 
 
AGA's National
Presidents gathered at the recent PDC in Orlando. (Left to right) Donald
Kirkendall, John Cooley, CGFM, Clyde McShan, CGFM, Sam McCall, CGFM, Bill
Anderson, CGFM, Virginia Brizendine,
CGFM, Bobby Derrick, CGFM, Virginia Robinson,
CGFM, Tom Sadowski, CGFM, Jullin Renthrope, CGFM, Fred Heim, Jack Fawsett,
CGFM, Charles Harrison, CGFM, Jeff Steinhoff, CGFM, Richard Norment, CGFM,
and Bill Broadus, CGFM. Present at the PDC but not in the photo: Mitch
Laine, CGFM, and Jerry Murphy, CGFM.
Boy Scout color guard at opening
ceremonies.
GASB Chairman Robert Attmore, CGFM,
talks with Georgia State Auditor Russell Hinton, CGFM.
Retired Army Four-Star General Jack
Keane gave an outstanding address Monday morning, covering the state of
national security in a post-911 world. Attendees showed their appreciation
for the general's candor with a standing ovation.
Todd Russell Platts,
Representative, United States House of
Representatives, 19th District of Pennsylvania; Chairman, House Government
Reform Subcommittee
Past National Treasurers and members of
the Finance and Budget Committee gather at PDC in Orlando. Left to right,
Immediate Past National Treasurer Evelyn Brown, CGFM, PNT, Billy Morehead,
CGFM, Pat Wensel, CGFM, Doris Chew, CGFM, PNT Dick Bunce, CGFM, incoming
National Treasurer Karen Holmcrans, National Treasurer Jeanne Erwin, CGFM,
PNT Eva Williams, CGFM, PNT John Webster, CGFM, PNT Diane Dudley, Dave
Barrett, CGFM, PNT Julie Bryant, CGFM, and staff liaison Cristina Barbudo,
director of finance and administration.
The Orlando-based SAK improv comedy
troupe performed at opening ceremonies.
PDC Technical Committee Co-Chair and NASA
CFO Gwendolyn Sykes, CGFM, welcomes attendees and wishes NASA
astronauts well as the country returns to space with planned launch of
Shuttle Discovery later this week.
PDC Technical Committee Co-Chairman and
Oracle Director of State and Local Government J.D. Williams greets
attendees.
Comptroller General of the United States
David M. Walker, CPA, led Tuesday's program with a keynote addressed.
He later participated on a panel discussing human capital issues.
Mae C. Jemison, MD, the first African-American woman in space,
discussed human potential and the role each person plays in making the world
a better place.
AGA National President Bobby A. Derrick, CGFM, presented AGA's annual
$30,000 contribution to Governmental Accounting Standards Board Chairman
Robert Attmore, CGFM. Derrick then surprised Attmore with a second check
for $20,000. AGA Executive Director Relmond Van Daniker, DBA, CPA, told
Attmore that AGA is pleased to be able to continue supporting GASB's
important mission.
Dr. Jemison talks with Justin, the nephew of Eva Williams, about what
it's like to be an astronaut.
Renee Gilman, CGFM, and Past National Treasurer Eva J. Williams,
CGFM, encourage PDC attendees to participate in the National Community
Service Raffle.
Past National President William J.
Anderson Jr., CGFM, receives the Robert W. King Award from National
President Bobby A. Derrick, CGFM, on the final day of the Orlando
PDC.
Ian Ball, chief executive of the International Federation of
Accountants.
Cynthia Cooper, WorldCom whistleblower.
Left to right, Past National President and National Treasurer-Elect Tom
Sadowski, CGFM, with AGA Executive Director Relmond Van Daniker,
Dolly Van Daniker and former AGA Executive Director Charles W. Culkin
Jr., CGFM, who is also a Past National Treasurer.
Immediate Past National President Bobby A. Derrick, CGFM, thanks the
AGA members for a great year.
From left to right, Dean, Luci and Megan, the grandchildren of
Immediate Past National President Bobby A. Derrick, CGFM, escort him
off the stage.
National Treasurer Jeanne Erwin, CGFM, is honored for her work during
the 2004-2005 Program Year.
Incoming National President Sam M. McCall, CGFM, receives the gavel
from now-Immediate Past National President Bobby A. Derrick, CGFM.
National President Sam M. McCall, CGFM, outlines his plans for the
coming year.
AGA Executive Director Relmond Van Daniker, DBA, CPA, challenges the
PDC attendees to take home the lessons learned at PDC and come back next
year to report progress has been made on the many issues confronting the
profession.
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The PDC update
AGA's PDC Off to a Successful Start
in Orlando AGA kicked off its 54th Annual Professional Development Conference &
Exposition in Orlando Monday with more than 1,600 government accountability
professionals gathered for “Leadership > Preparing Tomorrow’s Accountability
Professionals.”
The conference brings together participants from federal, state and local
governments, the private sector and academia to discuss issues of common
concern. The conference began with a keynote address from Retired Army
General Jack Keane, who talked about his 37 years leading American soldiers
and his thoughts on the War on Terrorism.
“We are in a war of ideals and values,” Keane said, comparing the current
conflict with World War II, in that Americans are fighting to defeat
radicals who “want control and domination of their part of the world.”
Keane, a recently retired four-star general, said Al Qaeda believes
Americans are weak, morally bankrupt and that they lack character. While
they cannot defeat us militarily, they seek to destroy us by undermining our
confidence in our leaders and hurting our economy, he said.
Keane said he believes that the United States did not respond strongly
enough to the bombing of the embassies in Africa and other acts of terrorism
in the 1990s. That led terrorists to believe they could attack the United
States without retaliation. “They came for us, thinking they could have
their way with us.”
Keane was in the Pentagon on Sept. 11th when it was struck by terrorists,
and he recounted many stories of heroism on that day. He said the Pentagon
was like a battlefield, not only because of the smoke and fire, but also
because of the emotional reactions of fear, terror and panic. He said 77
awards were given out for heroism in the Pentagon battlefield. One petite
woman put out a fire on one of her colleagues, who did the same for her, and
then carried the woman on her back to safety by crawling close to the floor
because the smoke was so thick.
She broke a window with a PC and then pushed the woman out to safety. The
heroine, who will not allow Keane to use her name, did not then jump out.
“She had life through that window,” Keane said, but instead went back into
the smoke to rescue another woman in a nearby office. Although two of the
women broke bones, all three survived.
Despite the horror of the attack, the vast majority of Pentagon employees
returned to work on Sept. 12. “They knew we were at war and they wanted to
make a contribution.”
Keane also spoke of the heroism of a battle with Al Qaeda three weeks later
that showed the fighting spirit of American soldiers. Despite being
outnumbered 10-to-1, 30 American soldiers fought for 12 hours, they treated
the wounded, including Al Qaeda. “The Army has values that reflect the
American people.” We celebrate and preserve life, he said.
Keane then moved on to the war in Iraq. While Saddam Hussein’s regime was
toppled quickly, he noted that the military did not see the insurgency
coming. “We did not plan adequately for it.” He said the insurgents are
primarily Sunnis, some are from Saddam’s former secret police charged with
doing the killing at Saddam’s bidding. Others are nationalists who oppose
American occupation. Others are terrorists.
Keane noted that the progress being made in Iraq is too often overlooked by
U.S. media. A legitimate government is in place; another election will be
held in December; 27 colleges and universities are operating in Iraq;
hospitals and schools are operating; marketplaces are teeming with people.
He acknowledged that unemployment is high, at 40 percent, and poverty is
widespread. “There are major challenges, but there’s also steady, steady
progress that’s being made.”
He said the soldiers in Iraq are not quitters or complainers. “This conflict
is all about the American people,” he said. “War is personal,” he said, and
it is terrifying. “Death is always, always a silent companion.” While
soldiers do not want to die, they are willing to die for their country.
“That devotion should not be taken for granted.”
A Commitment to Public Service
After lunch, attendees heard from Rep. Todd R. Platts (R-PA), chairman of
the House Subcommittee on Government Management, Finance and Accountability.
Platts began his address by complimenting the PDC attendees on their
commitment to public service and said his desire to serve dates back to
childhood when he learned by the example set by his parents. “What I do
today as a public servant is what my parents have always done.”
He credited the men and women in uniform who are serving in harm’s way with
making it possible for those of us at home to continue working and living in
peace. “The most trying of our days pales in comparison to the trying times
our men and women in uniform face every day.”
He noted the enormous contribution the government’s financial management
work force makes and thanked the AGA attendees for their service. “You’re
making a difference in the lives of your fellow citizens. Yours is an
honorable profession.”
Platts discussed his committee’s work on legislation that would consolidate
and streamline the more than one dozen financial management laws enacted
over the last 25 years, which now total more than 800 pages of statute. This
presents a confusing challenge to those charged with managing the
government’s business.
The Founding Fathers, he said, mandated that a tally of the government’s
receipts and expenditures be published “regularly.” Over the years, Congress
has had the best of intentions each time it passed a new law governing
federal financial management, but the times have changed, he said. The
complexity of today’s federal government demands a more disciplined approach
and “the time has come for all of us to work together to streamline this
process.”
He singled out the CFO Act of 1990 for making the greatest contribution to
federal financial management reform. The act ensured that the presidentially
appointed chief financial officer would be more than just a steward, but
would serve as a member of the agency’s management team. He acknowledged
that to be successful, the CFOs rely on a cadre of well-trained financial
managers—the very people gathered at AGA’s conference. The CFO Act has
spurred a movement from data entry to data analysis with the facilitation of
analysis being the primary goal.
In 1996, the first year that the CFO Act was fully in effect, just six
federal agencies achieved timely financial statements with clean audit
opinions. Today, nearly every agency achieves both timely statements and
clean opinions. However, the committee would like to see more emphasis
placed not on the end result, but how we get there, avoiding the need for
the heroic year-end efforts to get the clean opinions. “That doesn’t help
the manager out on the front lines with day-to-day decision-making,” Platts
said, adding that the clean opinion should always be a consequence of good
financial management.
Platts pointed to the President’s Management Agenda (PMA) as an example of
the Bush administration’s commitment to this effort. Financial management
reform is just one of the five tenants of the PMA, but he said it is the
foundation of the entire effort and is critical to determining if the other
four areas are successful. All the efforts in the world won’t matter, Platt
said, until we improve financial management systems.
“Congress has to resist the urge to ignore these issues, which should be on
the front page every day,” Platts said, adding he spends time daily in his
York County, Pennsylvania district and hears what taxpayers have to say.
“They don’t mind paying taxes except when the money is not properly
accounted for.”
He also called for consequences for failure to comply with statutes. There
has to be accountability for misconduct, he said. “The more we clean up our
act on our own, the more our profession—public service—will gain respect.”
In encouraging AGA members to contribute their ideas on streamlining federal
laws to his committee, Platts said whether you are working in federal, state
or local government, “We are all part of the same team.”
By: Christina M. Camara and Marie S. Force
_____________________________________________
Day 2: Tuesday, July 12
The United States is facing threats that are far greater than those posed by
any other country or terrorist group, said Comptroller General of the United
States David Walker.
Walker, speaking to about 1,600 attendees at AGA’s 54th Annual Professional
Development Conference & Exposition in Orlando Tuesday, said America needs
strong leaders to deal with three critical challenges: the federal budget
deficit, the balance of payments crisis and the dangerously low overall
savings rate, which is the lowest of any major industrialized country.
He added that the U.S. also lags behind many industrialized nations in K-12
education results, health care outcomes and infrastructure needs.
Walker, who has eight years left in his 15-year term leading the U.S.
Government Accountability Office, spoke on, “America’s Need for Leadership:
Rising to the Challenge.” He followed his keynote speech with a panel
discussion on human capital issues.
He said the nation is at a critical crossroads, and the fiscal path the
country is on now is “imprudent and unsustainable.” While the U.S. is a
global superpower, Americans risk entering into a period of decline unless
the financial problems are solved. “We need to start now because time is
working against us.”
He called upon the accountability professionals at the conference to lead by
example. The U.S. government lacks a governmentwide plan and outcome-based
indicators that would help strategic planning efforts. Otherwise, he said,
“We’re flying blind in increasingly turbulent skies.”
Financial reports need to better reflect agencies’ true financial picture;
annual reports need to be more readable; federal agencies need to eliminate
tunnel vision and near-sightedness to be more externally focused. He also
called for a new chief management officer position for some agencies,
especially at the U.S. Department of Defense, to lead this cultural
transformation. “DoD wastes billions and billions of dollars a year, and
that’s got to stop—it’s unacceptable.”
Leaders need to speak the truth, no matter if it’s unpopular, he said.
Human Capital Challenges
Walker then joined a panel discussion on, “Human Capital: Crisis or
Confidence,” with Samuel Mok, CGFM, the chief financial officer of the U.S.
Department of Labor, and C. Morgan Kinghorn, CGFM, president of the National
Academy of Public Administration.
The panelists discussed ways to recruit and retain top talent to government
jobs. All the panelists agreed that “making a difference” is a top motivator
for people working for local, state or federal government. Mok said that the
fulfillment of working for a government institution can’t be measured in
dollars. He added that government employees don’t have to worry about the
pressures of Wall Street or their pension plans being terminated. “No CFO in
the federal government has gone to jail yet,” he joked.
The panelists also stressed the importance of training and professional
development in recruiting and retaining government employees. Mok said he
never promotes someone unless they have trained someone below them to be a
qualified backup.
Changing from the General Schedule pay system to a pay-for-performance
system was also discussed, with the panelists agreeing that additional
flexibility is needed, but that creating a fair and transparent process to
get there is paramount. Walker said that he believes no change in the pay
structure should occur unless employees are involved in creating safeguards
to make sure that the new rules are fairly and consistently applied and that
a due process is in place for grievances. “If you don’t do it right, you’re
really going to screw it up quick,” Kinghorn said.
Living Up to Our Potential
Mae C. Jemison, MD, the first African-American woman in space, gave an
inspirational talk Tuesday as a keynote speaker at AGA’s 54th Annual
Professional Development Conference & Exposition in Orlando.
Jemison, who is also an engineer, was the first woman of color to go into
space in 1992 aboard the space shuttle Endeavor. She is now an entrepreneur,
founding two technology companies, but she also describes herself as a
wannabe dancer who chose to go to medical school after graduating from
Stanford University rather than try to make it on stage in New York City.
She left NASA in 1993 to start the Jemison Group, Inc. to focus on the
integration of science and technology into everyday life.
She said science and technology is misunderstood. At the heart of science
is, “I think, I wonder, I understand.” Technology is putting that
understanding into practical use.
Jemison said that individual decisions we make every day are part of the
bigger picture of the kind of world we will leave behind for future
generations. For example, how do we want to spend government research
dollars? Should we research nuclear physics to make medicine or bombs?
Should satellites be used to study the earth, or to assess military
capabilities of other countries and then augment our own?
She said each generation must discover its mission, fulfill it or betray it.
“I had to learn very early not to limit myself due to others’ limited
imagination,” she said in a statement. “I have learned these days never to
limit anyone else due to my limited imagination.”
By: Christina M. Camara
_________________________________________
AGA’s PDC Ends on a High Note
The final day of AGA’s 54th Annual PDC began with an address from Ian Ball,
chief executive of the International Federation of Accountants (IFAC), who
discussed international developments in government accounting.
IFAC, which was founded in 1977 and ventured into the public sector in 1987,
represents the accounting profession globally with 163 member bodies. It
sets standards for the profession, including international standards for
auditing (which are now being adopted by the European Union); sets the
international code of ethics for accountants; sets the international
standards of education for accountants; and sets international standards for
financial reporting.
Ball discussed the recent spate of corporate scandals, which have spurred a
dramatic raft of regulatory action, including the Sarbanes-Oxley Act of
2002. “Let me assure you, its ramifications have echoed around the world,”
Ball said of the act, which has provided the impetus for similar legislation
around the world and has resulted in improvements.
Ball discussed IFAC’s efforts in this area, which has included the
development of a series of reforms. These reforms led to the establishment
of the Public Interest Oversight Board to oversee IFAC’s standard-setting
activities with members chosen by a nominating committee that is completely
divorced from IFAC.
Another sign of progress, Ball said, is the work the major accounting firms
have done to enhance their independence, including shedding their consulting
arms. “They have made significant progress,” Ball said of the firms, with
the result being greater transparency and independence.
Lots of attention has been paid to the cost of all the reforms, Ball said,
noting that early estimates placed the cost of compliance at $300,000 to
$500,000 for most companies, a number that has proven to be low as the real
costs soar to $3 million to $5 million a year for many companies. The
overall cost of compliance in the U.S. is expected to be between $2 billion
and $5 billion. While it’s clear that the cost of compliance is going to be
much greater than anticipated, “Good financial reporting is worth the cost,”
he said.
The citizenry has a right to have confidence in government financial
reporting for three reasons. The first is performance. If governments don’t
operate efficiently, it’s a huge drain in the economy. The second is
accountability—governments are spending our money. The third is democracy
and a properly functioning democracy required citizens to have confidence in
politicians and public servants.
In comparison to many governments, Ball said, Enron would be a model of
transparency. When the audience laughed at his comment, he added, “The
problem is, that’s not funny.”
Ball acknowledged the role AGA is playing in the development of legislation
and standards. He pointed to the recent AGA research report, “Audit Federal
Financial Controls—Sooner Rather Than Later?” as an example of the
Association’s leadership.
A Whistleblower’s Story
The decision to go public with the massive $3.8 billion fraud at WorldCom
was easy, said whistleblower Cynthia Cooper, but it was not without huge
costs.
“Doing the right thing doesn’t mean there’s no cost,” she said, but added
that the right ethical decision should be made despite the consequences.
Cooper, WorldCom’s former vice president of internal audit, was an AGA
keynote speaker Wednesday morning. She was one of Time magazine’s 2002
Persons of the Year, one of only eight women to be named in the 77-year
history of the magazine’s award.
Cooper said most whistleblowers crack under the enormous strain, plunge into
depression or even alcoholism; some lose their families or their homes.
While she said her family, friends and faith sustained her while she was at
the center of the storm, she and her co-workers suffered intense pressure
from the media, investigators and members of the small community of Clinton,
MS, where WorldCom was headquartered.
About 17,000 WorldCom employees were laid off as the company filed for
bankruptcy in the fraud that eventually totaled $11 billion. The company has
since emerged as MCI, with its headquarters moved to Virginia. Five top
executives were indicted, including former Chief Financial Officer Scott
Sullivan and former Chief Executive Bernard Ebbers, who was sentenced
Wednesday to 25 years in prison for his part in the fraud.
Cooper stressed that uncovering the fraud was not the cause of the company’s
demise: It was the implosion of the telecomm industry. The fraud, which was
conducted at the highest levels, merely masked the true picture of the
company’s financial health.
Part of the reason for WorldCom’s downfall reached back to the company’s
acquisition of 70 companies over two decades. Auditors had to deal with 60
different billing systems, the clash of cultures between MCI and WorldCom,
and the rapid, unsustainable growth of the company.
In WorldCom’s case, Internet growth fell short, start-ups went bankrupt and
WorldCom found itself with enormous network overcapacity. Ebbers made
investments in yacht building companies, timberland and more using his stock
options as collateral. He got into trouble when the stock’s prices started
dropping, he received a total of $400 million in personal loans from the
company’s board of directors, who banked on an upswing in the company’s
stock price. The upswing never materialized.
Moral Compass
Cooper talked about the challenges her internal audit team encountered at
WorldCom. She was actually told not to use the phrase “internal controls” in
any audit report. She encountered hostility from the head of the audit
committee and from CFO Sullivan.
“In hindsight, I think we were operating with one hand tied behind our
backs,” she said. The fraud began to be uncovered by tracking 50 unusual
journal entries that were spread among different subsidiaries. Although
financial frauds that are conducted with executive involvement are the most
difficult to detect, Cooper’s team was able to figure it out through access
to the accounting system, a team of forensic auditors, a highly qualified
team with 90 percent of them having earned professional certifications. She
also said she followed her instincts, and confronted management and external
auditors when she faced resistance.
The fraud was uncovered through a regular capital expenditures audit.
Working at night and behind closed doors because of all the barriers and
hostility they encountered, the team eventually found $700 million in
fraudulent entries. By falsely categorizing billion of dollars of operating
expenses as capital expenditures, the company publicly reported a $2.4
billion profit in 2001.
Cooper went to Controller David Myers’ office, and he admitted that there
was no support for the entries and that they shouldn’t have been made.
Cooper called for a meeting with the audit committee, and that meeting in
June of 2002 led to the firing of Sullivan and an avalanche of other events
that rocked the world markets.
Cooper did not leave MCI until one year ago, and quickly hired a Coke
whistleblower to join her consulting business. Now that the storm of scandal
is over, Cooper urged the audience to understand that “small decisions
matter” and that doing nothing is also a decision. Trust your instincts, she
said, and follow your moral compass. Do not allow yourself to be
intimidated. Discuss your decisions with others. Ask yourself whether you
would be comfortable if you actions were reported on the front page of the
Wall Street Journal.
She concluded, “Courage is acting in the face of fear.”
By: Christina M. Camara and Marie S. Force
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