to government
decision-makers. The past, she said, “was nothing to be proud of.”
Today her staff is working on the following
agenda: reliable financial information, reduction in erroneous
payments, streamlining of grants programs, performance tracking,
management of federal assets and consolidation of payroll
systems. Her presentation at
www.agacgfm.org/conferences/pdc/bios.aspx shows the past
situation, what has been done and what’s ahead in each of these
areas.
“Financial management is not just what happened
in the past,” Springer said, “[it is also] looking at how
information can be used to better manage an organization.”
Lessons from the Navy
PDC attendees were treated to a lively
discussion from Capt. Gail Harris, U.S. Navy retired, who was the
top African American woman in the Navy.
She spoke frankly about prejudice and the role
it has played in her life. “Everyone is prejudiced against something
or someone,”she said. “We’re human so I see no problem with being
prejudiced. The trick is to know it, to recognize it.”
Harris learned throughout her career that
having the right attitude can make all the difference in promotion
and self-respect. There were just 400 female officers and 4,000
enlisted women when she joined the Navy. “I always thought of myself
as a Naval intelligence officer, not a female Naval intelligence
officer.”
She advised attendees to learn an
organization’s culture and work hard to fit into it. “It’s a small
price to pay if the primary focus is on being the best you can be,”
she said.
Harris said it is incumbent on workers and
managers to demand excellence. “If you can be the best you can be at
what you do, that is the great leveler.”
Harris was often criticized during her career
for being to hard on the people who worked for her. “I didn’t see
people where they were,” she said, “I saw them where they could be.”
She concluded by saying, “I believe that every
one of us has within us the seeds of greatness.”
PCAOB
Kayla J. Gillan is one of four founding members
of the Public Company Accounting Oversight Board (PCAOB), an
organization created by the landmark Sarbanes-Oxley Act of 2002 and
charged with reforming the way in which public companies are
audited.
Prior to her appointment to this board, Gillan
worked in the pension field for more than 16 years, specializing in
trust, securities, governance, administrative, policy and
operational matters. Gillan served for six years as general counsel
to the $130 billion California Public Employees’ Retirement System
(CalPERS) and for 10 years in other CalPERS positions, including
deputy general counsel.
Her message to PDC attendees was simple,
“Public accountability is like perfection, never completely
attained.” She discussed the difficulties that are constantly
hovering around the boards of directors within public companies.
They are designated to manage the company, so they must be held
accountable.
Gillan said she is pleased with the progress
the PCAOB has been making in its short existence. It began with four
employees should have 300 by 2004.
Homeland Security
Bruce Carnes, chief financial officer, U.S.
Department of Homeland Security, covered the challenge of merging 22
departments into one.
The dominant theme for Carnes and the new
department is flexibility. “I went from an Energy CFO office of 700
to a CFO office of 40 at the Homeland Security Department, so if you
are looking for a job, let me know.”
PDC attendees were very interested to learn
about how to set up a new federal CFO office. His office takes
President Bush’s Management Agenda very seriously, so he plans to
stick to a Program Objectives Memorandum (POM) process, which
includes a five-year budgeting plan built to fit the strategic plan.
“I believe in the HSD mission—and we take this
very seriously. As a result, we must reward people for the behavior
that we want.”
DoD Update
Terri McKay, is director for Accounting and
Finance Policy and Analysis in the Office of the Deputy Chief
Financial Officer within the Office of the Under Secretary of
Defense (Comptroller).
In this position, she has responsibility for
the development of DoD’s Accounting and Finance Policy and the
Performance and Accountability Report as required by the OMB. In
addition, her office performs the analysis of the department’s
financial statements and works to resolve the material weaknesses
identified in DoD’s Annual Audited Financial Statements Audit
Report.
McKay told PDC attendees that everything must
remain consistent with the business management process. “There will
be tough challenges ahead, so we are planning to focus on program
performance and results.” McKay revealed that the secret key to
success will be the development of good performance metrics.
DoD’s plan is simple: program, plan, budget,
execute. However, McKay admitted that promoting DoD’s plan of attack
will require top-notch business and certified financial managers.
“Managers with better professional training and certifications like
AGA’s Certified Government Financial Management (CGFM) Program are
avenues that all financial management professionals should pursue.”
Other Speakers
Sheila Fraser, auditor general of Canada, spoke
about the differences between her office and its U.S. equivalent—the
U.S. General Accounting Office. The difference, she said, is that
GAO does more peer review, value-for-money audits and her office
does fewer audits, all of which are requested by legislators. Her
office issues just 100 opinions per year. She is serving a 10-year,
nonrenewable term.
“Accountability is, of course, at the heart of
our work,” she said.
Attendees also heard from Tom Allen, CGFM,
chairman of the Governmental Accounting Standards Board (GASB), who
provided an update on the GASB agenda and the implementation of GASB
Statement No. 34. Items scheduled for deliberations by GASB include
tobacco settlements; termination benefits; net assets and fund
balance; derivatives and hedging; conceptual
framework—communications methods; intangible assets; and government
combinations.
On the final day of the PDC, the AGA leadership
gave special recognition to Executive Director Charles W. Culkin
Jr., CGFM, who retired the following week. Culkin, who served as
executive director since March of 1997, thanked the members and
leaders for the opportunity to serve the Association. See the Summer
issue of the Journal of Government Financial Management for more
about Culkin’s tenure.
AGA wishes to thank the sponsors and exhibitors
who made this conference possible. Go to
www.agacgfm.org/conferences/pdc to view the complete list of
sponsors and exhibitors.
And, make plans now to attend the 53rd Annual
PDC at the Marriott Wardman Park Hotel in Washington D.C., June
27-30, 2004. The theme is “Technology: Powering the Accountability
Age.” Watch the official PDC website at
www.agacgfm.org/pdc
for program and registration information. See you there!
by Marie S. Force and Jennifer I. Curtin