The Evolving Role of Government Financial Executives

For most parts of history, government financial executives have been taken as scorekeepers, and made responsible for collecting, processing and reporting the financial information that used by elected officials and senior managers who use them in making their decisions. The question is whether their role has now changed with the present importance of information technology. (From Scorekeeper to Business Partner: The Evolving Role of Government Financial Executives)

Now there is increasing evidence of the importance that information technology is getting in public administration and this is resulting in more and more insistence from the public that government financial executives have a greater say in all decision making activities of the government. The finance executives are now the individuals to lead the charge for getting an entrepreneurial type of government and have it judged based on its performance.

For most of the finance executives now, the changes are leading to redesigning of entire processes related to finance, introducing best practices for financial management, improving and integrating financial management with other information management and in certain cases even shifting the responsibility of all financial operations to outsiders. The trend is now to change finance functions in a manner that control functions for financial expenditures are built into non-financial processes so that the non-financial manager also has to take up responsibility for the activities.

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From Scorekeeper to Business Partner: The Evolving Role of Government Financial Executives) This provides a lot more freedom to the finance experts to use their expertise for the purpose of finance. The attempt here is not to demean the traditional duties of government financial executives, as it is always important to comply with accounting and financial reporting that is required, make correct cash reconciliation and process all financial transactions in time.

Yet, these activities were generally thought to be only the regular duties of the finance executives. (From Scorekeeper to Business Partner: The Evolving Role of Government Financial Executives) There are also finance officers at different levels and the state or provincial level executives who are the link to the local finance officers from the top.

They meet rarely - generally once a year during annual conferences of some type or the other. The importance of these executives is in the fact that they represent their association at official ceremonies. (State and provincial representatives (Profiling GFOA)) The importance of financial officers is being increasingly recognized and in the preface to the GAAFR 2005, which is the set of guidelines to be followed.

There are the summarization and specific revisions as also updates of the text of the 2001 edition: there is addition of all the amendments that were earlier included in the GAAFR Update supplement; there has been addition of new material which are connected to the GASB statements from 39 through 45; there has been addition of new material based on the guidance that had been given in the comprehensive implementation guide as given in the GASB 2004; that included a guidance that was given for the first time in relation to GASB statement 40; there was addition of a new section related directly to all school district issues; there was reworking of a significant number of chapters; the set of references to original material was increased to a large extent so that research on the subject could become easier; an expanded and revised glossary and a redesigned index. (Making the most of the New Blue Book) Thus the importance of the finance executives in operation of the government is certainly realized and steps are being taken to help them in operation of their functions.

This is because of the present importance of the functions of the finance executives which helps the government in various ways like helping operation managers develop the financial parts of business cases and proposals for new or expanded services; leading efforts to reposition and increase the funding sources which have not been appropriated like fees, rents, royalties and franchises; provide guidance for financing new and original ventures like setting up of revolving funds, getting into public and private partnerships, or even setting up of fee for service arrangements; help performance based management; to activate a level playing field for the competition between government and the private sector.

From Scorekeeper to Business Partner: The Evolving Role of Government Financial Executives) Sometimes the finance executives are placed in situations beyond their capability and these results in many problems. One of the instances when this sort of event occurs is in situations when the elected person leaves it to the finance person to manage the affairs in even the small cities. Even they have become multi-million dollar enterprises today. The elected person may have been a merchant, homemaker, lawyer, community activist or anything else, but in general they have little understanding of public finance. This makes them rely on the administrators or auditors that they have in their organization.

This is what happened in Orange County, California and the faulty investment strategy of the treasurer led to losses for the county of well over a billion dollars. The budget that is presented may be balanced, but that does not mean that the collection and disbursement of money is in proper order. (Guarding the Public Checkbook) In certain cases, for balancing the budget, easy methods are adopted; the money is drawn from reserves. This withdrawal can be done only once, yet the city of Miami followed this process for many years as the city had deficit operations and used bond collections to cover it up. The important matter is that the budget be balanced through the use of current revenues only.

This can be understood by looking at the general fund balance sheet and the total requirement checked and the collected resources should exceed the requirements. Any management of a public corporation should be adding to the funds and not decreasing the funds by drawing from it. (Guarding the Public Checkbook) This is the primary responsibility of finance executives as they are able to understand financial statements the best.

Yet problems of this nature keep on happening and a Senator in United States was shocked to learn that District of Columbia had received an unqualified audit opinion though it had a deficit as high as $700 million. The reply from the audit firm was that the financial statements were presented properly and "in accordance with generally accepted accounting principles". Guarding the Public Checkbook) Thus the matter should have been determined by the accounting executives and brought to the notice of the people as it is their funds that are not in order.

The job of the leadership is to decide where the body has to be taken, and the finance executives have to determine what is happening to the revenue base, what are the major problems for the body, what are the implications of the changes that have been made, and so on. When the issue of Orange County bankruptcy hit the headlines, the final truth was revealed that both the chief administrator and the treasurer did not know much about finance. This should have been mentioned by them and the decisions left to better qualified individuals. These sorts of problems come up when the recruitment and hiring processes are not correct.

Otherwise someone should have realized that it all right to hire individuals who are not financial experts, but every organization must have at least one individual with that capacity. It is clear that elementary oversight must be practiced. In the case of Orange County, supervisor Bill Steiner clearly admitted that he did not know what questions he should have asked, and this finally made him an accomplice in the whole unfortunate affair. It is important that individuals in charge of recruitment develop the knowledge of asking relevant financial questions. Even when the problem was noted, another mess was nearly started when the county thought of using a sales tax increase as their method of getting out of the situation.

The county had fallen into a position where it had to decide on privatization, program reduction, asset sales, etc. the county was trying to take a simple way out. It is clear today that the increase in tax was neither intelligent nor needed. The best advice for the county was to file for financial bankruptcy and this was provided by the Board of Supervisor, Thomas Reilly. (Guarding the Public Checkbook) It is clear that finance executives have an important role and they must live up to the expectations of the people who they are serving. However, like all other government officials, even accounting personnel have to provide leadership and one such case was in the disaster recovery effort after the Hurricane Ivan had struck northern Florida.

They were a team of six high level managers who are normally accustomed to working in nice offices in a large organization. They had to toil from dawn to dusk in very high temperatures with steamy weather and there was no electricity. There was no fresh water and not a place for them to take a break. They had to do a lot of physical labor and adequate tools were not available. The food was just peanut butter, cheese from a tube, apples, and candy bars - and this was the same food for all three meals. Sleep was in the back of a cramped vehicle and that had no air-conditioning, and go through the same schedule for a few days. Yet in spite of all the difficulties the team were focused on there jobs, with cooperation and high enthusiasm.

Yet the reasons why they had come were not due to government duty, but with the purpose of helping a colleague whose home had been badly damaged. (Unlocking the potential of Your Employees) The main story about all this is that the secret of making people work with a will is treating them like trusted and valued adults. They can work the best when there are clear goals and expectations with autonomy, feedback and appreciation. At the same time, it is essential that the leaders also show a certain amount of enthusiasm and human touch. The leaders have to continue working with the same energy and dedication while relinquishing some amount of control and authority.

The attitude of the leaders to others must be one of empathy, or fellow feeling. On top of everything, no leader should feel that the leader knows best about all matters, and be ready to apologize when they make mistakes. These are certain behavioral techniques that help in getting the best help from employees. (Unlocking the potential of Your Employees) This appreciation of leadership role is useful to the chief financial officers and finance directors who are no longer being viewed as only scorekeepers but as trusted business advisors and partners. In the private sector, this change has been going on for quite some time, but it has started only recently in the government.

This also determines the role of the financial executives and they have to spend most of their time in determining the correct strategic and operating decisions and spend much less time in earlier operations which used to take up a lot of time - like account reconciliation, payment processing and historical financial reporting. This is all being done in the machine, and thus the shift of the emphasis of the finance executive's direction is not requiring extra employment. (From Scorekeeper to Business Partner: The Evolving Role of Government Financial Executives) As a matter of fact, the size of employees in the finance function will reduce. The change in the role of the finance executive is occurring in all organizations.

Considering the development that has taken place over the last few years, it is important for financial executives to strike a balance between their roles as score keeper and adviser. What is meant by balance is that the regular work also has to be finished, and at the same time take up a more important role in organizational development. The results of this change in the government organizations can be seen through improved budgetary processes that are now beginning to link funds allocation to performance achieved, innovative methods to recover administrative costs, and increased use of technology to reduce the need for reconciliation and useless data entry. The help from technology is high in the areas of account reconciliation, payment processing and historical financial reporting.

From Scorekeeper to Business Partner: The Evolving Role of Government Financial Executives) One of the important measures of finance officers in local governments is now performance measures and that is driven by increasing demands from citizens for government accountability, increased interest from local legislators regarding performance related information so that better evaluation can be made of programs as also for resource allocation and the efforts from different organizations and professional associations to make governments targeted to results. The performance measures allow policy makers, managers and the general public find out the effectiveness of government services.

The measurement of performance takes into account the resources used, the activities generated by the programs and the final results obtained from the programs and services. However quite a few of the performance measurement activities are limited to only measuring program inputs and outputs. (Performance Measurement) On the other side, correct methods of performance measurement should also talk about the program results. From the side of the government, the Governmental Accounting Standards Board or GASB has been concentrating on performance measurement from the early 1980s. As a result of this concentration, there was a series of research reports called "Service Efforts and Accomplishments reporting" that was issued for the help of governments in measuring performance.

This was followed up in 1994 with the second statement on the same lines. This stated that "service efforts and accomplishments information - including both financial and non-financial performance measures - is an essential aspect of the measurement of governmental performance and is necessary for assessing accountability and making informed decisions". (Performance Measurement) It is important for government finance executives to tell the truth and not hide it for presentation purposes. An example is in the case of Oregon where the proportions of adult Oregonians who are smokers are only 20. 7 percent when in the rest of the country the same ratio is 23. 2 percent.

Yet, they were not felt to be enough in Oregon as the state had fixed a target of 15 percent to be achieved by 2000 and this was fixed in the year 1989 by the benchmarks program in the state. While fixing the target, the committee was anything but realistic as this sort of non-smoking does not exist in United States. This is a matter that should have been properly discussed at the time of setting up the targets. The targets were set in all areas with direct goals to be reached - in health, education, economic development, environmental policy and so on. (The Problem with promises) The decision was taken that the state government would try to reach these targets within ten years.

The decisions for allocation of funds and other matters were then to be made according to the achievements of targets. In one of these instances, the state wanted to reduce the use of drugs among students of the eighth standard to 3 percent from the original figure of 14 percent. Some time later it was realized that the target would not be reached, and then the solution sought for the problem was to change the target to 15 percent from 3 percent. At the end of the period, the proportion of users was 14 percent - the same as at the start of the plan - but it was viewed that the target has been reached. (The Problem with promises) These types of efforts by the accounts officers are just efforts to hide the truth and do not help any part of society.

The importance of being truthful has been realized by the National Performance Review and they have stated that "effective entrepreneurial governments insist on customer satisfaction. They listen carefully to their customers - using surveys and focus groups - and restructure their basic operations to meet customer needs. They use market dynamics such as competition and customer choice to create incentives that drive their employees to put the customer first". (Linking Quality to Business Planning and Performance Goals in Local Government) The importance of government finance officers are best utilized when they end up providing the truth to the public.

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