The True Financial Manager

onsider the following scenario: A group of finance officials is discussing a financial management topic such as cost accounting. The officials arrive at a conclusion, a decision and a plan of action. Then someone says, "We really should discuss this with program officials and get their buy-in."

When the finance officials talk to their program counterparts, they find little interest among program officials unless it directly affects their day-to-day operations. Finance officials go away frustrated that they can't communicate with their program counterparts.

The federal government labels accountants and those who work with them "financial managers." As financial managers, they process transactions, oversee internal controls and provide financial information. Since these activities have become computerized, the number of financial managers (i.e., accountants) can be reduced-or so goes the dogma. The people doing the "real work" of government are the policy and program officials who make loans, perform research, inspect food products, etc. However, lines of demarcation are not so clear.

Program officials are also frustrated. They are frustrated that they do not have enough money, people, information and other resources to provide service to their constituents. Most lack information, analysis, projections and evaluations to make the many money-oriented decisions they face. More and more, program officials raise questions about program costs, availability of funds, aging of receivables, costs of opening and closing offices, and other issues. Unfortunately, too often the information is not available.

Program management and financial management are inextricably intertwined. As quoted in the 1993 Office of Management and Budget booklet, Financial Management for Program Managers: Accountability in Federal Program Operations: "Financial management is not the exclusive domain of Chief Financial Officers and their subordinates. As the Chief Financial Officers Act of 1990 (CFO Act) makes clear, agency heads and program managers are equally accountable. No less important are the demands of the American people for accountability and demonstrated results. That also makes a dynamic partnership between program and financial managers especially critical."

Most policy and program activities have financial implications, and all financial decisions are made by policy and program officials. Decisions about making a loan; initiating research; expanding inspection; changing health care standards; relocating or closing an office; hiring, firing or promoting an employee; procuring goods and services; and hiring a contractor all have financial (resource) implications. Policy and program officials make these decisions. Consequently, they are the true financial managers. This is even truer since enactment of the 1993 Government Performance and Results Act, which emphasizes outcomes and impacts of federal programs rather than inputs and outputs.

Changing Roles

Viewing program officials as financial managers changes the federal management paradigm. The typical program official does not have the skills or time for financial analysis and evaluation, yet he or she needs the information. The financial official must provide the wherewithal to support good decisions by policy and program personnel. It is such a partnership (emphasized by the Chief Financial Officers Council) that will enable the government to improve services to program recipients and taxpayers.

However, saying that program officials are financial managers does not define the realm of knowledge and skills they need for such a responsibility. Financial management is broad. For example, a program official dealing with a major loan portfolio requires knowledge of delinquency rates. Another official dealing with a large real estate portfolio needs to know deferred maintenance costs. Financial information and skills must be tailored to the varying needs of program officials.

Most program officials do not need to understand the intricacies of debits and credits or accounting policies and standards established by the Federal Accounting Standards Advisory Board. They do not use annual financial statements for day-to-day decision-making. However, program officials must have reliable, accurate and timely information. They have a vested interest in assuring that the processes that generate financial and program information are efficient. Program officials need finance officials to help them obtain and use information to do their jobs.

Not Just Number Crunchers

If program and policy officials are the financial managers, what is the role of accountants and others who have traditionally held that title?

Accountants and other finance officials must be directly involved in program activities, not off to the side doing "accounting things." They must move away from transaction processing to analysis, design, forecasting, evaluation and guidance. Finance employees should support and enhance program plans, program design, legislative response and interpretation of results.

The shift to analysis is inevitable as computers handle more and more of the transaction processing. The risk of computers is that policy and program officials receive too much unusable data and not enough useful information. A key role of the financial staff is to translate raw data into usable information. With this shift, financial personnel will become more critical to the delivery of public services. Financial personnel must add value to program delivery.

Financial officials also have a critical role in implementing the Government Performance and Results Act. They are needed to help develop strategic plans and performance goals and measures. They can develop useful analyses and reports comparing planned to actual results.

In fulfilling their roles in analysis, financial officials must better understand the programs being delivered and the relationships between program results and resource needs. There is no such thing as "one size fits all" information. The program, its characteristics, sensitivity and customers determine that information.

Agencies are striving to break down the artificial boundaries between program and finance officials. For example, one agency is moving personnel with program expertise into key administrative and financial positions. Also, program officials are serving on financial review boards; financial, information technology and program employees evaluate IT capital investments; and financial personnel are being detailed to program agencies.

Learning More

A few public and private institutions have attempted to provide courses for program managers in financial disciplines. Unfortunately, those courses tend to be limited to budget topics. The Federal Executive Institute, Senior Executive Service Candidate Development Programs and other career development programs should incorporate significantly more financial management into their program structures. The Agriculture Department developed a seminar titled "Financial Management for Non-Financial Managers" to help program executives understand their role as financial managers.

Finance officials face similar challenges. Finance officials must rapidly broaden their capabilities by hiring people with a blend of skills, by striving to understand more about their agencies' programs and by expanding their own education and training. Further, they need much more background and experience in analytical and evaluative techniques to be in a better position to advise their program counterparts.

Perhaps program and finance officials can trade roles for a while, or headquarters personnel can work in the field and vice versa. The opportunity to walk in each other's shoes may be the best education.

Irwin T. David is deputy chief financial officer at the Agriculture Department. This column is excerpted with permission from his article in the Winter 1997 issue of Government Accountants Journal, published by the Association of Government Accountants.