CFOs: Surviving in a New Era - AGA

More documents

Recommendations

Info

14 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.
15 Several federal CFOs say they are on executivelevel risk management committees and do not confine themselves to financial risk. Others provide financial risk comments on strategic risk management plans or on component or program plans. Unfortunately, many federal and state financial executives in the survey report have little or no interaction with risk management activities outside of fiscal areas. Some say they simply do not have the time or resources to play a role wider than the areas of accounting and internal controls. Several state CFOs say that risk assessment and management outside of the financial arena lies with the budget office or specific programs. Entities that structure risk management leave themselves vulnerable to operations problems because they lack a financial management perspective on risk — and as we said earlier, there are no borders when it comes to risk. A word of caution: pointing out risks is a risk in itself, according to some executives. Says a state CFO: “Nonfinancial managers routinely elect to ignore risks until they are unavoidable. In addition, they perceive the controller function as ‘causing’ the resulting problem because we speak out about and attempt to address risks.” Besides training and skill building, nonfinancial managers need to be rewarded for mitigating risk, instead of being punished for identifying them. A federal executive says that some of his entity’s nonfinancial managers are reluctant to “get on the risk list” because no one seems to get off it, so that extra works can continue for years. One thing is for sure: governments are going to be paying much more attention to risk management in the future. This is an opportunity for the CFO who takes an active role in ERM, especially in helping integrate internal controls and other risk management activities. Such a financial professional will be able to rise in the ranks of leadership because the world is not getting any less risky.
Page 1 and 2: Association of Government Accountan
Page 3 and 4: 1 executive summary The Association
Page 5 and 6: 3 Table of contents Executive summa
Page 7 and 8: 5 Risk management Governments, indu
Page 9 and 10: 7 In addition, as shown in Figure 2
Page 11 and 12: 9 The CFO of a U.S. federal departm
Page 13 and 14: 11 There are also risk management o
Page 15: 13 Table 3: Federal executives’ t
Page 19 and 20: 17 • Business Intelligence (BI) s
Page 21 and 22: 19 to increase transparency in orde
Page 23 and 24: 21 Audits and auditors Auditors may
Page 25 and 26: 23 Consolidating and sourcing Sever
Page 27 and 28: 25 Table 7: Federal executives’ o
Page 29 and 30: 27 Changing the annual audit cycle
Page 31 and 32: Design by www.sparkdesign.net Addit

CFOs: Surviving in a New Era - AGA

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?