OMB financial management chief pledges to urge quick results

The Obama administration will insist on short-term progress in improving federal financial management, despite its commitment to long-term change, said a top Office of Management and Budget official on Tuesday.

Danny Werfel, controller of OMB's Office of Federal Financial Management, said the administration's guiding principle is to focus on defining financial management and take immediate steps toward improvement while not shying away from significant change.

"In the very short term we need to make sure that the investments we're making in all aspects of government have the maximum return on investment," Werfel said at an Association of Government Accountants Leadership Breakfast in Washington.

"It's that dynamic that is quite challenging, because transformational change often requires longer-term process, longer-term investments."

While much of the change will come from modernizing agency business systems and other investments, Werfel said agencies also should adapt to focus on the financial metrics that are most important to taxpayers.

"I see a new set of metrics emerging as the more critical metrics of our success in financial management," he said. "It's not, 'Did we achieve a clean audit opinion?', for example... those metrics are critically important, but they are not the metric by which we will be held accountable by the public for our financial management success."

Measures more critical to the government's bottom line, such as whether it consistently makes payments properly and effectively manages its debt portfolio, are likely to grow in importance, Werfel said.

His statements came as the research group INPUT released a report stating the recession and increased spending under federal benefits programs, particularly Medicare and Medicaid, are contributing to more improper payments.

The report, released on Tuesday, highlighted the fact that improper payments increased by 38 percent from fiscal 2008 to $98 billion in fiscal 2009. One agency alone -- the Transportation Department -- saw a 673 percent rise in improper payments between fiscal 2008 and 2009. Angie Petty, author of the report, said the massive jump was due largely to the influx of stimulus funds to the department.

"There was more money flowing through Transportation than there otherwise would be, and they are one of the agencies that are less adept or equipped to cope with huge amounts of funding at once," Petty said, citing insufficient personnel, oversight and technology to handle the spike in spending.

Petty reported that technology could play a major role in helping to combat improper payments and other forms of waste, fraud and abuse throughout the life cycle of a federal payment. Systems can be developed at every stage -- from prescreening and initial authorization to investigation and recovery -- to help agencies avoid errors and fight fraud, she wrote.

INPUT expects investments in data capture, processing, business intelligence and prevention technologies to combat inefficiency and negligence for significant growth during the next five years.

Werfel said the administration is committed to using technology effectively for financial management, but agencies must accept their limitations and make smart choices about which modernization path is right for them.

"We don't do an effective job of deploying large-scale financial systems," he said. Werfel encouraged agencies instead to make critical, incremental improvements to existing systems and to focus on what was absolutely necessary for business rather than what they would like to have under ideal circumstances. "This is not the time for nice-to-haves," he said.