AGA TOPICS Newsletter

NLC 2005 A Big Success

By: Christina M. Camara

More than 500 government finance professionals attended AGA’s Third Annual National Leadership Conference last week in Washington, D.C. With a theme of "Improving Government Performance: Financial Managers Take Center Stage," the conference brought together leaders from federal, state and local governments as well as the private sector and academia.

Some highlights of the conference:

Financial Management at the U.S. Department of Homeland Security (DHS)—Andrew B. Maner, MBA, CFO of the DHS, knew he was in for a challenge when DHS secretary nominee Judge Michael Chertoff told him, “Oh my God, you have a hard job.”

The task of bringing together 22 agencies from 11 departments, covering everything from hurricane response to drug seizures and more, is indeed complicated, Maner told the audience at the close of AGA’s National Leadership Conference Tuesday. While no handbook exists to create a new agency, starting from scratch also means that bad habits haven’t been established yet, he said.

The department has already made some important strides in the financial arena. DHS was just two days late in submitting a combined Performance and Accountability Report for the first time last fall. The department is developing a new financial system, and recent legislation has established the department as a CFO Act agency with the requirement that its internal controls will have be audited in 2006. An internal control committee has been set up to develop the correct approach to the audit, which will be a first among federal government departments. “A lot of people are watching how we do things,” Maner said, adding that he believes DHS is “leading the way” in internal controls. Despite the multiple systems, processes, organizations and locations involved in the new department, Maner said, “We don’t have a messy bureaucracy. It is a very flat place to make a decision: You want it, it’s done.”

The Presidential Election and its Impact on Managing Government Operations—Paul C. Light, Ph.D., the founder of the Center for Public Service at the Brookings Institution, kicked off the conference with a keynote speech on trends in government management and how AGA can play a role in communicating good government to the American people. Surveys repeatedly show that Americans are resistant to the idea that government is getting better. In fact, they are convinced that government is not particularly accountable and that the lion’s share of government money is wasted. That belief persists, Light said, even though financial statements are cleaner and fraud, waste and abuse are down. “The message is not getting out to the American people,” he said.

Better management has become central to the conversation about good government. Different management structures were considered immediately after the events of Sept. 11, 2001, with the creation of the U.S. Department of Homeland Security and the re-organization of U.S. intelligence functions. Better administration of programs can help boost Americans’ confidence in government.

Light also stressed the important role AGA can play in reassuring taxpayers that their money is well spent. Americans are not worried so much about what government is doing, but how they’re doing it. “They’re saying, ‘Show us the results.’ “He urged AGA to continue pushing for improvements in tracking and monitoring government accountability and to quadruple efforts to measure performance of government entities, which will serve to restore public confidence.

Identity Fraud— Called the fastest-growing white-collar crime in the country, identity theft affected 4.25 percent of the U.S. adult population last year, according to Joanna Crane, identity theft program manager at the U.S. Federal Trade Commission. Identity thieves who created new accounts in someone else’s name usually used the new accounts for six months, and it took victims more than 60 hours to resolve the problems.

Attendees also heard about efforts of the Social Security Administration and various state motor vehicle departments to balance the need for privacy with the need to root out terrorists. The terrorists of Sept. 11, 2001 used false Social Security numbers to establish bank accounts in Florida, and four of the hijackers held multiple drivers’ licenses with different identities.

The challenges are daunting, according to Selden Fritschner, with the American Association of Motor Vehicle Administrators. He pointed to the fact that 240 different, but valid, ID cards and driver’s licenses are now in use in U.S. and Canada, with 32 in New York alone. There are more than 1,400 versions of U.S. birth certificates and 40 versions of the Social Security card. The AAMVA proposes a common set of security features on every driver’s license and a standard set of issuance procedures.

But Jody Westby, JD, managing director at PricewaterhouseCoopers LLP, pointed our that the issuers of credit are mostly to blame for identity theft due to sloppy procedures and unverified information that is used to issue credit. Requiring all credit checks to be verified will reduce fraud. “This is a situation you can do something about,” Westby said.

Emerging Issues— Joseph Kull, CGFM, CPA, director at PricewaterhouseCoopers LLP, discussed a research project of AGA’s Corporate Partner Advisory Group that aims to make Performance and Accountability Reports more useful. The plan is to gather suggestions from CFOs and others and made recommendations to the U.S. Office of Management and Budget (OMB). Some ideas for improvement include better identifying users’ needs, recognizing that most users want information that looks forward instead of looking back, as in the traditional accounting model. He added that PARs of 400-600 pages are simply overwhelming.

William Taylor, CGFM, chair of AGA’s Professional Certification Board, said that AGA leaders are working with the University of Maryland to offer governmental accounting courses to be offered on nights and weekends to meet the needs of working professionals. He added that the need for governmental accounting classes is great, as fewer accounting graduates are taking the CPA exam and the number of accounting doctoral candidates are at a 17-year low.

Nancy Valley, CGFM, CPA, a KPMG partner, discussed the impact of the private-sector Sarbanes-Oxley Act on state and local governmental entities. She noted that over the last six months, governmental entities are picking up the SOX internal control requirements as best practices for their organizations. The California Pubic Employees Retirement System, for example, is considering adopting some of those regulations as it has demanded better accountability from corporations it invests in. Rating agencies may also start asking questions about the strength of internal controls, which can further drive the effort forward. A CPAG research project will survey state and local governments for gaps in their internal control structures and also touch on auditor independence and other issues.

Governing by Network—Stephen Goldsmith, a Harvard professor and former mayor of Indianapolis, spoke about the need for governments to solve problems through collaboration with nonprofit organizations and the private sector. The recent argument over outsourcing at the federal levels is becoming “increasingly shrill” and “increasingly irrelevant,” he said. Rather than focus on whether a service should be wholly privatized or purely governmental, more complicated models can be used. Government will always have too little money and too many problems, he said. Creating networks can be “messy,” he said, but they can transform governments into entities that provide better value to the public.

State and Local E-Government Initiatives—Faisal A. Hanafi, executive adviser to the Internet Business Solutions Group at Cisco Systems, and Helene Heller, the senior director of Project and Information Management at the Housing Authority of New York City, discussed the new dialing codes made available to deliver government-related information to citizens. In New York City, 16 call centers at various agencies were combined into one 3-1-1 dialing code about two years ago. New Yorkers now have one number to call for nonemergency city services, such as setting up appointments with city inspectors. The 3-1-1 center, operated by city employees, takes 40,000 calls a day and can handle requests in 179 different languages. In contrast, the Texas 2-1-1 system is de-centralized, with 150 call center agents employed by nonprofit agencies working in different locations all over the state. Hanafi and Heller also led participants through the questions they would need to answer to help determine the capabilities of a new system and how it could be implemented.

Evolving Role of the CFO—Chief financial officers at various levels of government talked about their ever-changing, and sometimes confusing, role and the need to give the position a higher public profile.

Samuel Mok, CGFM, CFO of the U.S. Department of Labor; Natwar Gandhi, CGFM, CFO of the District of Columbia; and Edward Long, CFO of Fairfax County, VA, gave audience members an insightful and sometimes humorous look at what their jobs entail.

Gandhi’s role as CFO is unique—he is the most powerful municipal-level CFO in the country. While the CFO was a “tool of the mayor” 10 years ago, the dire financial problems Washington, D.C. faced in the late 1990s led Congress to make the position independent and empowered the CFO to shut off cash to agencies, without regard to politics. Closing D.C. General Hospital in 2001, for example, was a financial decision made at “great political cost” to Mayor Anthony Williams.

Mok, by contrast, said his powers are limited and the responsibilities of the office often overlap with that of the chief information officer. CIOs are in charge of information technology and CFOs oversee financial management. The conflicts are creating “operational inefficiencies” and should be resolved, he said.

Mok, who also received AGA’s Distinguished Federal Leadership Award Tuesday, said CFOs should raise the public profile of their positions and of the products they produce. Financial statements are being produced more quickly but they need to be made more useful. “We fail to market that to our leaders,” he said.

Long said the role of the CFO is expanding. "The CFO is looked at as a change agent now," he said. Looking forward, Long said he hopes the next five or 10 years bring improved communication across organizations, more efficient use of technology and a culture change to encourage organizations to think strategically.

Challenges Facing Government and Looking to the Future—William Hudnut, the mayor of Chevy Chase, MD, former mayor of Indianapolis, IN, and a resident fellow at the Urban Land Institute, urged attendees to take a long-range view of the future of their communities. Begin at the end and work backward, he said. “Where do we want to be five, 10 years from now?” He noted that the U.S. population is expected to grow by 60 million people between 2000 and 2025. Where will those people live? He noted that 90 percent of land development since the 1950s has been in the suburbs. While suburban living is popular, people are longing for a sense of place. Sometimes, the only way to know if you’ve moved from one community to another is not when you see new city halls, monuments or museums, but the franchises repeating themselves. “A whole bunch of 7-11 stores don’t make a place.” He also urged the audience to promote reinvestment in central cities. “You can’t be a suburb of nothing.”