CFOs still have concerns about move to shared services
- By Adam Mazmanian
- Oct 15, 2014
Agency CFOs still have lots of questions about how moving financial systems to shared services is going to affect operations and their ability deliver needed information to senior executives, according to a survey from the Association of Government Accountants and Grant Thornton.
Overall, CFOs are increasingly convinced of the business case that the use of a few shared service providers for financial management will increase efficiency, but questions remain about quality and control.
The survey of CFOs, deputy CFOs and other senior government financial managers found that two-thirds had concerns about quality of services, and a third reported worries about loss of control and the ability to manage costs.
Jim Taylor, managing director of Grant Thornton and formerly CFO of the Department of Labor, told FCW that a big issue is "the CFO is not in most cases the ultimate consumer" of financial information. "The CFO is in the middle between the shared service provider and the client," a deputy secretary or other senior agency leader. An agency with an in-house financial system can generate reports or data analysis on short notice. But it's trickier to tell another federal department, "I don't care, I need it tomorrow. That's a different story entirely," Taylor said.
There's also a psychological factor to giving up control, suggested Office of Management and Budget Comptroller Dave Mader, who spoke at an Oct. 15 AGA event where the survey was presented. "If I don't own [my financial system] and I don't touch it and I don't turn it on every morning, how do I know it's going to get done?" Mader said. "I think the challenge that we have as we move into shared services is establishing the relationship between the provider and the client. It's not just a consolidation, it's a business relationship."
Funding for scaling up shared services is also an important issue. Mader noted that shared services was a "different business model for the government," and that shared service providers might need working capital funds, franchise funds, or other revenue streams that remain available outside of annual budget authorizations to support the activity of onboarding agencies, and growing as warranted by business activity. A shift to a new funding model would require legislative approval.
Taylor said it might be possible to get Congress to act on funding for shared services, even in the polarized political climate. "The one thing that has some kind of gravitas on the Hill and in the administration are management initiatives because it's stuff that everyone can understand, and in a lot of cases it's stuff that makes good sense," Taylor said.
The CFO survey found that just 20 percent of agencies had designated a chief risk officer. The OMB is in the midst of a performance review as part of the Obama administration's management agenda. Mader said that while it might not be essential or even useful for every agency to have a chief risk officer, he said that "we do believe that there needs to be an enterprise risk management program and protocol across government," that covers not just financial risk, but overall program risk.
For federated agencies with large components, the answer might be a committee that periodically meets and evaluates risk across the entire agency portfolio, Mader said. "I'm reluctant to say at this point we need somebody designated as a management officer," he said. Mader said he expected OMB to issue recommendations on risk management by the end of March 2015.
The survey found that about half of CFOs use or are planning to adopt predictive analytics to manage future costs, and that about 40 percent don't have a handle on the full cost of agency operations and financial management processes. CFOs are evenly divided on whether a retirement wave in the federal workforce will sap agencies of institutional knowledge or pave the way for a new breed of financial manager steeped in modern analytics practices.
Adam Mazmanian is executive editor of FCW.
Before joining the editing team, Mazmanian was an FCW staff writer covering Congress, government-wide technology policy and the Department of Veterans Affairs. Prior to joining FCW, Mazmanian was technology correspondent for National Journal and served in a variety of editorial roles at B2B news service SmartBrief. Mazmanian has contributed reviews and articles to the Washington Post, the Washington City Paper, Newsday, New York Press, Architect Magazine and other publications.
Click here for previous articles by Mazmanian. Connect with him on Twitter at @thisismaz.