Financial Executives Gain Clout with Government.

• Author: Hinchman, Grace
• Position: Brief Article

The General Accounting Office's (GAO) 2001 High Risk Report (www.gao.gov) identified concerns related to the alarming exodus of senior managers responsible for the day-to-day management of the federal government, resulting in several problems.

Among those in the report:

* IRS computer systems are still not functioning properly, resulting in billions of dollars in suspected tax filing fraud and outstanding collections.

* The 1990 CFO Act has yet to produce auditable financial statements government-wide.

* 'Pervasive and complex" financial management problems in the Department of Defense, which remains incapable of providing a consolidated picture of its very large non-contractual liabilities (e.g., environmental remediation).

* Lack of real-time accounting controls between inventory control and contract managers -- especially in the Department of Defense.

While these and other problems outlined in the GAO document have been reported in the media for some time, Comptroller General David Walker has called special attention to the increasingly pervasive "human capital" crisis facing the federal government. The inadequacy of the federal work force only exacerbates the issues noted above and creates problems, as well as opportunities, for the private sector that sells essential services to the government.

FEI's Committee on Government Business (CGB) closely follows a wide range of issues associated with the intersection between business and government. Currently, issues relating to "outsourcing" and "public-private competitions" are at the top of CGB's list -- especially since President George W. Bush has directed federal agencies to outsource at least 5 percent of their workforce and services or have federally-run services compete against the private sector. For example, under the President's directive, a federally managed and operated motor pool for the Department of Agriculture will have to compete for a contract alongside a Hertz, General Motors or any other private-sector auto-leasing company.

Competition Will Help

An upside is that as the federal government relies more on outsourcing, it will begin to address the human capital crisis by attracting competitive bids that will inevitably provide a new infusion of experienced managers. The implication of public-private competitions and outsourcing for financial executives is that government business is likely to become a mainstream business line for an increasing number of companies.

One...