Born-Again Financial Management

nteragency cooperative teams sometimes work effectively in a crisis, but rarely function well over a sustained period. There are many examples of interagency councils and committees that began with lofty intentions but withered away.

The Chief Financial Officers Council, established by the 1990 Chief Financial Officers Act, was well on its way to becoming one of those moribund teams by the end of 1992. Today it is thriving, providing cooperative leadership, along with the Office of Management and Budget and the Treasury Department, in implementing some of the most far-reaching bipartisan government management reforms ever enacted-the 1993 Government Performance and Results Act, the 1994 Government Management Reform Act, and the CFO Act itself.

What's the story behind the CFO Council's revival? Can the Council sustain its success?

Creation and Insurrection

The passage of the CFO Act in 1990 came as something of a surprise. Various drafts of the bill had been introduced in Congress for years. But since legislators generally considered management reform about as exciting as sorting cranberries, there was little expectation it would pass. When it did, each department and several large independent agencies quickly had to appoint chief financial officers. In most cases, a political appointee already in place (usually an assistant Secretary for management or administration) got the new job. Some of these appointees had financial management backgrounds, but many did not.

To get the new financial officers to work together, the law created a Chief Financial Officers Council, to be chaired by the OMB deputy director for management. But by the end of 1992, council meetings were reduced to briefings by staffers from OMB's Office of Federal Financial Management (also created by the 1990 law), with minimal interest and support from the agency CFOs.

The start of the Clinton Administration in 1993 provided an opportunity to fill agency CFO positions with political appointees with financial management backgrounds. Phil Lader, then the deputy OMB director for management, along with Ed Mazur and Hal Steinberg, former OMB controller and deputy controller, respectively, worked with White House staffers to get qualified financial people into CFO jobs. For the most part, they succeeded.

Appointing qualified CFOs did not automatically forge them into a team, but an initiative begun by several CFOs and deputy CFOs, both career and political, jump-started the process. The group included Dennis Fischer, General Services Administration CFO; Education Department CFO Don Wurtz and his deputy, Mitch Laine; and Treasury CFO George Munoz and his deputy, Ed Verburg. They met to discuss opportunities to transform the passive CFO Council into a vehicle for more active cooperation among agencies dealing with common problems. They discussed their ideas with OMB officials and other members of the federal financial management community. Then, at an informal lunch with the CFOs and deputy CFOs of several departments held at the Education Department in early 1994, the group outlined a strategy to transform and re-energize the CFO Council. Their recommendations:

• Council membership should be broadened to include both the CFOs (mostly political appointees) and career deputy CFOs, to insure cooperation and continuity of effort beyond the average two-year tenure of political appointees;

• The council should elect other officers besides the chair-the OMB deputy director for management-mandated by the legislation. The new positions would be executive vice chair, vice chair for programs, vice chair for legislation, and secretary-treasurer. While the executive vice chair would always be a political appointee, the other positions could be either career or political officials.

• The council should set the agenda for monthly meetings in coordination with OMB staff, rather than simply being informed of the agenda.

The CFOs agreed to propose the plan-some called it an insurrection-at the next CFO Council meeting in March 1994. Munoz alerted OMB's Alice Rivlin, who was at that time chairing the CFO Council. She immediately supported the plan and asked OMB staffers to assist in making the changes.

The publication in late March of a report to the National Performance Review on improving financial management provided further momentum for remaking the CFO Council. While most such reports were delivered with a "Dear Colleague" letter signed by the leader of the team that developed the report, copies of this one were delivered to all members of the CFO Council with a letter signed by Vice President Gore. It was the only instance in which the Vice President sent a letter transmitting an accompanying NPR report. Gore wrote, "I was very pleased to learn of your efforts currently under way to work together to strengthen the council's active role in helping to resolve long-standing financial issues facing the federal government."

In April, the council held a two-day retreat during which the initial slate of officers was elected. Since then, cooperation among council members, including providing resources to accomplish common projects, has accelerated. Examples of CFO Council efforts to help implement the Government Performance and Results Act (GPRA) and the Government Management Reform Act (GMRA) provide a flavor for what's happening.

Performance and Results

GPRA, like the CFO Act, passed with strong bipartisan support. It is the first legislatively mandated attempt to measure outputs and outcomes of federal programs. The traditional method of implementing this (or any) law would have been to tell an overworked staff member at OMB to develop draft implementation guidance, send it to agencies for comment, decide which comments, if any, to use, and then issue final guidance for further reinterpretation by each agency. Information about how to implement the law, and about its relation to other reform efforts, would have been rather general, if given at all.

The CFO Council tried a different approach. It established a GPRA Implementation Committee, chaired by Sallyanne Harper, acting CFO at the Environmental Protection Agency, to develop a handbook for CFOs and nonfinancial managers alike explaining the law and the steps needed for its implementation. Thirty-two committee members from fifteen agencies (including OMB and Treasury) collaborated in developing this highly readable 29-page guide, published in May 1995. The handbook increases the likelihood agencies will consistently implement the law and explains how the law relates to other management initiatives.

Management Reform

GMRA presented another challenge for the CFO Council. The law permits consolidation and streamlining of the many reports agencies are required to submit to Congress. The goal of consolidation is to pare these reports down to two-an Accountability Report and a Planning and Budget Submission-which can meet both agency and congressional needs.

The CFO Council formed a committee of fifteen people representing nine agencies, led by the Veterans Affairs Department's deputy CFO Frank Sullivan, to work on GMRA. The committee has been developing the reports in collaboration with OMB Controller Ed DeSeve and Treasury officials. Since the reform law passed two years ago, the group has identified six agencies developing pilot versions of the reports: Treasury, VA, the General Services Administration, NASA, the Nuclear Regulatory Commission and the Social Security Administration.

GMRA also includes a section on franchise funds, which are revolving funds used to support an administrative service that an agency offers to other agencies on a cost-reimbursable basis. The law provides for pilot franchise funds at six agencies to test the idea of expanding entrepreneurial efforts within government. As OMB's current deputy director for management, John Koskinen, recently commented, "not every agency has to use their own staff to do everything."

A subcommittee of the CFO Council, chaired by Clyde McShan, Commerce Department deputy CFO, collaborated with a National Performance Review planning committee and OMB staff member Mike Wenk to recommend which agencies should start pilot franchising projects. As of late March, OMB had accepted five of the six CFO Council recommendations and congressional approval of the choices, as required by the law, was imminent. The five agencies are the departments of Commerce, Interior, Treasury, and Veterans Affairs and the Environmental Protection Agency. The sixth CFO Council recommendation was still under review at OMB.

In addition to its work on GPRA and GMRA, the Council has been developing amendments to strengthen the 1982 Debt Collection Act with new debt collection tools; assisting an OMB-Treasury-General Accounting Office task force implementing governmentwide audits; expanding efforts to develop electronic commerce tools; developing core competencies and standards for CFO-type positions; and coordinating development of financial systems able to meet the federal accounting standards being completed this year.

OMB's Koskinen has strongly supported the CFO Council. From his experience in private industry, Koskinen values the ideas and enthusiasm of people who must deal with actual results daily. He says decisions, policies and follow-through improve when implementers are involved from the beginning. Koskinen has only modest resources at his disposal, but he has tremendous leveraging opportunities through the many interagency councils he chairs. That approach is clearly working with the CFO Council, which can serve as a model for other interagency efforts.

Teams like the CFO Council, with talented and dedicated players, do not require over-coaching. The council's success can be sustained as long as leaders who support its recommendations are in key positions at OMB and Treasury.