High performance in federal financial management: moving from the back room to the board room

1. High performance in federal financial management: moving from the �back room� to the �board room� Denver Chapter - Association of Government Accountants April 19, 2011 KPMG LLP

2. Federal accountability and transparency � The words of President Obama �Those of us who manage the public�s dollars will be held to account � to spend wisely, reform bad habits, and do our business the right way � because only then can we restore the vital trust between a people and their government.� Barack H. Obama, President of the United States, January 20, 2009

3. The journey to high performance in federal financial management Federal financial organizations have come a long, long way over the past two decades. Their role continues to become more relevant to their agencies� missions. The 2008 AGA Annual CFO Survey, Financial Management: Providing a Foundation for Transition, revealed a desire to further evolve the role of the CFO and finance organization.

4. Results of AGA�s 2008 survey The finance organization is pushed into a chief accountant role as opposed to an executive leadership position more consistent with the private sector. Too much time is spent on obtaining an unqualified audit opinion. Mission priorities get the back seat to compliance efforts There are steeper compliance requirements with smaller rewards.

5. We will explore How an entity can involve its financial organization to move the finance organization From . . . the �back room� of transaction processing and compliance or value preservation To . . . the �board room� of decision support with a seat at the table or value creation.

6. Moving from the �back room� to the �board room� � the basic premise Federal CFOs have many roles to play, and success depends on having a solid foundation from which to grow. To provide value across the organization, Federal CFOs need to: Be high-performing financial managers Have working partnerships with program managers Be strategic advisors How do they do this? Strategic decision making where the CFO is a respected and trusted business partner To be high performing, CFOs should go well beyond the basics of financial mgt that is typically associated with CFOs. All these point toward the CFO being an integral part of the management infrastructure of the organization---CFO Act and companion legislation, OMB and GAO guidance, experience in leading organizations 3 most important parts of CFO Act provisions call for the systemic measurement of performance, the development of cost info, and integration of systems---budget, program, and accounting The end game of the CFO Act is information to support the efficient and effective mgt. of government and stewardship better and more accurate info to decision makersTo be high performing, CFOs should go well beyond the basics of financial mgt that is typically associated with CFOs. All these point toward the CFO being an integral part of the management infrastructure of the organization---CFO Act and companion legislation, OMB and GAO guidance, experience in leading organizations 3 most important parts of CFO Act provisions call for the systemic measurement of performance, the development of cost info, and integration of systems---budget, program, and accounting The end game of the CFO Act is information to support the efficient and effective mgt. of government and stewardship better and more accurate info to decision makers

7. KPMG executive guide to high performance in federal financial management Summarizes extensive research that represents the range of roles and activities that typically characterize a high-performing federal finance organization Draws content from authoritative sources of law, guidance, and information that include: Office of Management and Budget Department of the Treasury Government Accountability Office Representative federal CFOs and government financial management leaders

8. Executive guide objectives Promote a common understanding of what is necessary for a finance organization to be high performing Engender a much greater appreciation of the finance organization Foster stronger partnerships with finance across the agency Assist a finance organization in assessing its performance The usefulness of the Guide. The usefulness of the Guide.

9. High performing federal finance organizations operate in three areas of responsibility Dimension 1 � Finance Operations: Performs basic finance functions with a high degree of effectiveness and efficiency. Dimension 2 � Program Operations: Supports the achievement of the agency�s programs with reliable, relevant, and timely financial information and analysis, an effective and efficient internal controls. Dimension 3 � Enterprise Operations: Demonstrates leadership as a key member of the agency�s senior leadership.

10. The KPMG federal financial management framework Framework: A multifaceted framework for depicting the breadth and depth of the finance organization through its reach (or influence) across the organization (columns) and the roles associated with that reach (rows) High Performance: When the finance organization is able to do most or all of the activities within a role well, the finance organization can be considered high performing in that area. Assessment: To assist entities with assessing their performance, KPMG developed the �KPMG Executive Guide to High Performance in Federal Financial Management.� To depict the various roles of the CFO we developed the FFM Framework. Discussion of Framework columns and rows and dimensions. To depict the various roles of the CFO we developed the FFM Framework. Discussion of Framework columns and rows and dimensions.

11. Finance operations dimension Walk audience through the guide over the next 3 slidesWalk audience through the guide over the next 3 slides

12. Finance operations dimension (continued) Driving performance through strong finance strategy and sound governance Share finance strategy and vision across the agency Establish governance that avoids stovepipes and empowers financial personnel Continually improving financial operations based on recognized leading practices Optimize use of technology Establish proper balance of internal control

13. Finance operations dimension (continued) Assessing and cost-effectively managing financial risk across the finance function Implement a formal risk management program Enhancing stakeholder confidence through effective Budget execution Forecasting Financial and managerial reporting Regulatory compliance

14. Program operations dimension

15. Program operations dimension (continued) Supporting the assessment and cost-effective mitigation of program risk Manage to acceptable level of risk Develop risk mediation plans Enhancing stakeholder confidence through compliance with selected laws and regulations Improper payments Debt collection Federal Funding Accountability and Transparency Act American Recovery and Reinvestment Act of 2009

16. Program operations dimension (continued) Helping drive performance through strategic and operational planning and performance management Use quality financial information to make informed decisions Continually supporting the improvement of program management Manage for results Provide training and tools Establish internal controls Manage contracts, grants, and assets Utilize cost accounting

17. Enterprise operations dimension

18. Enterprise operations dimension (continued) Helping drive performance through leadership and entity-wide strategy Involve finance organization in strategic decisions impacting the entity Continually improving budget formulation Ensure budget ties into agency�s strategic plan Verify that cost estimates are reasonable Perform independent analysis and approval of business cases supporting budget request Forecast impact of new programs and changes to programs

19. Enterprise operations dimension (continued) Continually improving capital planning Integrate organization goals into capital decisions Use investment approach to analyze and select capital programs Balance budgetary control and managerial flexibility Use project management tools that optimize projects for success Continually improving cost estimation Develop cost-effective cost estimation methods Prepare and verify cost estimates

20. Enterprise operations dimension (continued) Assessing and cost-effectively addressing enterprise risk Enhancing shareholder confidence through actions such as identification of emerging issues Analyze financial and economic trends Assess impact of demographic and other changes on programs Understand and consider technology innovation Monitor financial impact of proposed legislation Attentive to agency�s customers, stakeholders, and partners

21. Final thoughts Financial management is everyone�s responsibility High performance in financial management means: Doing everything in the finance operations dimension, or the �back room�, exceedingly well to preserve value and to provide the foundation to create value. Forming partnerships between finance and program managers, who have the ultimate responsibility for the range of activities covered in the program operations dimension. Being at the table in the �board room� at the enterprise level where finance is a trusted strategic advisor.

22. References Association of Government Accountants, Financial Management: Providing a Foundation for Transition, July 2008 (AGA Annual Survey of Federal CFOs) Journal of Government Financial Management, Spring 2009 Vol 58, No. 1, Taking the Next Steps to High Performance in Federal Financial Management, by Jeffrey C. Steinhoff, CGFM, CPA, CFE, Executive Director, KPMG Government Institute, and Laura Price, CGFM, CPA, Partner, KPMG LLP The KPMG Executive Guide to High Performance in Federal Financial Management, KPMG LLP, authors Laura Price and Jeffrey Steinhoff The CFO Act Turns 20 Years Old: As We Blow Out the Candles, Where Are We Today and Where Do We Go From Here?� by Jeffrey C. Steinhoff and John R. Cherbini, MBA, CGFM, CPA, National Partner in Charge Advisory Services, KPMG LLP, AGA Journal of Government Financial Management, Winter 2010 �From the Back Room to the Board Room: Federal CFO Role in Managing the Cost of Government,� by Jeffrey C. Steinhoff and Laura A. Price, The Public Manager, Spring 2011

23. KPMG Government Institute The KPMG Government Institute was established to serve as a strategic resource for governments seeking to achieve high standards of accountability, transparency, and performance. The Institute is a forum for ideas, a place to share leading practices, and a source of thought leadership as a catalyst to help governments address difficult challenges.� For more information: kpmginstitutes.com/government-institute Jeffrey C. Steinhoff, Executive Director, KPMG Government Institute

24. Contact information Brett Hanselman KPMG LLP 303 382 7079 bhanselman@kpmg.com www.kpmg.com All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

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