Transcript Document
AGA Montgomery Chapter CGFM Exam Review Presented By Steven H. Emerson, CPA, CGFM, CGAP, CFE, CITP, CGMA CFO Responsibilities Chief Financial Officer may be chief fiscal officer, finance director, comptroller or treasurer. In Federal Agencies Often appointed In State Agencies Often elected The Chief Financial Officer Act of 1990 Codifies the federal CFO’s role Primary duties of the federal CFO Ensure effective accounting and financial systems are in place Ensure adequate financial management activities and operations are designed and implemented by a well-qualified staff Prepare annual financial reports Identify budget requirements and monitor budget execution CFO Responsibilities - continued The CFO at the state level is usually grounded in laws and regulations, as with the federal level. The State of Florida devotes an entire chapter of their state code Chapter 17 of Title IV, with 66 articles Florida’s CFO is elected Florida law echoes the CFO Act of 1990 for federal CFOs States and local entities “tailor” the CFO role to suit their needs Florida CFO responsible for statewide toll-free hotline as well as check cashing for state employees Florida CFO and staff provides accounting and payroll services on a fee basis to any college, local government or other entity that receives state funds CFO Responsibilities - continued Chief Financial Officer Act of 1990 Agency CFO’s responsibilities include: Developing and maintaining integrated accounting and financial management systems Directing, managing and providing policy guidance and oversight of all agency financial management personnel, activities and operations Approving and managing financial management systems design and enhancement projects Developing budgets for financial management operations and improvements Overseeing the recruitment, selection and training of personnel to carry out agency financial management functions Implementing agency asset management systems, including systems for cash management, credit management, debt collection, property and inventory management and control and cost estimating Monitoring the financial execution of the agency budget in relation to actual expenditures CFO Responsibilities – continued Local Government CFOs Duties are often defined by state statutes and elaborated in local charters and ordinances Responsibilities are similar to their state and federal counterparts The local CFO may personally perform a wider range of tasks The local CFO may personally prepare the entity’s budget and financial statements and reconcile the statements to the budget CFO Responsibilities – continued The City of St. Louis, MO Their fiscal officer (comptroller) is elected The City Charter Stipulates the annual salary of the fiscal officer Requires the incumbent be bonded for $300,000 The fiscal officer Serves as general accountant and auditor Records all special tax bills and liens Has the power to administer oaths Has overall charge to “preserve the credit of the city” Leadership Role The CFO Ensures the entity conforms with all laws and regulations pertaining to management of public resources The role is complicated by intergovernmental grants and shared revenues Results in multiple sets of rules and requirements Operates as a trusted advisor Develops and “markets” a vision that demands quality and attracts and retains qualified and motivated personnel to the financial function and the organization as a whole Leadership Role – continued The CFO – continued Creates an atmosphere that eliminates impediments and promotes innovation, collaboration and cross-servicing Establishes and maintains integrated accounting and financial management systems Provides timely and cost-effective reports, analyses and advice to managers, clients, legislators and other decisionmakers Helps agency personnel and clients restructure their work processes to improve financial management and the quality of financial data Promotes strategic planning and performance measurement and reporting Support Role CFOs Support programs and program managers Assist other managers as they: Work to identify and control risks Obtain and classify program data Weigh trade-offs in resource investments Implement new technology Support the CEO in all areas of budget and finance Advises the CEO on critical questions such as: Are revenues keeping pace with budgetary estimates? Are expenditures aligned with appropriations? How will broad economic factors impact future revenues and demands for services? May testify before legislators or provide other expert advice Role of Financial Management Systems A Financial Management System Organized means for the collection, processing, transmission and dissemination of financial information May be automated or manual, though most entities use automated systems Encompasses much more than the “computer” Components include: Processes and procedures (manual and automated) Documentation Internal controls Personnel System tests and audits Hardware and software Added components include: Data administration policies Data dictionaries Procedures for interfacing with other systems Role of Financial Management Systems - continued A Financial Management System - continued Contains applications that support: Collection, processing, maintenance, transmission and reporting of data about financial events Financial planning and budgeting activities Accumulation, reporting and analysis of cost information Preparation and dissemination of financial statements and other reports Provides other benefits Promotes accountability by providing accurate information on how tax dollars are spent and how assets are protected Promotes efficiency by increasing the reliability and reducing the cost of information Supports decision-making by providing timely data that managers can use to link costs to outcomes and guide resource allocation Guidelines and Requirements U.S. Office of Management and Budget (OMB) publishes “OMB Circular A-127: Financial Management Systems” Covers definitions and system requirements that can be applied to any level of government Addresses the need for common data elements, common transaction processing for similar transactions and efficient data entry (non-duplicate entry of data) Covers the need to document instructions for both manual and automated systems (for automated systems, this includes complete documentation of computer code) Guidelines and Requirements - continued U.S. Office of Management and Budget (OMB) publishes “OMB Circular A-127: Financial Management Systems” – continued Covers the need to apply internal controls to all system inputs, processing and outputs to ensure the validity and confidentiality of information Includes access controls and automated edits Covers the need to provide adequate training and support to both users and operators of the system, based on their roles and responsibilities Covers the need to provide ongoing maintenance to ensure systems are operating in an effective and efficient manner Guidelines and Requirements - continued The Financial Systems Integration Office (FSIO) of the General Services Administration Another source of guidance for financial management systems The FSIO publications, such as “Core Financial System Requirements” are useful at all levels of government More specific, as opposed to OMB Circular guidelines which provides general guidance on system requirements i.e. it delineates the invoice attributes that should be captured in the system Vendor ID Number Vendor Invoice Number Account Number Invoice Date Invoice Receipt Date Guidelines and Requirements - continued FSIO – continued Excellent starting point for exploring how human resources relate to the overall success of a financial management system Identified recommended core competencies for key individuals Recommended core competencies for budget analysts, accountants, program managers, financial managers and others who play a role in sustaining the financial management system can be found on the FSIO website Guidelines and Requirements - continued The Federal Financial Management Improvement Act of 1996 (FFMIA) Provides guidance to agencies, including indicators for use in evaluating financial management systems Requires all agencies to maintain systems that comply with federal accounting standards and the U.S. Standard General Ledger Requires auditors to report on the level of compliance of financial management systems Requires agencies to adopt formal remediation plans if their systems fall short of requirements Guidelines and Requirements - continued State and Local Entities Establish their own financial system policies and procedures i.e. The State of Ohio has a full library of policies and technical guidance for its integrated financial management system. The Ohio resources address common concerns such as the chart of accounts, data dictionary, reports, security and access controls, and job aids for users of the system Government Financial Systems Usually designed to support Internet-enabled electronic commerce Guidelines and Requirements - continued E-Government Government to Citizen (G2C) Government entities use the Internet and other e-government capabilities to improve access and service delivery At the simplest level, governments distribute information via the Internet, such as the schedule of public hearings or open hours at the library At a second level, citizens engage their government in two-way dialogue, such as posting comments or requests and receiving feedback At a still higher level, citizens conduct transactions with government over the Internet i.e. Filing tax forms or claims for unemployment benefits Guidelines and Requirements – continued E-Government – continued Government to Business (G2B) Common government to business transactions include electronic funds transfer (EFT) and electronic data interchange (EDI) Under EDI, structured data is transmitted in lieu of documents EDI takes the place of documents for activities such as purchase orders and receiving reports Government to Government (G2G) Distribution of grants and shared revenues, and distributed posting of accounting data are among the intergovernmental activities that are executed electronically G2G also includes filing of periodic compliance reports and shared, online training programs Guidelines and Requirements – continued Telework Working from home or other remote locations Introduces new requirements for financial management systems Improves productivity due to fewer interruptions Allows organizations to reduce cost by reducing the need for office space and utilities Plays a role in continuity of operations It may allow employees to remain productive despite natural disasters that impede travel to the central work site Some organizations require extended telework (up to 30 days) as a preparedness exercise in the continuity of operations program. Guidelines and Requirements – continued Telework - continued The most recent presidential directive on continuity of operations, signed in May 2007, calls for geographic dispersal of operations to increase survivability and maintain uninterrupted government in the event of enemy attack Means for achieving decentralized operations Legal requirement for federal agencies, and many state and local governments have telework policies Managers should consider the need for remote connectivity and security when designing or upgrading financial management systems Fraud Prevention Automated Financial Systems Can greatly increase governmental efficiency Unfortunately, they also introduce new opportunities for fraud An entity’s internal control program should include specific risk control procedures for financial systems, such as access controls and built-in edits Organizational structure, such as separation of duties, can help prevent fraud The IT department should be separate from the financial management department, however, this may not be possible in small entities Fraud Prevention – continued Some typical elements of prevention programs Fraud Risk Assessment Identify the activities that pose the greatest potential and risk for fraud, i.e. How great is the risk of receiving false electronic data from vendors? How does this compare to the risk of employees creating dummy vendors in accounts payable? What controls are already in place to mitigate these risks? Anti-fraud Policies A formal code of conduct, which frames the behavioral expectations for individuals, is part of a fraud prevention program Other policies may address background screenings for new personnel and required rotation of personnel out of high-risk positions Fraud Prevention – continued Some typical elements of prevention programs - continued Education and Training Employees at all levels are trained on the potential damage that could result from fraud, the code of conduct and expectations for ethical behavior and individual responsibilities for reporting suspicious behavior Monitoring This includes periodic test of the effectiveness of internal controls and taking swift action when faced with suspected, fraudulent activity A hotline for anonymous tips is an essential part of the monitoring program Fraud Prevention – continued Some typical elements of prevention programs - continued Forensic Auditing The term “forensic” implies that the results will be admissible as legal evidence Forensic auditing combines the skills of auditors and accountants with investigative techniques The many functions performed by forensic auditors include determining whether activities such as identity theft or employee theft have occurred Forensic auditing techniques can also be used to minimize the risk of future loss Fraud Prevention – continued Having a visible prevention program is important to help reduce the risk of fraud but detection measures are needed Data mining is increasingly used to detect fraudulent transactions Data mining uses a supplementary computer module to detect suspicious patterns in data Criteria used by the Government Accountability Office in a data mining project and related findings is shown in the following example Data Mining Criteria Government Purchase Card and Travel Card Audits The Government Accountability Office (GAO) reported on results of its data mining audit of use of government travel cards and charge cards. The GAO data mining software looked for suspicious transactions in several categories. The categories and examples of suspicious transactions are show below Nature of the Transaction Prohibited merchant category codes, such as jewelry stores, pawn shops and gambling establishments Personal use, including food, clothing, luggage and accessories Merchants Specialty stores, such as hobby shops, sporting goods stores, Victoria’s Secret High-end stores, such as Dooney & Bourke, Coach and Louis Vuitton Gentlemen’s club and legalized brothels Cruise lines, sporting events, casinos, taxidermy services and theaters Data Mining Criteria Government Purchase Card and Travel Card Audits continued Dollar Amount of Transaction Transactions having unusually high dollar amounts Convenience checks over $2,500 Numerous recurring transactions with same vendor, indicating the need for a contract Transactions in round dollar amounts, such as $330, $440, etc., indicating possible fee for cash schemes Timing of Transactions Holiday and weekend transactions End of fiscal year transactions Transactions that were made late at night Multiple transactions on the same day, at same vendor, totaling more than $2,500 Definition ERP systems attempt to integrate all data and processes into a unified system to manage and access complex, interrelated activities. Before conversion to an ERP, the organization must have systems for human resources and payroll, procurement, and accounting and accounts receivable The goal of an ERP is to integrate the separate systems into one system that supports information process needs across the entity Definition - continued Key Features A common, shared database One-time entry of shared data Automated integration and sharing of data across business functions A system can be considered an ERP if it integrates at least two functions, although the term is typically used for large, broadbased applications integrating multiple functions An ERP is usually not introduced all at once but rather two functions are initially integrated and then other functions are added as the project advances i.e. start by integrating payroll and accounting and then later add other functions like procurement and supply management Definition - continued Typical ERP System Uses multiple components of computer software and hardware to achieve the integration Organizations usually rely on external consultants to help design, develop, implement and sustain ERP systems due to the size, complexity and cost of ERPs Work processes are examined in detail to identify where they must be standardized and streamlined to create optimum flows of information An ERP cannot succeed if work processes have not been reviewed and refined A major challenge is getting various managers and workgroups to agree on common procedures The front-end analysis and standardization of processes results in a systems requirements document i.e. the State of Ohio completed an ERP analysis that required 2,100 software capabilities Advantages Reduced cost, achieved by sharing of common data across functions Reduced errors, achieved by reduction of manual data entry and use of built-in edits Improved coordination across functional departments as managers from various functions use standardized data Increased flexibility in report writing and query capabilities Improved analysis and decisions making via real-time access to enterprise-wide data Built-in features that capture cost data for activity-based costing and performance reporting Disadvantages Major investment of time and money required to implement Greater risk of loss (due to fraud or faulty controls) associated with an entity-wide system Difficulty of achieving agreement across functions on common procedures and data elements Sizeable cost of employee training and retraining Entity is “captive” to vendor for costs of future upgrades and license fees Personnel turnover during development and implementation phase can jeopardize success State of Ohio’s ERP Ohio Administrative Knowledge System (OAKS) Estimated Costs The cost to implement OAKS is approximately $158 million. Included costs are project management consultant staff, the OAKS Program Management Office (PMO), ERP hardware and software, and ERP integrator services Benefits Enhancing government operations requires business processes that are efficient and effective. The benefits of implementing an ERP system range from intangible benefits, such as improved data to support decision-making, process efficiencies and improved service levels to more tangible hard dollar savings. Within five years of full implementation, Ohio expects to realize savings from such things as: Leveraging the state’s purchasing power Increasing the use of vendor payment discounts Using bar coding to conduct physical inventories State of Ohio’s ERP Ohio Administrative Knowledge System (OAKS) - continued Further Returns on Investment OHIO OAKS Through a survey administered to state agencies, it was estimated that the state could save up to an additional $195 million in maintenance and replacement costs for current, redundant systems by implementing OAKS. When coupled with projected savings from the identified tangible benefits, OAKS represents significant direct and indirect savings over a five-year period. Full payback should occur within four years after all software modules have been implemented General Concepts Continuity of operations (COOP) refers to the efforts of an organization to ensure it can sustain essential operations regardless of planned or unplanned incidents. A comprehensive COOP program includes regular tests of response capability as well as the COOP plan Has been part of the federal government since the Cold War Continuity of government orders issued by President Eisenhower in the event of a nuclear attack North American Aerospace Defense Command (NORAD) General Concepts - continued A formal COOP program increases the odds that agencies can continue the essential functions amid natural, technological or national security emergencies and COOP incidents may be large or contained and occur at several levels Major disruptions or attacks 9/11 Oklahoma City bombing Hurricane Katrina Regional disruptions Closures due to blizzards Regional loss of electrical power Building level events Fire Contaminated ventilation system Computer failure General Concepts - continued The private sector also makes continuity of operations a priority, however, public entities must be even more prepared for contingencies because they are responsible for maintaining civil order and basic infrastructure and for coordinating recovery efforts. Government officials are responsible for safeguarding sensitive information Social security numbers Payroll and tax information Driver’s license numbers General Concepts - continued Many COOP plans focus on damage to property and equipment, however, significant loss of personnel due to a biological attack or pandemics is an attendant threat i.e. influenza could immobilize numerous government personnel and vendors Such “nontraditional threats” require specific plans California Office of Emergency Services created a document “Continuity of Operations/Continuity of Government and Pandemic Influenza Planning” to address an influenza pandemic. This document urges state and local entities to minimize person-to-person contact while maintaining essential operations COOP Planning Objectives Ensure continued performance of essential functions Reduce loss of life and minimize damage to property and infrastructure Ensure succession to key leadership positions Reduce/mitigate disruptions to governmental operations Protect public assets and confidential information Achieve timely recovery of normal operations (reconstitution) Assess response and identify lessons learned for future planning COOP Planning Objectives - continued Agency plans should aim for restoration of essential operations within a minimum period, such as 12 hours following activation of the plan. A further objective is ability to sustain the plan for a minimum duration. Many COOP plans call for a sustainability window for 30 days, but this may be insufficient in the case of a public health emergency. Finally, entities should be capable of implementing the COOP plan without warning. COOP Planning Elements The details of COOP plans will vary among agencies, however, common elements should be reflected. The following are COOP planning elements of the United States Department of Homeland Security Essential functions Identify the agency’s essential functions that must continue with no or minimal disruption Delegations of authority Prepare documents that give officials, including those below the agency head, authority needed to make difficult decisions during a COOP situation. Delegations of authority should specify the activities that those who are authorized to act on behalf of the agency head or other key officials may perform. COOP Planning Elements - continued Succession planning Create orders of succession that provide for the orderly and predefined assumption of senior positions during an emergency, in the event that current officials are unavailable to execute their duties. Alternate facilities If the COOP plan is activated, the agency’s primary operating facilities may be damaged, destroyed or otherwise unavailable. Identify and prepare an alternate location and facility that can be used to carry out essential functions. Additional business continuity sites should be identified in case the alternate facility is rendered inoperable. COOP Planning Elements - continued Alternate and interoperable communications Ensure COOP responders have an alternate communications system for performing essential functions until normal operations can be resumed. The communications system should be interoperable with other agencies and levels of government; permit access to data and systems; and be sustainable for a minimum number of days. Vital records and databases Identify records and databases needed to continue essential operations. This includes emergency records such as succession plans and delegations of authority. Create backup copies at an alternate location; ensure the alternate records are updated and maintained. COOP Planning Elements - continued Human capital During COOP activation, agencies must perform essential functions with reduced staff. Ensure key personnel are adequately trained and cross-trained to allow flexibility in performance of essential functions during emergencies. Devolution and reconstruction Devolution planning supports the transfer of essential functions to other agencies and staffs when the primary agency is incapable of performing its role either the primary or alternate facilities. Reconstitution is the process by which surviving and/or replacement personnel resume normal operations after the emergency; it maps the return to normal operations. Test, training and exercise This portion of a COOP plan is often called TT&E. Agencies use ongoing tests, training and exercises to ensure the COOP program is capable of supporting the continuation of essential functions. Tests and exercises range from simple, “table top” exercises to full simulations involving numerous personnel Steven H. Emerson, CPA, CGFM, CGAP, CFE, CITP, CGMA P.O. Box 834 Helena, AL 35080 (205) 807-4466 (205) 449-8666 (Fax) [email protected] www.shecpa.com