Is federal financial management stuck in the 20th century?
More than three decades after legislation codifying the role of the chief financial officer was passed into law, functions like budget authority, cost and performance data and many other CFO-related functions are often spread out among different agency officials.
While the green eyeshades might be gone, if you snuck into a federal agency chief financial officer's office late at night, you're very likely to see the majority of the staff working with antiquated technology—from paper to spreadsheets and everything in between. This, despite the fact that over the last 20 years the federal government has invested many billions into modernizing financial systems, forgetting perhaps that while the core financial systems themselves may be modernized (and some of these are not), many of the tools we use for financial reporting, preparation of performance reports and congressional budgets are in need of their own modernization investments.
When Congress passed the CFO Act of 1990, they intended that CFOs would have a seat at the management table, just like CFOs in the private sector. To many this meant a "strategic" role, rather than one that is largely compliance focused. More than three decades later, implementation of the CFO Act remains somewhat inconsistent across government, with functions like budget authority, cost and performance data and many other CFO-related functions often spread out among different agency officials. Beyond this, CFOs still remain largely beholden to the agency CIO to assist them in identifying and acquiring the technologies needed to enhance their overall mission performance and value. Throw in the exponential growth of agency data, and the criticality of that information to the agency's financial performance and one can easily see a need to update the policies that govern CFO activities.
In the last Congress, former Rep. Carolyn Maloney, chair of the House Oversight Committee proposed legislation known as the CFO Vision Act. Among other things, the bill sought to ensure that CFOs have lead responsibility for such critical areas as budget formulation and execution, planning and performance, risk management, internal controls and financial systems, while driving better planning and reporting. The idea was simple: let's finally give agency CFOs the strategic seat at the management table they deserve. While CFO Vision represents a smart move in the right direction, I believe there's more that can be done to help move federal financial management into the 21st Century.
Under the CFO Act of 1990, the vast majority of the 24 largest federal agencies are required to have a CFO that is appointed by the president and confirmed by the U.S. Senate. This same requirement applies to the head of the OMB Office of Federal Financial Management (OFFM). In recent years, Senate confirmation of CFOs has become an impediment to agencies actually having CFOs. As it currently sits, a quarter of all CFO Act agencies do not currently have a Senate confirmed CFO. The OFFM has been without a Senate confirmed leader for more than 5-years. If Senate confirmation is a roadblock to filling CFO jobs (and I believe it is), we need to come up with a better way. The role is too important to be pushed to the back burner.
Enhance financial reporting
Consistent with what was proposed in the CFO Vision Act, we must enhance current financial reporting requirements to ensure that we are focused on the right things, including:
1. Identifying and reducing duplication in financial report requirements, online disclosures and audit frameworks.
2. Reviewing and improving the data standards for financial reporting to support data and system interoperability between federal, state and local government reporting.
3. Increasing the use of modern technology and systems to improve and automate financial transparency and reporting.
Today's federal CFO is largely without a role in the acquisition of the technology they need to perform their mission. This "use what we give you" approach has left many CFOs unable to bring needed efficiencies to their operations. A better solution, make sure CFOs are directly involved in the selection and acquisition of hardware, applications, software and related technology necessary to carry out the requirements of the CFO Act, including those technologies that help automate and modernize federal financial and internal controls reporting, and preparation of annual audits and performance reports. This simple change would greatly enhance the ability of CFOs to modernize the tools of their trade.
In 2021, Congress passed the Congressional Budget Justification Transparency Act to, among other things, ensure that the CJs are transparent, machine readable and all posted to a single website. Why stop there? Going forward, let's add to the requirement and make sure all agency financial documents – performance reports, audit reports, and strategic plans are machine readable and posted to this single site. This level of transparency would go a long way to restoring faith in federal government operations.
The role of the CFO has certainly evolved over the 33 years of the CFO Act but now is the time to make changes that ensure the structure is right for the next three decades and beyond.
Paul Faust is vice president, public sector at Workiva, Inc.
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