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How CFOs Should Prepare for Agency Reform

US government agencies are under pressure to produce 'agency reform plans' by June 30 to show how they can run their organizations for less money; CFOs have a critical role to play

As far as politicians’ promises go, telling the public that you’ll reform the public sector is hardly a original line. Yet, the Trump administration has made it a particular focus of their first term.

They started by issuing a government-wide hiring freeze on the president’s first day in office (with exceptions for certain positions), and only lifted the freeze by issuing OMB M-17-22 on April 12. This memo also asked executive departments and agencies to create an “agency reform plan.”

Agencies must outline a plan for eliminating activities, restructuring or merging activities, improving organizational efficiency and effectiveness, and improving workforce management. It’s a far more ambitious endeavor than what has come from previous administrations, and there’s not much time to get it done. Agencies are required to provide the US Office of Management and Budget (OMB) a high-level draft of their agency reform plan by June 30.

Three Steps to Prepare

Federal CFOs will play a critical role as agencies prepare their agency reform plans. There are three steps they should take to get ready.

  1. Use enterprise risk as a framework for evaluating services: As agencies are asked to eliminate or reduce services, a key element that they must consider is risk. A decision to reduce or eliminate a program or service that subjects the agency to undue risk could have disastrous consequences, both for the agency and the citizens it serves.

    CFOs can use their agency’s enterprise risk profile as a framework to decide what (or what not) to include in their agency reform plan. For instance, one finance team in CEB’s networks used a risk tolerance frontier, which they created through interviews with business unit leaders. This process illustrated the impact of enterprise risks on the organization and its mission (see chart 1).

    This helped the team understand which services needed additional resources to mitigate unacceptable risk and, just as importantly, it showed where they could afford to take on more risk and divert resources.


    Chart 1: Risk tolerance frontier process  Illustrative  Source: CEB analysis


  2. Assess the finance function: In addition to helping their colleagues, CFOs will have to evaluate their own finance function. OMB M-17-22 identified financial management as one of several mission-support functions where agencies “should look for greater efficiency while maintaining or improving quality.” CFOs can use the Ignition™ Diagnostic for Government Finance to help with this.

  3. Revisit your finance talent strategy: The agency reform plan requires agencies to “take near-term and long-term steps to reduce the size and cost of the federal workforce.” This will require them to improve how they hire, train, and retain talent.

    Federal finance functions have increasingly been called on to shift focus from “governance” activities to “guidance” activities. This means that finance staff will have to develop a new set of skills to get their jobs done. Focusing on guidance activites – such as being a business partner or decision support partner – can help the finance function be successful despite increased resource constraints.

 

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