CFOs: Surviving in a New Era - AGA

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home — it should be the basic CFO responsibilities,
fundamentals like internal control over basic
accounting. Deal with things inside your shop
first, and then go outside. Next, look for where
your entity is hemorrhaging money or having
other problems that could be mitigated by financial
management approaches, skills and tools.”
“We need good estimation models of how much things will cost,
the outlays and what are the outcomes. We must make sure to
keep track of funds weekly so that we do not spend more than
we think we will have. ”
— a state financial executive
An initial step might be to assess the risk management
skills of financial staff against the
financial and nonfinancial goals of an entity. On
average, federal executives give their financial
staffs a low score on having the skills needed to
apply risk management methods, while state
financial executives give their staffs a relatively
high score (Table 5). 3
Table 5:
Executives’ satisfaction with their
financial staff’s risk management skills
U.S. Government
Mean satisfaction
score on
1 to 5 scale*
Federal executives 2.7
State executives 4.0
*1 = very dissatisfied, 5 = very satisfied
3
State financial executives’ scores may be somewhat higher than
those of federal executives because of a higher percentage of auditors
among the state survey respondents.
We also asked participants in the online survey
whether they were satisfied with their skills and
training in risk management. About 6 of 10
managers at each level of government — federal,
state and local/regional — were satisfied with
their skills and training; 2 in 10 were not, and
the balance did not know.
An immediate application of financial risk management
skills might be monitoring and predicting
revenues versus expenses in entities that
are supported by fees or specific tax revenues.
Says a state CFO in such an organization, “Most
of our money comes out of a trust fund built
from specific tax receipts. Over the past 10 years,
when the trust fund started to run out of money,
the legislature gave us general appropriations.
We are running out of money now and we may
not get enough appropriated funds to make up
the difference. So, we now keep track of outlays
and we have plans in place to ration funds if we
do run out. We need good estimation models of
how much things will cost, the outlays and what
are the outcomes. We must make sure to keep
track of funds weekly so that we do not spend
more than we think we will have.”
Another entry point in operations risk management
is through internal controls, say some
financial executives. Says a state CFO, “My office
establishes agency risk management and internal
control standards that each state agency is required
to implement. We require agencies to certify that
they comply with the standards and review their
implementation to confirm this.” Some state auditors
in our survey say that they become involved
in operational risks through the annual financial
statement audit, if such risks have an effect on
audit findings. Then, they recommend ways to
improve risk assessment. Other state auditors say
they have no role in risk management.