1. 2009 AGA Survey Department of Commerce Analysis Clifton A. Williams, CPA, Partner Shiva Verma, Director Grant Thornton LLP August, 2009

2. Agenda

• About the survey

• Maximizing value of financial management

• Annual financial statements

• What new CFOs need to know

3. About the survey

• Sponsored by AGA, supported by NASACT & fmi*igf, conducted by Grant Thornton LLP in Spring 2008

• 492 respondents

• • 168 senior executives in U.S. federal & state governments & Government of Canada (in-person)

• • Oversample of Department of Commerce executives

4. Maximizing value of financial management

• Which is the best way for a CFO to maximize value of financial management to others?

• Provide analytical support for business decisions

• Have a "place at the table"

• Understand & communicate with users

V V V

5. Maximizing the value of financial management (full survey) Internal stakeholders External stakeholders

6. Maximizing the value of financial management (DOC)

• To internal stakeholders

• Take their point of view, e.g., report plan v. actual

• Give them good, useful information & show them how to use it; after awhile, they will get used to using it.

• Communicate the value of good budget execution & financial management through regular communication

• Don't pretend that some compliance requirements are useful when they are notjust explain that they must be done for the greater good

• To external stakeholders

• Take their point of view

• The CFO is a "clearinghouse" of information requests, so there are many opportunities for influence

• Show links between financial information & customer requirements

• Be transparent; tell the truth if something is going wrong

• Many times it just comes down to relationships, so build, cultivate & maintain them with stakeholders

• Provide facts: charts, figures, anecdotes

7. Skills, insights & services that FM leaders should offer non-FM leaders (DOC)

• Provide enhanced performance reporting, not private sector-style financial statement reporting.

• Other CxOs depend on the CFO to make tough choices.

• This is currently being done by conducting analysis of their budgets, regular meetings on their status, etc. These help give non-financial leaders the understanding & focus they need to move forward. Also, other stakeholders recognize that non-financial leaders are in a dilemma & need assistance during tough financial times.

• Staffing needs to catch up with technology so that we can provide more analysis to non-FM leaders. Technology does the basic functions FM staff used to do, so we need to get better analytical skills.

• Need up-to-date, on-target information for decisionmakers

• Give guidance on what can reasonably be accomplished, given resources. Focus on ROI of new programs.

8. How can the CFO have a greater role in program management & oversight? (DOC)

• The DOC CFO is instrumental in program management & oversight. However, there is a vacuum in the experience levels of program managers, so that CFOs may be forced to play a more active management role (vs. oversight role) than they should.

• You have to convince individuals that you are doing the right thing.

• Help show the value of the programs & business lines, so that they can get resources (i.e., budgets) they need.

• Stay involved with programs through internal financial reporting; make oversight part of the analysis of plan vs. actual.

• Understand the business needs of programs, along with their missions.

• Help programs with projections, forecasts & other forward-looking data & analysisdon't simply supply historical information.

9. What new CFOs need to know: top 5 things

• Which is among the top 5 things new CFOs need to know:

• Accounting standards?

• Staff retention & development?

• Financial systems?

10. What new CFOs need to know: top 5 things (Full survey)

• Emphasize customer & stakeholder relationships & communication

• Understand entity business & program needs

• Initiate succession planning staff retention & development activities

• Trust your staff

• Establish effective internal controls

11. Top things that new CFOs need to know (sample of DOC responses)

• Customer/stakeholder relationships

• Know them all & never surprise them

• Prove your value to the programsyou exist because of them, not vice versa

• Have more details on hand than first asked forthey'll be wanted later

• Be the honest broker

• Make sure auditors listen & understand

• Understand business/program needs

• The CFO job is both financial & non-financial; be involved in both areas

• Learn unwritten budget process rules

• Need to better integrate administrative & mission needs & procedures

• Play a key role in performance management & oversight

• 3/4.Staff

• People won't stay as long as you would like; prepare succession plans

• Newer employees have a different culture & motivation than older ones

• Maintain ties with academics to recruit the best people.

• Internal controls

• Important, mentioned many times

12. Annual financial statements

• How can CFOs increase the value of the annual audited financial statement?

• Change them

• Communicate more about them

• Can't be done

13. How can CFOs increase the value of the annual audited financial statement? (Codable answers only) Response All DOC

• Change the financial statements in some way: eliminate all or parts; re-focus; more/less detail

37% 20%

• Communicate more: educate public, program managers, others about the value of the statements & how to use them

36% 50%

• No value: the statements have no value whatsoever

11% 20% Other 20% 10%

14. How can CFOs increase the value of the annual audited financial statement? (Selected DOC responses)

• Change statements

• • Benchmark results against those of other agencies.

• • Report in plain English

• Communicate more

• • If you dont demonstrate the value, then people wont give you the dollars. Need to demonstrate that you can account for the dollars.

• • There needs to be continued emphasis & communication about the importance of a clean opinion.

• • Break reports down into aspects important to customers & educate them on these aspects.

• • Individual entities do not feel connected to the annual financial statements. Each lower level feels more & more distant. The CFO should work with business line managers throughout the year & ensure that the managers see a link.

• No value

• • Most major decisions are political with financial statements providing little or no value.

• • Nothing that can be done to increase the value of the statement because it doesnt provide value. The production of the statement is value free.

15. Internal controls (2008 CFO Survey, all responses)

• Current model is SOX-based OMB A-123

• 3 out of 4 executives positive about A-123 results

• • strengthened controls over financial reporting

• • raised awareness among non-financial managers

• • results mostly financial, not mission-oriented

• Need to emphasize program efficiency & effectiveness scope :

• • Controls over mission results more important than financial reporting

• Need more integration of control activities among CxOs & program managers

• Take a risk based approach to controls

16. For more information

• Clifton A. Williams, Partner

• 703-637-2889

• [email_address]

• Shiva.Verma, Director

• 703-373-8740

• [email_address]

• To download a copy of the full report of Recovery & the Transparency Imperative (the 2009 CFO Survey), visit:

• www.agacgfm.org or

• www.grantthornton.com/publicsector