Government-wide Financial Reporting - AGA

Structure
Interviews
The AGA Research Team undertook a
series of interviews with four state, two
private-sector, and OMB, FMS, Treasury
and GAO officials to gain an understanding
of how compilations of CFS and
other complex entities are successfully
accomplished. These interviews are
summarized in Appendix E.
Observations
Three themes — leadership, standardization
and discipline — consistently
arose during our interviews with publicand
private-sector financial managers,
who suggested that success is achieved
by maintaining the following:
Top leadership as the owners of
the initiative — words backed up
with actions to reinforce a sense
of urgency and to make necessary
investments
A well-defined statement of the
objective and its importance
A clear assignment of operational
responsibility together with the
authority to achieve the objective,
i.e., someone in charge with the
ability to enforce decisions across
agencies.
Standardized processes, data and
systems
Discipline in adopting business rules
and providing needed information
Accountability and ability to hold
people accountable
Neither complexity nor size was
seen as a major issue. Arguably the federal
government is the largest and most
complex entity in the world; however,
the job of preparing auditable financial
statements is not complex at its core.
The organizations and individuals we
met with during our research represent
high-ranking Fortune 500 entities able to
overcome their own set of complexities
and achieve reliable and timely financial
reporting that could meet the test of
an audit. Not once did we hear that
one of the components or subsidiaries
was special or different and therefore
unable to meet the necessary reporting
requirements or that they could not
make the reporting entities do what was
needed. The mandate came from the
top, and expectations for results and a
sense of collective urgency were drivers
of reform.
Our interviews also indicated that
entities were expected to perform so the
desired reporting requirements were
met. The level of performance was clear
and well-articulated, primarily defined
by competition, especially with respect
to the capital markets. This is particularly
true for the states, where bond
ratings and access to and cost of capital,
hinge on performance and results. The
same may be said about the private
sector, although direct market competition
also drives the need for reliable,
timely data to make business decisions
that maximize profits. It would be safe
to say that governors and CEOs expect
their organizations to provide timely and
reliable financial information to their
regulators, overseers, lenders, investors
and the public. The inability or failure to
provide such information would most
likely be a death knell for the CFO and
As a result, the need for this capacity remains
today since neither OMB nor Treasury have
invested sufficient resources, systems or people
to carry out the role as the preparer of the CFS.
CEO, if not the entity.
Limited resources were not seen
as an impediment, either. Because of
the high priority placed on reporting,
leadership committed people and funds
to achieve results, and results were
expected for the investment. The people
aspect of this takes on various forms:
Pennsylvania borrows staff during
surge periods.
IBM and Marriott employ “tiger
teams.”
Massachusetts runs continuous
training for its finance staff and
agencies’ staff.
Maryland has a culture of strong
state controllers, one having served
for 35 years.
Infrastructure and process-related
investments enjoyed similar support.
From a people perspective, perhaps
former Treasury Secretary Paul O’Neill
said it best by referring to the fact that
people want to do good work — and
want to be part of something important
and challenging.
In one way or another, Treasury
has adopted some of the approaches
mentioned during our interviews, such
as the use of standard templates, Closing
Packages, team resolution of differences,
and agency and staff training activities.
However, there continues to be the need
for data standardization and business
rules in key areas that impair data
compatibility and quality as cited by IBM
and Secretary O’Neill — as well as a clear
mechanism for enforcing existing data
standards and requirements as described
in our discussions with Marriott, IBM and
state financial officers.
The latter is in part driven by the
need for clear responsibility, authority
and purpose, as well as resources to
make changes that address the root
cause of the remaining reporting challenges
with a sense of urgency. These
missing attributes could be traced to the
early history of the CFO Act, which suggests
the framers recognized the need
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AGA Corporate Partner Advisory Group Research