The Business of Government Hour


About the show

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. The executives discuss their careers and the management challenges facing their organizations. Past government executives include Administrators, Chief Financial Officers, Chief Information Officers, Chief Operating Officers, Commissioners, Controllers, Directors, and Undersecretaries.

The interviews

Join the IBM Center for a weekly conversation about management with a government executive who is changing the way government does business.

Donald McCrory interview

Friday, June 14th, 2002 - 20:00
Donald McCrory
Radio show date: 
Sat, 06/15/2002
Intro text: 
Financial Management...

Financial Management

Complete transcript: 

Arlington, Virginia

Friday March 29, 2002

Mr. Lawrence: Welcome to The Business of Government Hour. � I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of The Endowment for The Business of Government. � We created The Endowment in 1998 to encourage discussion and research into new approaches to improving government effectiveness. � Find out more about The Endowment by visiting us on the web at �

The Business of Government Hour > features a conversation about management with a government executive who is changing the way government does business.

Our conversation this morning is with Don McCrory, deputy chief financial officer at the National Science Foundation. �

Good morning, Don.

Mr. McCrory: Hello. � Good morning, Paul.

Mr. Lawrence: Joining us in our conversation is Jay Gremillion, also with PwC. � Good morning, Jay.

Mr. Gremillion: Good morning, Paul.

Mr. Lawrence: Don, let's start by talking about NSF. � I'm not sure many of our listeners really understand its mission or its activities. �Could you describe them for us?

Mr. McCrory: The National Science Foundation is an independent agency located in Arlington, Virginia. � We have about 1,200 employees who are involved in -- what we use is almost analogous to a venture capitalist organization for the government, where we do grants to basic research in science for math, engineering, and the basic disciplines. � We have also 300 independent rotators from universities around the country that come in to NSF and help us do our business.

We have a budget of about $4 billion; 95 percent of that goes out the door in research grants, with about 5 percent dedicated to the management of the organization. � So we're a very lean organization in terms of administrative overhead to our organization.

Mr. Lawrence: What type of people are there besides the people on rotation in terms of the skill sets of the staff?

Mr. McCrory: About 75 percent of the people at NSF have Ph.D.s. � They normally come from university backgrounds. � The organization actually has the feel of a university, of a campus atmosphere. � So it's not your typical government organization.

The organization does have two operating directorates. � One is the budget, finance, and awards management, and we basically are the business office of NSF. �We take care of the awards, the administration of the awards, the financial aspects of the grants. � We also do policy and outreach on grant policy. � We're very involved in the e-grants initiative of the President's Management Agenda. � We have a very robust finance and accounting system, grant system, and we basically are a leader in that area. � In terms of an initial President's management scorecard, we were rated a "green" in financial management, basically on the business processes we've been able to automate in that area.

Mr. Lawrence: How big is the average grant, or how do the grants range?

Mr. McCrory: Well, that's an interesting comment, because that's a contention we've had with the Office of Management and Budget, where we're trying to increase the size of our grants. � The average grant size now is at about $120,000. � They'd like to double that, and that's being looked at in terms of a study of -- is there more benefit to the science, is there more benefit to the principal investigators that get grants if the duration period is extended? � Will we get more successful solutions to grants; will the hypothesis bear out in a finding? � So there's a lot of information being looked at there.

There are a lot of independent committees of visitors outside of NSF who are providing us input, whether that will make sense to increase the size of our grants. � Of course, it's a tight budget situation, so we're looking at that.

Mr. Gremillion: Don, you wear a couple of different hats at the National Science Foundation. � Can you describe your roles and responsibilities as the deputy chief financial officer?

Mr. McCrory: Sure. � We have 33 people in my division, and we're basically responsible for all the business processes of NSF. � We have a business system in our grant system called Fast Lane, which is our total business system from cradle to grave, where we get the proposals in the system, awards, awards management, and post-award monitoring of our grants. � We have a system basically that's analogous to an automated teller machine, that our grantees can go in at any time and request cash against a grant, and we can monitor that within the internal controls of our finance system and determine if there's money available, if they are able to draw money, and they can automatically pay themselves. � We don't get involved in that other than just to review the payments on a daily basis.

Conversely to that, each quarter, they must submit expenditure reports to us in our finance system, and we do that through an Excel spreadsheet in which we communicate with our grantees through the Internet. � They pull that down and they're able to fill out their expenditures, report it back to us, and we're able to apply that right to our FAS system, basically seamlessly. � We're able to basically pay $4 billion a year with about four people. � It's all done with automation.

Then we have a section of core accountants which does the financial reporting to the government, our financial statements, ensure the accountability report is prepared, works with our IG in our independent audit. � We have a small systems group that also is involved to support the business systems of NSF. � So we're able to do a lot of work with a very small staff of about 30 people.

Mr. Gremillion: Let's talk about your career before you joined NSF. � How did you arrive at your current position?

Mr. McCrory: Jay, I started out at the Department of the Treasury in 1985. � I was basically a journeyman accountant working on balancing cash reconciliations, 224s, had the green eyeshades on doing that sort of work. � But at that time, the Chief Financial Officer's Act came in 1990, and I sort of got involved in that at a very early process. � At that time, financial statements were new, the government had no accounting standards, so I got very involved in that at Treasury. �

I spent 12 years there, working on basically producing the first CFO financial statements for the U.S. Secret Service in -- I think it was 1989 or 1990 we did that, so they had the very first financial statements. �

From there, I moved to the National Science Foundation, where I was the chief of the Accounting Operations branch. � Basically, at that time, NSF had not had a clean opinion on their financial statements and was still grappling with the accounting standards at that time. � So I came in and we worked to where we're at the point now that we're probably one of the cleaner financial shops in the government. � I became the deputy CFO in 1999, when my predecessor retired at that time. � So basically, I have close to 20 years in the federal sector. �

Mr. Gremillion: You look like such a young guy. � You've accomplished so much in those years.

Mr. McCrory: Actually, I am sort of an anomaly. � I'm 40, and there are not many people in the government that are at the executive level that are 40, only because human capital planning in the government in general is a critical issue; it's one of the President's management agendas. � We have a very expert group of people at the 50-plus age, but the next generation succession planning is not there. � I don't have a lot of peers in the federal government in terms of managers in the ages of 40 to 45 range. � I think the GSO has recognized that human planning is a high-risk area. �

Thanks for saying I'm young.

Mr. Gremillion: What drew you to public service?

Mr. McCrory: I graduated from the University of Pittsburgh back in 1983 and I moved to Washington, D.C. � Actually, at that time, I decided to work for the federal government and try a stint in the federal government, so to speak. � It was interesting work. � I wanted to work at the Department of the Treasury. � The federal government is a large employer, with a diverse ability to have different careers and basically work for the same employer.

I've very much enjoyed the federal sector. � It's very interesting work. � I think the CFO Act and just being at the front end of that and basically being part of implementing audited financial statements in the government has been a very interesting challenge.

Mr. Lawrence: What of the different positions best prepared you for your present position?

Mr. McCrory: I think working in accounting and working with statement standards, being able to be part of basically formulating standards; certainly not independently formulating, but we were there at the time when people were saying what makes sense in terms of presenting assets on a balance sheet, what are the proper liabilities of the government, what is stewardship reporting, what is statement of net cost? � Is an income statement in the federal sector the same in the private sector; what are the issues there? � And we aren't the same as the private sector, but yet we want to have the same type of model. �

And all those issues have been very interesting and very interesting to work on. � I think being part of the accounting operations over at the Secret Service and then coming over to the operations at NSF have been basically the foundation that's taken me to this level.

Mr. Lawrence: And how did you transition from just an accountant, and I don't mean that in a bad way, to a manager of a large staff? � When did that shift take place in your career?

Mr. McCrory: I think it came when I came to NSF. � NSF is a small delayered organization. � There's a lot of talk in the federal government now about delayering management and getting people to the front lines of organizations to do the work. � NSF did that 10 years ago. � We're there.

I mean, even though I'm the deputy CFO, I work on a lot of day-to-day stuff. � And I think that's what sort of prepared me. � When I was chief of the accounting operations branch, I had much, much more responsibilities at NSF than I would have at the Secret Service, only because of the nature of the organization; much smaller, much more agile, much more at the front lines.

And I think it was at that point where I had a lot of contact at high-level meetings in terms of audit issues, issues that affected the Foundation in general, that it sort of cut my teeth on leadership skills, was able to sort of launch me to the next level.

Mr. Lawrence: Well, we're at a good stopping point. � Stick with us through the break as we continue our conversation with Don McCrory of NSF. �

When we come back, we'll ask him about their green light on the OMB management scorecard. � If you don't know what the scorecard is or the significance of getting a green, you'll find out when The Business of Government Hour continues. �


Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. � And this morning's conversation is with Don McCrory, deputy chief financial officer at the National Science Foundation. � Joining us in our conversation is Jay Gremillion, also with PwC.

Mr. Gremillion: Don, National Science Foundation was the only agency to receive a green light on OMB's management scorecard for its financial management. � What's the secret of your success over there?

Mr. McCrory: Well, thanks for noticing that, Jay. � We're the only the only green light. � And trust me, you're not the only one that's noticed that. � I probably get a call a week from people that say what's the secret of the success? �

Well, let me just start with the baseline. � Because we understand it from OMB, what was the baseline to get a green? � And the baseline is: � an unqualified opinion on your financial statements. � They must be submitted on time. � There should be no material weaknesses in internal controls or compliance with laws and regulations, basically, there is no material weakness in there. � And also, being able to be compliant with the Federal Financial Management Improvement Act of 1996. � And that compliance comes from the agency -- that assertion.

So those are sort of the baseline criteria to get the green light. � And it would seem simple, but it's not. � There's a lot of -- you know, the government. � Although the CFO Act now is a little over 12 years old, there's a lot of agencies still grappling with these very issues. � So that is the baseline criteria for getting the green light.

And then I think the technologies that we've been able to launch, in terms of our grant processes, have certainly been well-received at the Office of Management and Budget. � You know, they realize that we've sort of been forward-thinking in terms of federal financial management. � Our financial systems are highly integrated with all our core business systems -- our payroll system, our personnel system, travel and so forth. � It's very integrated, very tightly integrated.

And basically, our budget has doubled in the last 10 years, where our staff has basically stayed at about 1,200 people. � And we have done that all through technology and being able to leverage technology.

And I think OMB recognized that overall holistic success we've had in financial management, and wanted to sort of set us apart as NSF is someone other agencies can follow and emulate.

Mr. Lawrence: Tell us how the thinking on these issues began. � I mean, you didn't wake up one day and have totally integrated systems that worked so well. � And yet you indicated that it seems very simple, but the challenges are hard. � How did people figure this problem out? � How long did it take? �

Mr. McCrory: Well, NSF has a culture -- there is a culture that has to start from the top down. � Do you want to be automated? � Is it important to your organization? � Is the strategy to become technologically driven? � And I think NSF thought about that 10 years ago. � You know, NSF did invent the Internet. � So we are in the front lines there.

We had a director that was from IBM, about 10 years ago came in, who was used to technology driven in the private sector. � And when he got here, he very much was interested in technology driving the organization. � And we began, I think, there, where we had mainframe computers.

We had PCs on desktops when people were still, you know, sharing one desk -- one computer on 10 desks. � So, I mean, it seems simple, but that's the progression to get to a � point where technology starts to drive your mission.

And we have a lot of, as I said, people that come from the university community into us, who are used to having technology available to them to do their job, and they very much demand it in their work when they come in, that they will have the technology available to do it. � And so that's how we sort of got here to there.

And that's flowed through to the administrative systems, finance, and award systems. � And that's all integrated now. � So --

Mr. Gremillion: Well, what accompanied the thinking around technology? � There's a lot of organizations that have technology that don't have clean opinions, or obviously got green lights on the scorecard. � What was it with the technology that brought about the change? ��

� Mr. McCrory: The difference was that they have a lot of perhaps maybe fragmented systems, or systems that were built prior to the CFO Act, FASAB standards, being able to produce timely and accurate financial information, having them monitored. � The statements were very much driven just to produce payments and give me my budget numbers.

And you might only be interested in your own information and your own field office, or your own district, and not necessarily the integration of your total financial picture of the organization. � And there's a lot of disaggregation out there still, and it's the connectivity of that that's being the problem.

I mean, it's easy to build an ERP system at a headquarter office. � But then if you have a 30-year-old mainframe out in Kansas City, Missouri that you're trying to connect with, there is where the problems are starting to lie. � Or somebody who had been involved in building a system 20 years ago, and having that system sort of -- ownership of that system and giving that up for something better. � That's tough.

Again, NSF -- we demand to have cutting edge. � Our director demands it, our ADs demand that we have the best in technology. � And the culture is that we always are looking for change for the next better thing.

Mr. Gremillion: Did you have this integration vision when you began?

Mr. McCrory: No. � I won't say that we had this -- God, I wish we did. � You know, we're grappling with that now, an enterprise architecture. � And I'm not the CIO. � But, you know, we're involved -- the CFO and the CIO are very much involved in a process to look at the enterprise architecture at NSF, and maybe come up with, you know, a way we're going to go to the next generation of web-based development products.

We've sort of developed systems independently, but we have been able to integrate them fairly effectively in terms of we had a good test environment, we have good staff that are involved in this. � And the resources are available to make sure that the integration is there.

But yes, we are going through our capital strategy plan right now for our administrative systems of where we're going in the next generation for that.

Mr. Lawrence: We know the National Science Foundation gets about 30,000 proposals per year. � And that could really amount to a whole lot of paper. � How have you all helped transition your customer base, your -- the people who are submitting these proposals, to transition with you into the more automated paperless society?

Mr. McCrory: Well, 2 years ago, our director mandated that we go from a paper proposal submission process to a paperless proposal submission process. � Basically, we're going to accept things in PDF form, CDs. � Basically, everything would be electronic.

And in that process external to us, you know, there was some resistance. � But the mandate was made that we're going to accept only paperless proposals. � It was going to be electronic proposal submissions. � And it's actually been a larger success than we could ever have hoped for. � We're probably -- in 2 years, well over 90 percent of our proposals come in electronically. � And that has made a tremendous difference in terms of paper, being able to get our information, manage data, review data.

When 9/11 came and a lot of federal agencies couldn't get mail, we never missed a beat. � We accept all our mail electronically. � Our proposals kept coming in electronically. � And I think that in terms of e-grants and the e-grants initiative under the President's management agenda, everybody will be looking at electronic proposal submission for grants. � It's been a tremendous success for us.

Mr. Gremillion: What were the management challenges of going paperless?

Mr. McCrory: Well just basically, you know, are people going to accept that? � You know. � There was also things, in terms of -- if you submit a proposal electronically, they started bearing URLs in terms of the proposal, which, you know, added, you know. � And there's a varied baseline when they submit proposals that they want everybody to have some equal footing in terms of being able to select a grant.

So, you know, there was a lot of the electronic initiatives. � Could they be able to put URLs into their proposals? � Color versus black-and-white graphs in a proposal. � All those issues that came up. � What about a small grantee who may not be as technologically literate as a larger grantee, who might have -- is there an advantage or disadvantage?

So all those issues had to be sort of ferreted out. � It's a peer-reviewed system of grants. � It's panelists come in who review the grants in a very holistic view, look at it, make sure that each grant is given equal footing, equal evaluation. � So we're very cognizant to make sure that everybody has equal chance to get an NSF grant. � Those are the issues you need to deal with when you're in technology.

Mr. Lawrence: Well, we've talked about how the management has become technologically savvy, and we've talked about getting your customers being technologically savvy. � How have you elevated the technological capabilities of your workforce to be able to function with this paperless environment?

Mr. McCrory: Again, NSF is a culture of technology. � And our workforce accepts technology change, actually, pretty well. � They're not shocked when a new system's coming up or something's being automated. � And with like any new change of the system, you'll have about 20 percent that will accept change no matter what, you'll have about 20 percent that will never accept change, and you'll have about 60 percent that needs to be sort of brought in on the forefront, and let them have their say in the technology. �

And that's the 60 percent that you focus on. � And eventually, the systems come up without too much problem. � We do have, for every system, we get our union involved to give them presentations of systems. � Actually, on our latest finance system, we had our union involved in the testing, providing comments, feedbacks. � We allow people to help test the system that are going to use the system. � People help to support what they help to create, so we get people involved at the very front end.

So, we do do marketing plans as well; the staff, the marketing plans our systems, what they'll do. � You know, change in our systems is not really a problem.

Mr. Lawrence: That's a good stopping point. � Rejoin us as we continue our discussion with Don McCrory of NSF. �

When we come back, we'll ask him why financial audits matter, and what it means to get a clean opinion. �

Stick with us as The Business of Government Hour continues. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. � And today's conversation is with Don McCrory, deputy chief financial officer at the National Science Foundation. �

Joining us in our conversation is Jay Gremillion, also of PwC.

Mr. Gremillion: � Don, agency audits are coming under a greater scrutiny these days. � What are the challenges that National Science Foundation faces in first achieving and then maintaining its clean opinion?

Mr. McCrory: � Well, as you know, a clean opinion is not the means to an end. � But having a clean opinion sort of sets the foundation for everything else that we do. � And it's sort of the -- it's hallmark. � You say, okay, you've got the clean opinion, now let's get on with the business of performance and decisionmaking, those sorts of things. � And you've taken financial management off the table, but you realize that's -- the information that you're dealing with is credible. �

So it's very important, a clean opinion. � For us, keeping a clean opinion is going to be dealing with the issues that are pretty much in the President's management agenda criteria of, you know, accelerated reporting. � The federal government is going to quarterly financial statement reporting beginning this quarter; actually, the second quarter of fiscal year 2002. � And then beginning through -- start there forever, we're going to be going through quarterly reporting financial statements.

So accelerated reporting, being able to provide financial information on demand that OMB would want. � So we need to be able to do that. �

Other areas that we've been involved with are erroneous payments. � You know, that's a Presidential management agenda item, to reduce erroneous payments to get a green light in financial planning performance. � We don't have that problem at NSF, but nonetheless, we are doing a cost-benefit analysis of our payments to make sure that we're meeting those requirements. �

And also, we need to look at IT security, make sure our systems are secure. � Security in general is important. � We're a very open system, where we allow our grantees to access our Internet system. � And although openness has always been more important than internal controls in the past, in terms of having that balance be more open than too much control, post-9/11, having more control versus openness is sort of that dichotomy, that paradigm shift a little bit.

So we need to make sure we have secure systems to do what we need to do.

Mr. Gremillion: Don, I know that a lot of agencies look at a clean opinion as being a one time of year type of activity. � And so perhaps during 9 or 10 months during the year, they don't perhaps focus on the continuous improvement aspects of their financial operations that are necessary to achieve a clean opinion, and end up doing a Herculean type of efforts at the end of the year.

How has National Science Foundation been able to focus its workforce, its management, on developing initiatives for continuous improvement to alleviate some of these big-time efforts at the end of the year.

Mr. McCrory: Well, we look at our systems, and we currently -- you know, we study the standards. � We look at the OMB guidance. � And we're always looking to improve our system. � We've been Standard General Ledger-compliant for -- since the Standard General Ledger was out. �

The biggest problem a lot of agencies are having is the sand just shifts under our feet every year. � New requirements come out, changes in the SGL. � And they may not be able to quickly adapt to those new changes in their finance systems. � We can do that at NSF. � We can do that very fast. � So, we're able to stay on top of the government changes in a very real-time process. �

So it sounds easy, but it's not, in terms of large departments and so forth having that problem. �

Mr. Lawrence: You talked about how -- to get a clean opinion means you have insights into your financial information. � But you said it wasn't an end in and of itself. � How do you use the financial information to make budget and performance decisions?

Mr. McCrory: The government is very budget-driven, still is. � NSF is no different. � And our systems -- we do have an Enterprise Information System which is connected to our finance system, which provides information on budgetary data by program area. � And we also populate it with performance information on our investment and management goals.

So that information is available to our program managers and our division directors, basically, real-time, every day. � And it can be drilled down and sliced any way that they like to look at information, statistics, trends and so forth of how their grants are going in terms of spend rates and so forth. � So that information is used to make decisions.

Financial statements unto themselves do not provide a lot of decisionmaking support. � They are more the end result of showing that you have systems in place to capture financial information, to know the financial condition of your operations. �

But financial statements are not the end game. � They're not the Holy Grail of federal financial management. � I think, you know, financial managers will become less transaction-driven, more transformation-driven, will start using performance information and tying costs to that to provide value to agencies to make decisions. � That's tough. � That's tough. � That's the toughest part that everybody's dealing with right now. ��

Mr. Gremillion: NSF has been commended for being able to keep its operating costs low. � How have you achieved this success? �

Mr. McCrory: We doubled our budget in the last 10 years, had about 1,200 people in 1990, we had about 1,200 people in 2000. � It's basically the systems and being able to use systems to do our business. � We're totally a technology-driven environment. � A grant that comes in the door to the time the last payment is made and that grant is closed out is all done electronically, the whole process. ���

So cradle to grave, our process is done totally electronically. � We're actually working now on an internal process called the Electronic Jacket, which is basically the paper document that follows a grant around the foundation. � Right now, that's a paper document that follows it around. � We're actually looking at that E-Jacket will become basically the grantee's file. � And we will not have any paper inside the building in terms of grant jackets.

So basically, Jay, the technology has been what keeps us going.

Mr. Lawrence: � I was interested to read that NSF's 5-year financial management plan includes as its core values teamwork, respect, integrity, creativity, responsibility and something I found interest, a sense of humor. � How do you create an environment where all these values thrive? �

Mr. McCrory: � Teamwork, mutual respect. � This was a group effort. � We went out to everybody in the budget and finance and award directorate, at that time, our predecessor, the CFO, Joe Kull, who's now the deputy controller at OMB, wanted to have a mission statement, a core value statement that really was meaningful to people. � People would look at it and they'd make sense of it.

And sense of humor. � That was sort of -- we sort of keep our perspective, keep our feet on the ground, that we try to do the best we can. � And there may be hurdles and frustrations in the day-to-day job, but in the end, you know, we're all human and we all need to get along. �

It's actually the one part of our mission statement, sense of humor, that people seem to pick up on. � You know, it sort of makes the work environment at NSF -- it's sort of the way we try to do it; that we're -- you know, we need to get along. � We're sort of � collegial. � And there's no turf wars. � We're hanging in there. �

Mr. Lawrence: Yes. � Just when you think about the precision around financial management, you just don't think --

Mr. Gremillion: Yes. � Sense of humor?

Mr. McCrory: Sure. � Yes. � Accountants? � Yes, that's not usually synonymous.

Mr. Gremillion: How does National Science Foundation measure success? � What measurable goals do you have to determine how well the agency is performing?

Mr. McCrory: Well, we keep our watch on the President's management agenda. � That's probably the metrics we're following right now, making sure we get to the accelerated reporting requirements. � Make sure the security of our systems is in place.

You know, we're trying to get away from the clean opinion being our baseline. � I mean, we've been there, done that. � You know, it's important to keep the clean opinion. � But we're ready to move beyond that. � We don't want to say we've got the clean opinion, let's throw up our hands and the game's over. �

We need to move to the next level. � Our next metrics are, you know, what can we provide value to our senior management to make better business decisions? � And can we do that? � What do they need, and what can we help them do that?

So, the metrics are more to become more of an adviser rather than a scorekeeper, more than a fiscal cop. � We're there to be a business partner. � And, you know, in a private organization, a CFO has a very large part of how the organization is driven. � And I think the federal government is moving that way.

Mr. Lawrence: And I guess really a part of developing these measures is really having measures that are realistic, and measures that are not too easily attained that you can meet by just rolling out of bed in the morning, but also having measures that you can actually achieve as well.

Mr. McCrory: Right. � I mean, we're not trying to set measures where we know we're going to succeed. � We're setting measures where we think we need to be. � And we don't meet all our measures all the time. � And we have management investment goal measures in terms of dwell time, being able to get our grants out the door peer-reviewed, making decisions within 6 months. � I think we're up over 70 percent in that category. � And we're trying to make more progress in that.

But we're not where we want to be. � We have diversity goals, other goals of management investment that we're trying to reach. � And some we're there and some we're not there. � So we're setting goals where we want to be, not where we are.

Mr. Lawrence: What other lessons have you learned that you could pass along to other agency leaders who face financial management challenges?

Mr. McCrory: The key there, Paul, is it's got to be top-down commitment in terms of having a success in financial management. � If you don't have top leadership interested in sound financial management, it will be tough to have success at any other level in the organization. � People need to feel they have the top-level support to do the quality job that they want to do.

And I would say any advice is: if there is a way you can get that top-level commitment to federal financial management in your organization, that it provides value to you as an organization, that's going to be key to you. � That's going to be key to getting the job done.

Mr. Lawrence: That's a good stopping point. � Stick with us through the break as we continue our discussion about management with Don McCrory of NSF. �

Not all of their scores on the OMB Management Scorecard were green. � When we come back, we'll ask him about the other scores and how they are addressing those issues. �

This is The Business of Government Hour. � (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. � And today's conversation is with Donald McCrory, deputy chief financial officer of the National Science Foundation. �

And joining us in our conversation is Jay Gremillion, also of PwC.

Don, in the last segment, we were talking about the scorecard. � And in those areas where you didn't get greens, what are the plans to address these?

Mr. McCrory: � Thanks, Paul, for bringing up we didn't get greens in some of the � but, you know, there's five criteria. � They are financial management, which is a green. � We have an other area of e-government, which we were yellow in. � And although we're a very techno agency, we have a lot of technology that runs our business, we were very close in getting that. � I think there was only one criteria we missed. � I can't say exactly what it is now. � I think it might have been in security we missed that criteria or something.

But in terms of all our other ones, human capital, competitive sourcing, budget performance integration, what OMB is going to do, they're going to put out two scorecards starting this spring. � And they'll be what they call the baseline scorecards, or your -- the scorecards you get every year, this is the one that you're referring to. �

But they'll also have a process scorecard, or a progress scorecard. � And that scorecard will tell how agencies, if they're putting in plans to address these. � So the idea for most agencies is not necessarily to get their current status to a green, but to get their progress scorecards to a five-green status.

So that's where NSF is. � We're in that process. � We're trying to get all our initiatives to a five-green status. � The one we're having the most problem with at this point is budget and performance integration. � And that's the toughest one to get our hands around. � How do you measure science? �

If you have a grant and the grant does not come up with a proven hypothesis, is that a failure? � How do you measure that? � So we're looking at the scientific research outcome goals now in terms of how do we manage that into budget and performance integration.

Mr. Lawrence: Given that the scorecard is so public, and it gets so much attention, is this what NSF is going to devote most of its management attention to now? � Or does it just happen to be a coincidence that you were doing it anyhow?

Mr. McCrory: � Good management is good management. � The scorecard is something that sort of gives a dashboard of metrics to agencies to do things better. � These are things that you should be measuring yourselves on and OMB will be measuring yourselves on.

They're not the end game. � And I don't think they will be one size fits all. � And, you know, people ask NSF how we got a green in financial management. � I don't think somebody could necessarily take NSF's processes and just place them in their organization. � It's just not that simple.

So people have to think about how they're going to get to better management. � And maybe some of these things will not necessarily be -- you know, the baseline criteria may change over time, because it won't make sense.

In terms of competitive sourcing, we had 1,200 people 10 years ago, we still have 1,200 people. � We haven't really grown exponentially. � So how much outsourcing can we do? � How much competitive sourcing can we get out of that? �

So these are the kind of things that -- we're not going to be managing to the scorecard, but the scorecard will certainly be part of our day-to-day operations in terms of -- we're paying attention to them.

Mr. Gremillion: In the area of e-government, where NSF does have the yellow rating right now, for a technologically based organization like the National Science Foundation, how do you intend to proceed and go ahead and get that green rating?

Mr. McCrory: Well, we have an administrative and management plan that we're putting together. � And this administrative and management plan basically gives a strategy for success of each of those goals. � And even the financial management one, how we're going to keep the green in the future.

So there is a strategy out there of how to get from the yellow to the green. � And we're hoping to get the green in e-government for this year.

I think we just need to -- I think we missed one particular criteria. � You know, just like in financial management, there's some baseline criteria, we missed one criteria that kept us in the yellow. � We've already identified it, set a strategy to fix that, and I think we'll be in good shape for next year.

Mr. Lawrence: � In our conversation, you've talked a lot about how technology has helped NSF.

Mr. McCrory: Um-hum.

Mr. Lawrence: Are there new technologies on the horizon that will change the way NSF operates? �

Mr. McCrory: Well, our core business systems, our grant systems, are all web-based. � We're continuing to move our administrative systems to the web. � So the web seems to be the current generation of information. � If everybody can get to the web, it will make life a lot easier to integrated systems, instead of going from mainframe to client server, client server to the web. � I think when everybody gets there, we'll be in good shape.

NSF is moving very fast to the web in all our systems. � And that will help us, too, because a small school district in South Dakota usually has access to an Internet. � And once you have access to an Internet, you can do business with NSF.

Mr. Gremillion: We hear a lot about the coming government retirements wave and the expected impact on federal agencies. � What kind of challenges does this present to NSF? �

Mr. McCrory: � One of our current statuses in the President's Management Initiative was human capital, which we got a red. � So we do have some work to do on human capital planning. � We have to set together some succession planning to do some -- get our agency to do some strategies to improve recruitment, retention and those sorts of things.

You know, the government as a whole needs to look at human capital in terms of people have three to five jobs throughout their career now. � College students don't come out of college expecting to stay with the government 30 years. � That's just a fact. � That's the way it is.

I think, you know, OPM, along with a lot of agencies, are looking at strategies to

get -- ways to get people into the government. � And we're also looking at ways to recruit people, knowing that in 5 to 7 years, they may move on. � But we have them those 5 to 7 years. �

So we're putting a part into our strategic plan, our performance goal of human capital planning. � And we'll have a strategy to do that. � But NSF, like every other agency, has a large population of our staff that are in the 50-year-old range. � They're probably ready to retire in 5 to 7 years. �

Mr. Lawrence: As you reflect on all the challenges facing NSF, what do you think are the greatest management challenges? �

Mr. McCrory: I'd have to say that human capital is probably, you know, it's something that's always on the plate, trying to keep the right people, get good people. � As technology has taken over NSF, you've got to have the right skill mix for going from voucher examiners and technicians and people to process paper to people that are customer service-focused, analyst specialists, people that can help use the information, look at the information, dissect it, make sense of it, provide value to our program managers in how to use the information, make analyses.

So you know, the things we need to look at is the skills of our people, and getting the right people available to do the jobs that we need. �

Mr. Lawrence: Is it a challenge because the skills are changing or is it a challenge because of your present set of employees are being lured away by other offers?

Mr. McCrory: � No. � I think -- well, there's some of that. � I mean, we have ebbs and flows of people that come and go in terms of -- if the economy's good, the government is no different than Pricewaterhouse where you lose people to other agencies. � If the economy is good.

But NSF on the whole has a very good reputation as a good place to work. � And we are able to recruit people that want to come to NSF to work. � So it's mainly the skill level that we need to work with. � We need to look for people who are professionals, CPAs, people that have technical skills in the finance area, and people that have systems background, are not afraid of systems and using systems. � So that's the kind of skills we're looking at.

Mr. Lawrence: You said that at NSF, 75 percent -- if I say this right -- of the employees have Ph.D.s?

Mr. McCrory: Ph.Ds. � Right.

Mr. Lawrence: Are there any special challenges managing such a highly educated group?

Mr. McCrory: � Well, I don't manage any Ph.D.s directly. � CPAs but no Ph.D.s. � But, you know, just as the other agencies -- they come from the university background. � You know, coming to the federal government sometimes can be a little bit of a new way of doing business. � But I don't think there's any special challenges to having Ph.D.s in the organization.

Actually, it's quite refreshing in some ways. � They bring a lot of new ideas in. � They're very flexible. � And it's actually very interesting to work there.

Mr. Lawrence: What's your vision or the vision for NSF over the next 10 years? � How do you think it might evolve?

Mr. McCrory: Well, I can speak from the financial perspective of where we're going to be in 10 years. � NSF has a good profile in the government. � We're asked to take on a lot of leadership roles that we haven't in the past. � And that's great from the perspective that, you know, OMB and even Congress feels that NSF has the quality staff and systems to handle more money, more funds, new initiatives, new scientific projects.

But with that responsibility comes higher scrutiny. � And, you know, fighting the bureaucracies, fighting the layering of different approaches to things. � So NSF has made a reputation on being agile, being able to be flexible, being on the cutting edge. � And we need to balance that with taking on more initiatives, more money, doing things.

The government as a whole is becoming integrated. � And NSF cannot go out alone and do things on itself anymore. � And we pushed the envelope way ahead of everybody. � But now we're trying to work with people to do things as sort of a government rather than just NSF. �

And that's a struggle, because we want to keep being out on the leading edge. � But at the same time, we need to work with agencies that may not be as far along.

Mr. Lawrence: Well, Don, I'm afraid we're out of time. � Jay and I want to thank you for being with us. �

Mr. McCoy: It was great. � Thanks for inviting me to come on.

Mr. Lawrence: And did you want to mention the website in case people want to know more about NSF?

Mr. McCrory: � Yes. � NSF, it's � We have -- we're at 4201 Wilson Boulevard, a big NSF on the side of the building. � We have an information center right in the lobby, where you can come in and grab all kinds of information about NSF. � So if anybody wants to come down and check us, out, we'd be happy. � And check us out on the website. �

Mr. Lawrence: This has been The Business of Government Hour italic'>, featuring a conversation with Don McCrory, deputy chief financial officer of the National Science Foundation. �

Be sure and visit us on the web at � There, you can learn more about our programs, and you can get a transcript of today's interesting conversation. �

Once again, that's �

This is Paul Lawrence. See you next week.

Donald McCrory interview
Donald McCrory

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