Monday, Feb. 12, 2007

First Day of NLC Conference a Success—

More than 400 government financial managers gathered in Washington, D.C. on Feb. 12 to 'Forge New Paths to Improved Accountability'. The day began with a discussion about leading the battle to combat terrorist financing with Juan C. Zarate, Deputy to the President and National Security Advisor for Combating Terrorism, National Security Council.

“The flow of money is the lifeblood of terrorism.”

Zarate explained, "Our job is to disrupt the flow of money. This action is saving lives. Funding is so critical to these organizations. They need: logistics, training camps, travel and payments to global alliances."

The elements of terrorist financing: raising of funds by groups, the broad nature of groups and their motivations, fundraisers and charities work as fronts for these organizations, business models (fraud, extortion), smuggling, drug trafficking and front companies.

Zarate's team also tracks the movements of funds: wire transfers, informal cash value systems, the interaction between two trusts, charities and cash couriers.

“We are forcing these groups to make value judgments when we take away their money.”

He continued, "Post 9/11 told us that we need to focus on tracing terrorism funding. We have proven that financial trails or audit trails don’t lie."

CFO Perspectives: Looking Ahead, Considering the Legacy

Conference attendees shifted from learning about terrorist financing to gaining insights on financial management from chief financial officers at NASA and the U.S. General Services Administration (GSA).

Both CFOs discussed the considerable challenges they face in standardizing policies and procedures at huge agencies that are scattered in centers across the country, each with their own way of doing things.

Sykes said she took on the job of bringing uniformity to financial data coming from 10 different home-grown financial systems and more than 120 subsystems. “That’s why I have gray hair,” she said, calling it her “badge of courage.”

The goal is to provide good information that can help program managers, mainly engineers and scientists, achieve NASA’s mission. More automation means less need for transaction processing and more need for employees with analytical capabilities. NASA can now produce accurate and reliable financial data on a monthly basis that is used by the program managers.

Turco said her agency faces the same challenges as NASA in standardizing procedures, but in 2005, the agency also received a disclaimer of opinion on its financial statements, which required a “massive cleanup,” she said. “We were leaving residual balances on the books.”  By the end of fiscal year 2006, the effort paid off with GSA once again receiving a clean opinion. Now, GSA offers monthly profit and loss statements and is expanding its use of financial data to help drive day-to-day decision-making.

Update from Washington 

Ron Elving, senior editor at NPR News, entertained the attendees after lunch with his insights into the impact of the Democratic sweep in the 2006 elections and what it means for the end of President Bush’s term and for Congress this year.

He pointed out that in the summer of 2005, he called Washington, D.C. a “Bush town” with Congress in tow. However, the 2006 elections marked a “remarkable and unprecedented event,” in which no Democratic incumbent loss and all the congressional vacancies were filled by Democrats.

He said the congressional agenda is imposing: developing an approach to the war in Iraq, ensuring economic security for Americans, revising and extending Bush’s tax cuts, passing an immigration bill and agreeing on an energy policy package, among many other challenges. Oversight over government operations will become much more intense this year, Elving said, with the Bush administration, the Pentagon, drug companies and the Federal Emergency Management Agency being top targets of leading Democrats.

Creating the Control Environment: The Leadership Challenge

Representatives from the U.S. Department of Homeland Security discussed the ongoing challenges of bringing 22 separate entities together to form DHS. David Norquist, chief financial officer, described the department as "a challenging control environment." DHS has undergone three reorganizations in its three years of existence, and standardizing the functions of 22 distinct entities has been challenging, to say the least. "We have a very urgent mission, which gives us a compelling reason to stay focused on current events."

Norquist credits an excellent "tone at the top" of DHS as well as cooperation between the CFO and inspector general with helping to create the control environment needed. "We are focused on fixing the problem instead of reporting on the problem." Ten material weaknesses have been identified and a corrective action plan is in the works or has been developed for all 10. Our goal is to go beyond the auditor-identified weaknesses to map the process and test the process, he said.

Rendell L. Jones, chief financial officer of DHS's Citizenship and Immigration Services agency, said his agency's $2.6 billion budget (FY 08) is 99 percent fee-funded. CIS was created in the Homeland Security Act as a stand-alone agency. Jones said that more than 6 million applications for residency are received each year and 135,000 background checks are done each day. "We're the first ace of the federal government that newcomers to our country see," Jones said. Because his agency is new, he added, "We have a lot of opportunities to get it right from the very beginning. But with those opportunities come challenges.

David Zavada, MPA, CPA, assistant inspector general for audits at DHS, described the massive agency as a "start up, a merger and an acquisition." Each of the 22 agencies that came together to form DHS brought with them their own cultures, challenges and weaknesses. Bringing all these weaknesses into an agency with a need for expediency in its mission results in a lot of risk. Because 40 percent of DHS's budget is contracted out, the agency has additional challenges in the area of control. These many challenges have landed DHS on the GAO High-Risk List. The transformation cycle can take five to seven years. "We are in year four and still have a way to go, but we are making progress," Zavada said.

Rebuilding the Nation's Capital

District of Columbia Chief Financial Officer Natwar M. Gandhi, Ph.D., CGFM, reported that the District continues to have a very strong financial condition that includes a $1.435 billion surplus and the highest possible rating from all three bond rating agencies. For the tenth straight year, the District's budget is balanced, and Gandhi said no other city in America has come back as well and as fast as Washington. "This turnaround is truly for the record books," he said. With 6 percent of the budget in emergency and cash reserves and $400 million (or the equivalent of one month's expenditures) in reserve, the District is well positioned. He credits the fact that the city has an independent CFO as being partially responsible for the turnaround. The CFO has the authority to shut off the money to any department that outspends its allocation.

The city is not without its problems, however. With an adult literacy rate of 38 percent, the city council is debating whether to let the mayor take over the school system. And even though Washington has one of the hottest real property markets in the country, it has a constrained tax base in which two-thirds of the money earned in the District is taxed in either Maryland or Virginia. This lack of a tax base has resulted in a crumbling infrastructure and a lack of resources to address it. "Once we find a taxpayer, we never let him go," Gandhi said.