Danny Werfel Office of Management and Budget May 7, 2008 The CFO Act – Where Do We Go From Here?

2 “The Chief Financial Officer (CFO) of a company or public agency is the corporate officer primarily responsible for managing the financial risks of the business or agency. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management.” “The Chief Financial Officer (CFO) of a company or public agency is the corporate officer primarily responsible for managing the financial risks of the business or agency. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management.” - Wikipedia entry for “CFO”

3 CFO Act Objectives Public Reporting – Provide transparency into government finances, including the fiscal sustainability of government operations over time and the effectiveness of government programs. Internal Controls – Facilitate process, technology, and human capital improvements that ensure strong internal controls and sound accounting practices. Decision Support – Provide Federal leaders financial information to help improve management decisions and drive better stewardship outcomes (reduced fraud, error, waste).

4 No more than one repeat weakness under FMFIA Sec. 2 or Sec. 4 Meets reporting deadlines No more than one repeat auditor weakness Clean audit opinion No material non- compliances No chronic or significant ADA violations Expands routine data use Uses financial information to drive results in key areas No repeat weaknesses under FMFIA Sec. 2 or Sec. 4 FFMIA compliant No repeat auditor weaknesses Improving Financial Performance

5 Roles of Federal CFO Financial Report Preparer Compliance Officer Transaction Processor Provider of Key Management Data Risk Manager Strategic Planner

6 PMA Results 19 of 24 agencies w/ clean opinions Four consecutive years of declines in material weaknesses $7+ Billion in Real Property Disposals $7+ Billion in Improper Payment Eliminations ? All agencies meeting 45 day reporting deadline

7 Challenges of Meeting CFO Role in Federal Environment Overwhelmed by compliance Overwhelmed by compliance Responsibilities without authority Responsibilities without authority Complex (and sometimes decentralized) financial operations Complex (and sometimes decentralized) financial operations Human capital needs Human capital needs Resources to maintain steady state operations and initiate improvements (e.g., program integrity) Resources to maintain steady state operations and initiate improvements (e.g., program integrity)

8 The Path Forward At the Agencies… Integrated approach to financial management Integrated approach to financial management Changing the “Footprint” of financial operations Changing the “Footprint” of financial operations Zeroing in on the connection between CFO activities and agency mission objectives Zeroing in on the connection between CFO activities and agency mission objectives At OMB, FASAB, Congress, and GAO… Reconsideration of what’s required for compliance Reconsideration of what’s required for compliance

9 Integrated Approach to Financial Management CFOs in Integrated Organizations: Are more informed on organizational risk, business goals, and data needs Are more informed on organizational risk, business goals, and data needs Can standardize and/or centralization business processes more seamlessly Can standardize and/or centralization business processes more seamlessly Can more readily leverage other parts of the organization to help reduce workload in non-core responsibilities Can more readily leverage other parts of the organization to help reduce workload in non-core responsibilities

10 Changing the “Footprint” of Financial Operations Changing the “Footprint” of Financial Operations Federal CFOs need additional capacity to move beyond compliance Federal CFOs should evaluate financial operations for opportunities to: Centralize and standardize activities Centralize and standardize activities Leverage shared service providers Leverage shared service providers

11 Zeroing in on the Connection to Mission Objectives Federal CFOs should be working to identify – activities or work products that add value to the organization’s mission effectiveness activities or work products that add value to the organization’s mission effectiveness obstacles that exist in realigning or expanding current activities to ensure greater impact on organizational effectiveness obstacles that exist in realigning or expanding current activities to ensure greater impact on organizational effectiveness

12 Reconsideration of What’s Required Public Reporting – how can financial reports be more useful to the public, Congress, and other government leaders? Internal Controls – how can requirements better align controls with risk? Decision Support – should financial reports serve dual purpose of stewardship and information for decision-making? should financial reports serve dual purpose of stewardship and information for decision-making? can we facilitate cost accounting and other business intelligence tools to help agencies manage risks and achieve business goals? can we facilitate cost accounting and other business intelligence tools to help agencies manage risks and achieve business goals?