Something’s Gotta Give – Why CFOs Face an Uphill Battle

Something’s gotta give.

That’s the theme from the new survey by the Association of Government Accountants (AGA) and Grant Thornton on federal CFOs.

The survey finds federal CFOs and their staffs have only enough time, money and know-how to do the basics around financial management. The survey included 100 interviews and 180 self-selected responses from CFOs and their deputies and underlings.

Denise Lippuner is a partner at Grant Thornton. She leads their Global Public Sector Financial Management Advisory Services. She told Chris Dorobek on the DorobekINSIDER’s program that the world for federal CFOs is getting more and more difficult.

“Since our last survey in 2012, the federal fiscal environment has continued to degrade, making it formidable for agencies to perform effectively, especially chief financial officers, who shepherd agency funding and perform many other leadership functions. CFOs and other financial executives at departments and agencies are beset by extraordinary challenges, declining resources, departing talent, deteriorating morale, while at the same time ever increasing requirements and workload,” said Lippuner.

Will the culture get worse? Lippuner explains:

• The theme of this year’s survey is somethings gotta give. Think about what is happening today, you’ve got a partial government shutdown, the looming debt ceiling crisis right around the corner, and let’s not forget sequestration. On top of all of that you have a three year pay freeze for federal employees and sequestration related furloughs. That’s the whole decline in resources.
• On the other hand you have an increase in demand for better accountability and transparency. You can see that in the Improper Payments Elimination and Recovery Improvement Act, the revamping of the Grants Management policies, the Data Act, that is currently being considered in Congress.

“You have all this demand for an increase in accountability and transparency on the one hand and on the other you have this decline in resources, so it really creates this environment where something has got to give,” said Lippuner.

How does transparency factor in?

“The intent of the American Recovery and Reinvestment Act (ARRA) was to improve transparency and accountability by setting new reporting requirements. According to our survey it appears that for many agencies it was a huge manual effort to pull the data together and was therefore unsustainable. But it is not all negative though because agencies now have a framework in place to respond to Congressional inquiries. ARRA has forced agencies to find and compile information faster and at a more granular level however the benefit of ARRA from a sustainability standpoint isn’t there. Because of funding constraints many agencies just pulled the data together by a huge manual effort. Because they didn’t have automated systems in place,” said Lippuner.

People being asked to do more with less?

“It is especially apparent in the whole cost reduction initiatives that were put in place by sequestration. The majority of respondents that we surveyed were fine with the cost-cutting measures that have taken place in their agencies however, they wonder if these reductions are sustainable. A common concern was that the cost cutting initiatives were not performed in a sustainable manner. There was a bigger focus on making funding cuts than reducing actual costs,” said Lippuner.

Room to cut spending?

“There is definite room for doing smart cost-cutting initiatives in the government. There is plenty of waste going on. The problem is the way this was forced on agencies they weren’t able to take a look at the cuts in a strategic manner. Rather it had to be done across the board,” said Lippuner.

Challenges today and tomorrow?

• One of the interesting questions we asked was tell us your challenges today being the 1-5 year range and challenges in the future. The challenges CFO’s are facing today are pretty much evenly split between personnel, budget and services. But if you take a look at what their challenges are in 5 years – the biggest challenge they all view is a decrease in the quality of services they can all provide and that’s because of all the cuts and declining workforce. That is a huge issue on their mind.
• Technology in the next five years for CFOs is not going to be an issue because they think most agencies will be going to a shared services provider. Therefore that headache of dealing with an IT infrastructure will be removed from their purview.

Move to shared services?

“This is one thing that can be done to address the increase in demand and transparency – pushing for standardization and the sharing of infrastructure. It is the consolidation of similar functions. We are seeing this in the policies that are being put in place like OMB’s Share First, Cloud First Initiative. All of these activities are happening, but more needs to be done to address these challenges,” said Lippuner.

Shocking results?

“Reading this report it is pretty depressing, yet the CFOs are just absorbing all of this. They are marching on and doing their job. I think what was surprising when you put it on paper it looks pretty bleak, I think the outlook hasn’t been as bleak in in-person interviews,” said Lippuner.

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