Where's the money?

Chief Financial Officers Web site

The chief financial officer — a job mandated by law in 23 agencies — has moved from the backroom to the boardroom in only a few years, helping to make government officials accountable for every penny they spend.

CFOs have created a successful track record because a complete set of financial records is now required at every agency, said Rep. Todd Platts (R-Pa.), chairman of the House Government Reform Committee's Government Efficiency and Financial Management Subcommittee. He held a hearing Sept. 15 to review how CFOs have changed the way government officials keep their financial houses in order.

Platt said Congress has seen remarkable progress since the Chief Financial Officers Act became law in 1990. "In the past, the main focus was on paying the bills," he said. "Accounting was a back-office function, and reporting was not timely or useful to management."

Not anymore, he said. Department officials are developing single financial management systems, eliminating redundancies and saving money. Witnesses at the hearing echoed his comments about the success of government CFOs.

"CFOs now have a place at the management table," said C. Morgan Kinghorn, president of the National Academy of Public Administration.

Nevertheless, the role of the federal CFO is still a work in progress, Kinghorn and other witnesses said.

Lawmakers decided to mandate an empowered, management-level CFO position at key federal agencies after finding financial improprieties at the Department of Housing and Urban Development. The CFO's role has evolved into one akin to its private-sector equivalent.

"From budgeting and funding at the front end, through cost management during program execution, to the final accounting of the disposition of expenditures, the CFO is involved throughout the entire life cycle of nearly every agency initiative," said Linda Springer, controller at the Office of Management and Budget's Office of Federal Financial Management.

Lawmakers are working to expand the CFO mandate to the Homeland Security Department. The Homeland Security Financial Accountability Act, which would mandate Senate confirmation for the DHS post, passed the House and is on its way to the Senate.

Federal CFO positions were designed as a hybrid of the best of the political and career worlds in government. Deputy CFOs are career government employees, with an institutional clout similar to that of an agency's inspector general. CFOs are political appointees, with the president's power behind them.

"The price for continued success in financial management is strong oversight and support for CFOs in the agencies," said G. Edward DeSeve, professor at the University of Maryland's School of Public Policy.

Agency officials do not need to get an auditor's opinion on their internal controls, as their private-sector counterparts would be required to do if legislation winding its way through Congress is passed.

There is also a clear distinction between the CFO and the chief information officer in both worlds, said Paul Strassmann, a former federal CIO. He said CFOs have more responsibility than CIOs.

"The CFO can be guilty," Strassmann said. "No such thing is possible for the CIO." Computer failure is to blame for technological misfires, but the CFO is to blame for financial mishaps, he said.

Springer said federal and corporate CFOs share one critical characteristic: leadership. "Successful federal CFOs possess not only financial acumen and subject expertise," she said, "but have the full range of leadership skills that are found in CFOs of well-run private-sector financial management organizations."

Clarence Crawford, CFO at the Office of Personnel Management, said he remembers how difficult it was to run a government agency without accurate financial information.

"Who would have ever thought the federal government would have audited financial statements?" he asked. "To see as much progress in accountability has been remarkable."

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To-do list for CFOs

Although federal chief financial officers have done a good job of keeping track of agency finances, improvements in the CFO's role are needed to keep government officials on their financial toes, said C. Morgan Kinghorn, president of the National Academy of Public Administration.

He said experts recommend:

Unifying the functions of the chief information officer, the chief human capital officer and the CFO.

Focusing on improved decision-making at the program operations level.

Giving CFOs a seat at the decision-making table.

Integrating financial and program data to better understand organizational performance.