Agency CFOs feel strain of impending budget cuts

Agency chief financial officers and deputy CFOs said their top three priorities and challenges all revolve around improving how their agency manages spending, a...

Federal chief financial officers and deputy CFOs are feeling more pressure to help their agencies deal with impending budget cuts.

With the White House planning to release the fiscal 2013 budget request Feb. 13, agency CFOs and deputy CFOs said in an exclusive online survey by Federal News Radio that their top three priorities and challenges all revolve around improving how their agency manages spending. Agencies expect the 2013 request to include significant cuts in across-the-board discretionary spending.

Federal News Radio conducted the anonymous survey of CFOs and deputy CFOs in November and December 2011 asking about their priorities and biggest challenges for 2012. The survey received a 25 percent response rate. Out of those who responded, 55 percent were with a Cabinet-level agency and 45 percent were with a large agency. Most CFOs and deputy CFOs (63 percent) have one-to-three years of experience, while the rest have at least four years of experience on the job. And all but one respondent said they are a career official and not a political appointee.

Jim Taylor, the Labor Department’s CFO, also joined In Depth with Francis Rose and Federal News Radio Executive Editor Jason Miller for a discussion of the survey results.

Dealing with budget cuts top priority

CFOs and deputy CFOs said helping their agencies deal with budget cuts is their top priority for 2012 with an average ranking of 1.9 out of eight choices. Respondents ranked second “helping my agency use financial data to make better decisions.” Reducing improper payments, solving data quality and integrity issues, and modernizing or improving their agency’s general ledger financial systems rounded out their top five priorities.

Taylor said CFOs understand the budget challenges the government faces and want to be the ones to solve them.

“We understand there’s a problem,” Taylor said. “We want to use the information we have available — CFOs have access to that information, they have the analytics capability in order to help managers [and] leadership make those decisions … Let’s take a look at what is important and how we can make these programs either more effective, or identify whether they’re effective at all.”

Taylor said Labor has an aggressive performance-management team, which meets quarterly with the deputy secretary to make sure programs are on track and reviews whether more or less budget is helping or hurting the programs.

Two major administration priorities — better management of real property and improving or modernizing agency grant systems — ranked the lowest among the eight choices.

One CFO said addressing risk-management issues was a high priority for them in 2012. Risk management was one of several major recommendations from a recent federal review of the CFO community in a report to Congress on how to improve the 20-year-old CFO Act.

Workforce falls short?

CFOs and deputy CFOs also worried that their workforces are not ready to help them use data to make better decisions or to figure out how best to save money. In two related questions, a majority of respondents said their workforces needed help.

When asked to describe their workforce, 73 percent said “they work hard, but fall short in some necessary skills,” while 27 percent said their workforce is well trained. Additionally, when asked about their biggest workforce challenge, 27 percent said training and 27 percent said hiring.

One CFO commented that the workforce “has the skills to utilize existing systems, but needs training to achieve full benefit of [our] new financial system.”

Another CFO said his workforce’s biggest challenge was having the “right skills mix,” while other respondent said “succession planning” was the biggest challenge.

And finally, when asked to rate priorities on a scale of 1-to-5, with five being very important, workforce training received the highest average rank of 2.7, while reducing improper payments (2.8) and cutting costs (2.82) rounded out the top three.

Taylor said, in many cases, agency workforces haven’t kept up with requirements or expectations.

“In our case, what we’re really concerned about, is trying to make sure that the staff has the skill sets that they need,” Taylor said. “And that is a combination of business analytics and the ability to do risk management — to do the kind of analysis that we need for risk management. Our assistant secretaries are craving actionable information. And that information isn’t the grant accruals that I produce every year. But they’re craving more information, more analytical information. And (those are) the skills that we really do lack in our community.”

At the same time, however, CFOs and deputy CFOs said the biggest challenge facing the financial-management community was budget reductions and too many unfunded mandates, while workforce issues ranked much lower.

While workforce training is a major concern, only 9 percent of respondents said they were likely to move their financial-management system to a shared-service provider in 2012. Just under half of the respondents, 45 percent, said they do not plan on using the Treasury Department’s electronic payment processing system in 2012 either.

CFO Act needs update

CFOs and deputy CFOs gave good marks to Treasury’s 12-step plan to improve financial management, with 46 percent saying it’s making a difference. But 37 percent said it’s moving too slowly — so there seems to be agreement and also desire for improving the federal financial management process.

In fact, 55 percent said the 1990 CFO Act needs to be updated, while 18 percent said there are some parts that need to be revised.

Three commenters said the CFO Act needs to strengthen or update CFO’s and deputy CFO’s roles and responsibilities, including making the CFO a Senate-confirmed position. Two others said they agreed with the CFO Council’s report and recommendations sent to Congress in the fall.

Finally, CFOs were unsure how the Government Accountability and Transparency (GAT) Board would affect the government. Of the respondents, 18 percent said it will improve oversight and help gain control of spending, 36 percent said it will be another bureaucratic oversight body and 46 percent said it was too early to tell if it will help or hurt.

Migrating financial management to the cloud

Perhaps one of the most surprising responses from the survey was CFOs indicating they weren’t likely to use a shared-services provider for financial management. Taylor said there are several financial implementations already under way, but that result could reflect something else.

“OMB has also really pushed back on (enterprise resource planning) approaches,” Taylor said, “the big-bang theory, that we’re going to do everything all at once.” Part of the reason for that mindset is that CFOs often plan under an assumption that funding might not come again, “so you’ve got to go for it now and get everything you can,” he added.

Taylor said the Labor Department’s switch to the cloud for its financial-management system has been a huge culture change.

For one, the system has four times as many users as the previous one, he said. The system also provides instant feedback — positive or negative. “If you don’t do something correctly, you get the error message and nothing happens,” until an employee contacts the help desk, he explained.


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