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.

Donna McLean interview

Friday, September 13th, 2002 - 19:00
Phrase: 
Donna McLean
Radio show date: 
Sat, 09/14/2002
Guest: 
Intro text: 
Financial Management Managing for Performance and Results...

Financial Management Managing for Performance and Results

Complete transcript: 

Arlington, Virginia

Friday, August 23, 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 and our programs by visiting us on the Web at endowment.pwcglobal.com.

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 Donna McLean, Assistant Secretary for Budget and Programs and Chief Financial Officer of the U.S. Department of Transportation.

Good morning, Donna.

Ms. McLean: Good morning.

Mr. Lawrence: And joining us in our conversation is Dave Abel, another PwC partner.

Good morning, Dave.

Mr. Abel: Good morning.

Mr. Lawrence: Donna, perhaps you could start by giving us an overview of the activities of the Department of Transportation and its different agencies.

Ms. McLean: Well, the Department of Transportation is just as it sounds, the Department that oversees our modes of transportation. We have 14 individual modes in the Department, some that you might recognize, some you might not. The Federal Highway Administration. So basically, we're responsible for pulling in the taxes off the gasoline that you buy, and putting it towards concrete, and distributing that money to the states. And that's quite a big bit of our budget.

FAA, the Federal Aviation Administration. Obviously, most people think of FAA as the Air Traffic Controllers, who make sure that we fly safely, and that they in fact control those planes, and we pretty much have the safest aviation industry in the world. And that's something that we're very proud of.

But there are some other modes that you might not realize that we oversee. Coast Guard right now is part of the Department of Transportation. And they're responsible obviously for the safety in the seas, but also for saving folks if they are at sea and have trouble. And we also have the MARAD Administration, and we have the Federal Transit Administration. And, you know, several other modes. But that gives you a flavor of what we see.

Mr. Lawrence: You have a very interesting title. You're the Assistant Secretary for Budget and Programs and the Chief Financial Officer. That's a mouthful. What are your roles and responsibilities?

Ms. McLean: Well, let me just say, I didn't give myself my own title. It was there before I came to the Department. And lately, I must say, with the issues on the chief financial officers of WorldCom and some of these other organizations, I tend to use right now the Assistant Secretary for Budget and Programs, and not happen to mention the CFO part.

But at any rate, under my office is both the formulation of the Department's budget, and also the actual execution of the finances of the Department. So we have the accountants under our department as well. That sounds very boring to most people, but the advantage of the Department, or being in the Department and in the budget area, obviously is that if anybody needs money, they need to come to us, either to propose for additional money, or see if we have any additional money. And so, as a result, the budget office gets involved in a lot of issues.

Mr. Lawrence: How large is your office? And is it just all accountants, or are there other skill sets?

Ms. McLean: I've got about 50 folks working for me at the actual department. But then we have a CFO in each of the modes. So there's a CFO at FAA and Highways. And where we set at the Department the policy, so the accounting policies, maybe travel policies, how we use credit cards, what you can use credit cards for traveling, and that type of thing; that type of policy is set in my office, as well as the formulation of the budget that DOT sends both to the President and then finalizes it and it goes to the Hill.

So we have a mix of folks who are more policy accountants, I'd say, and more larger, bigger budget picture folks, where the more detailed folks reside in the modes.

Mr. Lawrence: You've had an interesting career leading up to your current role. Can you tell us a little bit about your career progression?

Ms. McLean: Actually, right out of graduate school, I graduated from Indiana University. I got my undergraduate in political science there, and then I went on to get a graduate degree in public policy at the School of Public and Environmental Affairs, also called SPEA, at Indiana University.

After graduating there, I actually came and worked for the Department of Transportation for the Assistant Secretary for Budget and Programs. So I worked in the office I'm now heading up. And the woman who was heading it up at the time was Kate Moore. And it was a wonderful beginning into government, because like I said earlier, the budget office often has so much exposure to a lot of the policies. It's just not crunching numbers.

And I only did aviation. And then I went from there to the Office of Management and Budget. And these were all career positions. I went to the Office of Management and Budget, and was the budget examiner for FAA at the time, so I was looking at policy more from the Executive Office of the President.

And then from there I went to the Hill, and actually started a political position, working for the House Transportation and Infrastructure Committee, again on aviation policy, and was there for about 6 years. And that was a great, wonderful opportunity to work for Congress.

And then I actually went back to a career position, which is a little bit unusual. And I started -- I was the CFO at the Federal Aviation Administration. And then from there went back to a political position, which is where I am now, the CFO of the Department. So actually, this job that I'm in right now is the first time I've had transportation experience beyond aviation. So this last year and a half has been fantastic, because it's just really opened my world, and my knowledge of transportation, so it's been great.

Mr. Abel: Let's talk a little bit about that transition from FAA to being CFO of the Department of Transportation. What are some of the differences in working at the agency level versus the department level?

Ms. McLean: Well, the agency level, obviously, you're a little more concerned as a CFO on budget execution. So, you know, are we paying our bills on time? Are we making sure that at the end of the year, we haven't inappropriately spent something? Obviously, there's policy involved as well.

When I went to the Department as the CFO, it's much more policy-oriented, and probably more politically influenced. And part of that is because, like I said, I went from a career job to a political job. And so I'm a little more involved in policy I think at the Department than I was at FAA. But at the same time, FAA has a very strong group of career experts, with some phenomenal skills.

So when I went to FAA, sort of I was competing, I guess I'd say, for the administrator's time with just some excellent career folks that just had such strong backgrounds. It was a little bit harder for me to push into policy. And that I think maybe has less to do with an agency versus a department level, and more to do with just the personalities of FAA, you know, at the time that I was working there. There's just some phenomenally dedicated and very smart career folks there.

Mr. Lawrence: How about the differences from being a career versus being a political appointee?

Ms. McLean: I guess, you know, since I, like I said, flip back and forth, it's all public policy to me. And everything I have been involved in, I've been fortunate enough to feel like the decisions are made on their merits. Whether I'm in a career position or a political position, I am unbelievably honored to work for this President, George Bush. I have so much faith in him, and I'm just thrilled that at this point in my career, I am able to work for this President. So in that sense, that's just fantastic for me personally.

But for my day-to-day decisions, like I said, I think Transportation is, unlike some of the other departments, is less political. I mean, we are, at the Department of Transportation, promoting safety. It doesn't matter if you're a Republican or a Democrat. You're promoting safety. And as a CFO, I'm very interested in making sure the money we spend is spent wisely and most effectively. And again, I don't think that has a difference between whether or not you're a career person or a political person, or if you're a Republican or a Democrat.

Mr. Lawrence: And you've worked on the Hill. How would you contrast your experiences as being in the Executive Branch and being in the Legislative Branch?

Ms. McLean: I think in the Legislative Branch, you set policies, obviously, when you pass a bill. And sometimes, a committee may not pass a bill for, you know, a matter of a year or so. Or you might be working on a very large bill, and it passes -- you know, reauthorization for the Federal Aviation Administration, for instance, may only come along every 4 to 5 years.

So you're making policy, and you're setting large policy, and you're helping the members of Congress, you know, put into law their ideas. But it tends to be on a little bigger picture, and on a little longer time horizon. Once you get in the Department, I think you're taking those larger picture decisions from the Congress, and putting them in place in, obviously, more detail.

So you're setting policy, but it's on a smaller scale and more detailed scale, and so you're diving into really how does the aviation industry work? Really how does the trucking industry work? And when I make this decision, how does that really affect the industry?

And so I think it's a level, a degree of granularity, I guess I'd say.

Mr. Lawrence: Do you find that your management skills are the same in both settings, or were there different tools used based on that?

Ms. McLean: I think in the Department -- well, on the Hill, you know, the staffing size is so small on the Hill, that even those folks who do have management positions are managing a handful of people. Maybe on the committee level, you're managing, you know, 60 people. But in the Department, you can have -- you know, you're managing hundreds of people at a time.

So I think in any case, communication skills are important. And obviously, in the Department, while I'm saying I'm doing a lot of policy decisions, it's also a very fast pace. And so one of the things that is incredibly important is making sure that your staff is up to date on the decisions that are being made, so that they can understand why these decisions are made and not feel like this decision came out of the blue.

So I think as much as I can, and as much as I can slow down and talk to folks and make sure they feel like they understand what's been happening and why the decisions are made, I think communication is probably key in both places.

Mr. Lawrence: That's interesting, but we've got to stop for a break. Come back with us in a few minutes as we continue our conversation with Donna McLean of the Department of Transportation.

How does one get a clean opinion? The Department of Transportation just got one, so we'll ask Donna when The Business of Government Hour returns. (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 Donna McLean, Assistant Secretary for Budget and Programs and Chief Financial Officer of the U.S. Department of Transportation.

Joining us in our conversation is Dave Abel, another PwC partner.

Well, Donna, the Department of Transportation just received its first clean audit opinion on the financial statements for 2001. What steps did the Department take to achieve this?

Ms. McLean: Well, I have to be honest about this. We actually received a clean opinion in 1999, and lost it in 2000, and got it back in '01. And it I think just simply proves that a clean opinion is, once you get it, you don't rest on your laurels, because it's hard to maintain it, particularly with -- we are just now modernizing our accounting system. And we are trying to keep our clean opinion with a rather antiquated system. And it results in a lot of good people working phenomenal hours at the end of the calendar year to basically make sure all of our documentation is in order.

If I can talk for a minute about why we lost our clean opinion, because I think it's sort of interesting. At least for a budget geek like me, I think it's sort of interesting. Anyway.

In 1999, we got our clean opinion, sort of, like I said, by the skin of our teeth, working very, very, very hard. In 2000, we lost it, because in 1999, we got our clean opinion. And the way the accountants look at this is obviously, when you finish your clean opinion, then they don't look back again. They're just looking at your clean opinion then for that current year.

And what happened in FAA, some good people just made some wrong decisions. Some folks who managed property for FAA and were trying to make the documentation even better and clearer changed some documentation that actually affected some of the calculations on property values from 1999 and prior.

So what basically was happening was, let's say that you had a radar. And there was -- we were making sure that our documentation was clear and clean. And we had some kind of a new feature added to the radar. So there was an upgrade. So the value of that property in fact increased.

Well, if somebody logged in and actually changed the value of that property that affected prior to 2000, that basically took a database that was clean, according to our 1999 audit, and degraded it. Again, these are people thinking they're doing the right things, but we just didn't realize this was happening until late in the year and we couldn't correct it. And so the accountants, or the auditors, looked back and said, hey, this has now been violated, this clean property information.

So we actually lost it because people thought they were doing the right thing. Well, we've got that a bit under control now, and we were able to pull our property back into shape at FAA. And we did gain our clean opinion in 2001. I think we're working very closely with our inspector general, who's helping us do the audit, or who is doing our audit. And I think we're going to have some real risks in 2001, in part because the Department of Transportation has had some big changes to it, which you've probably noticed.

And in part, that's the establishment of the Transportation Security Administration. And this is basically the screeners at the airports. And that right now is part of the Department of Transportation. So we have had to set up, and we are hiring, depending on whose opinion of how many staff there are, we right now have the authority to hire up to 45,000 people. But it could be larger than that.

You know, we've got new equipment and property we have to keep track of. So that's going to be a big risk for us for 2002.

Mr. Lawrence: Well, how about the OMB scorecard for financial management? How are you doing getting to green?

Ms. McLean: Well, I'm a fortunate CFO, because, you know, obviously I started with the Bush administration just a year and a half ago or so. And our predecessors had worked very, very hard to put in, or to start putting in a new financial system. It's an Oracle-based financial system we call Delphi. But we are progressing pretty well on that. We now have 10 of our operating administrations out of the 15 on our Oracle financials. And so as a result, we're doing pretty well on the getting to green financial. You know, we had a status grade of yellow for the Department of Transportation on financial management.

Mr. Abel: Let's talk for just a second about Delphi. Delphi, as we understand, is an integrated financial management system. Can you explain to us a bit about what that means? What does it mean to you to be rolling out this integrated system?

Ms. McLean: Well, in short, it means that we can have our consolidated financial system really at a push of the button. So previously, we had several accounting systems that were online, and we had to then have these interfaces that pulled numbers and data together, and then had a financial system that pulled all those numbers, and in fact created our financial statement.

Now it's all in, or will be, once we finish, will be all in one system. And so it obviously reduces the possibility for errors. But it also increases the reliability from the standpoint of managers logging in and getting information up-to-date, accurate.

Mr. Lawrence: How is your progress in rolling it out through the Department?

Ms. McLean: Well, a couple of years ago, the prognosis was not good. We were pushing ahead, probably more aggressively than many other departments. And we had an IG report that came out saying that in fact, I mean, that we were moving too fast. And I mean, how often does the IG or GAO come out and tell a department they're moving too fast? Not very often. They're usually saying you're behind schedule.

So, we were pushing very, very hard and very fast to get this system up and running. Oracle has upgraded its financial system. We had 11.03, and now we're at 11i, which basically means that Oracle had some problems with the older version, and they fixed some of those problems.

And we've got three big pieces left. That's our Federal Aviation Administration, Federal Highway Administration, and Coast Guard are all pending to be turned over to our Oracle financial. So in the next 5 months, we'll see how we do with these large organizations. We're doing well. Up to this point, we're doing really, really, really well. I'm just always concerned about the next milestone.

Mr. Abel: The progress is good. For those that are out there listening that may be thinking, I want to do this, I need to do this in my organization, what lessons learned or what recommendations would you give them as far as this transition and rollout is concerned?

Ms. McLean: Well, I think it is really, really hard to do this. But you have to do it. If you have an old accounting system that isn't FFMIA-compliant, or JFMIP-compliant, then you obviously have to upgrade. If you have a system that is homemade and made for your own department, you obviously have to get an off-the-shelf-type system.

And I think the biggest recommendation I would make would be that the person that heads up this transition does not necessarily have to be a financial manager. This is a big data change. It is like installing new air traffic controller computers or new high-tech equipment in a Coast Guard vessel. So you need a project manager that has some financial experience, but really has that project management, because it is driving this project to the finish line that's so important that, you know, financial managers on a day-to-day basis don't necessarily have that skill set.

So I would say that you really need to make sure that you get a project manager that has pushed a big project through to the end.

Mr. Lawrence: That's great advice. Let's go in a little bit different direction for a minute, and move from systems into some accounting methods. Some organizations have been implementing activity-based costing and other cost-accounting methods. Is this something that the DOT is currently using, considering?

Ms. McLean: Actually, whether we wanted to consider it or not, it was in legislation that FAA establish a cost accounting system a couple of years ago. And in fact, I was working on the Hill at the time. So I think I somehow was involved in that, writing that legislation. But anyway, now I'm living it.

FAA actually has put into place a cost accounting system that is quite impressive. It's not completely finished, but about 75 percent of its costs right now are -- FAA is able to produce in a cost accounting monthly data. FAA has taken that information, and has been able to provide some great incentives for its employees.

For instance, they've been able to make sure that the en-route facility in one location, which is, you know, basically a facility that controls the airplanes when they're in the high altitudes, and they sometimes will have, you know, 300 people in these facilities, or 500 people, that they understand what the cost of providing per operation is. And then that's compared to another facility that has similar responsibility.

And you sort of set up a competition, really, between these organizations, or these locations. And you sort of question, you know, why does Joe at his facility have a lower cost per aircraft operation than Bill does? And let's start looking at what are the operational changes that we can make to be basically most cost effective in all of our facilities? So it's set up some really good dynamics. And we're just scratching the surface on being able to use that.

For the rest of the Department, we are beginning to use, and we will be using the Oracle financials for our cost accounting. But we are just beginning that. Obviously, FAA is one of our more businesslike models, because they provide air traffic control on a daily, 24/7 situation. So they were the right place to start for cost accounting.

Mr. Lawrence: That's a good stopping point. It's time for a break. Rejoin us in a few minutes as we continue talking about management with Donna McLean of the Department of Transportation.

What does the CFO Council do? We'll ask Donna, who serves on the Council, when The Business of Government Hour returns. (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 Donna McLean, Assistant Secretary for Budget and Programs, and Chief Financial Officer at the U.S. Department of Transportation.

Joining us in our conversation is another PwC partner, Dave Abel.

Mr. Abel: Donna, you mentioned earlier in one of our earlier segments the tremendous challenge that the DOT has faced this year in bringing up the Transportation Security Administration. What have been some of the challenges that you faced in overseeing the Department's budget in bringing up the TSA?

Ms. McLean: Can I first say that even though it's been really very, very challenging to set up TSA, or the Transportation Security Administration, it has always also been extremely rewarding. I think that a lot of us felt, after September 11th, it was so devastating. And we all had a life-changing experience, and, you know, how can I help this country heal?

And at the Department, you know, we have been working phenomenal hours. But we have been doing something, I think, to help us all heal. And part of that is, you know, if it's not sounding too -- I mean, too -- I don't know, self-important or something. But I just mean I think we all feel very strongly that setting up TSA has been both a huge challenge. And we have all sacrificed time with our families because of the hours we're working. But it's also been very, very rewarding, and something that we all feel very strongly about.

But what our requirement from the law is to set up a federalized screening workforce by November 19, 2002. And that is in a year, basically, hire enough screeners at airports, train them, change the equipment so it's improved to cover 429 airports that are just scattered around the country.

We didn't even know what that meant. We still don't know completely how many people we're talking about to complete this effort. So usually, when you establish a budget, you say okay, this is our mission. This is how we're going to achieve it, which is usually pretty well laid out. And then this is how many people we need to achieve it. And, you know, maybe there's some gray area.

But the whole thing in setting up the TSA was a gray area. You know, yes, we knew that we had to have federal workers in place screening passengers by November 19th. But we immediately went out and tried to survey how many screeners were in place at the time the bill was passed. And we couldn't get a handle on how many people there were in fact physically screening people in airports. And so the estimates have gone from you know 20,000 people to 70,000 people.

And of course, it's not just screening the passengers. Because there, at least we could go out and get a feel for what's happening today. The law also requires that all baggage be screened by explosive detection systems by the end of this calendar year. We are building that as we speak.

So we had to take existing technology or any technology that's perhaps on the edge of becoming certifiable, and effective, and try to put that in place and to deal with screened baggage. So setting up a budget of how much that all costs has been a huge challenge, just because you have to have the information, obviously, to set up the budget.

And I'll just say I've had several people, several of my bosses say, you know, Donna, we need to get this budget number nailed down. But it's not the budget number. It's all the policy that goes into creating those budget numbers. And it's just been a huge effort to - because everybody has a different opinion on how to get the job done. And I mean by everybody people in the Department of Transportation, people in the White House, and people on the Hill, the Congress. Everybody has a different opinion on how to get the job done.

So it's been a great challenge. But, you know, an experience I will look back on and say, wow, how lucky I was to be in the middle of such a huge challenge.

Mr. Lawrence: How are you balancing it? You gave an interesting description. How are you balancing what I imagine is a need to go quickly, but a need to be, I guess, as the CFO, to be precise and then prudent with money? I mean, what skills do you use to sort of make those two mix?

Ms. McLean: We're not the only department that's facing this. I mean, this has been just an unfortunate, crazy year for budget cycles. I mean, we had the first supplemental before the end of the fiscal year, and then we had the December supplemental, and then we just passed another supplemental.

And then the President made a choice on whether or not he was going to initiate and use the $5 billion in the second supplemental. So in fact, we didn't actually know what our '02 budget final numbers were until about 6 weeks before the end of the fiscal year. I can't imagine that we have many situations where you're going through to the end of your fiscal year, and you don't even know what your budget is until 6 weeks before it ends.

So it has been a year of -- you know, we have numbers, and we're telling you these are the best estimates we have today, but we're collecting information as we speak. And you've got to help and understand that these numbers could change. And that's been hard for everybody, including me. Budget is a sort of world where you think of it as being precise and something that doesn't change. But it's been a little bit fluid this year.

Mr. Lawrence: Let me change subjects a little bit. You're a member of the federal CFO Council. Can you give us an overview of what the Council does?

Ms. McLean: I think the purpose of the CFO Council is to oversee, obviously, deal with sort of the issues that all the CFOs are facing. But the CFO Council was fortunate enough, again under the Bush administration, to have a very significant role, because of the Presidential Management Agenda that was laid out by President Bush very early on in his administration.

And two of the five Presidential Management Agendas had to do with issues that usually affect the chief financial officer: one on the financial management, improving financial management; and the second one on linking budget and performance integration.

So the CFO Council has taken those PMAs and broken them up, and there's been different councils basically trying to help the government as a whole achieve the goals of the President in those five Presidential Management areas. So that's certainly one of the main efforts and benefits of the CFO Council.

Mr. Lawrence: You're chair of the Budget and Performance Committee within the Council. Can you tell us a little bit about the objectives of the committee and perhaps some of the best practices that you've identified?

Ms. McLean: Yes. Well, let me also tell you how I became the chair. Mark Everson, who is at the Office of Management and Budget, he's sort of the CFO of the entire government. I talked to him about this Presidential Management Agenda, which was to link budget and performance. And basically, the concept was, you know, if you're going to spend a dollar, tell me what I'm going to get for it. That's a totally reasonable, wonderful philosophy.

But I said to Mark, listen, this is great, but how do people get there? I understand the concept, and I've been trying to do this for several years. And I don't get how you get from the theory into the practical world. And he said, well, Donna, I think you're right. And I think you should chair this group and figure it out.

So I guess unfortunately, I complained, and then was asked to head up the group. So it wasn't out of a skill set, necessarily. It was probably more out of complaining.

Anyway. So I was fortunate enough to have worked with a lot of great departments. And we worked with the Department of Energy, and EPA, and some folks from SBA and Interior. I'll probably forget some of them. But we all got together and basically said, you know, we really need a path to get from the theoretical to the practical.

And so we put together an approach that perhaps isn't pretty. But we have some more specific guidelines for the departments on how to get from the theoretical to the practical. And that can be a whole hour radio show in and of itself.

So, I'll just say that Office of Management and Budget decided to put it in their A-11 Guidelines, which are the guidelines on how you develop your budget. So there is some more information that you can find on the website.

Mr. Lawrence: Were there any best practices or particular tools and techniques that were being done that are worth mentioning?

Ms. McLean: To be able to link budget and performance, you have to have a new financial system, or you have to have a new budget system, or you have to have a system to help you do this. And I strongly believe that's a way to procrastinate. And it is really something that I think we just should not have as an excuse for not linking budget and performance.

Now, don't get me wrong. Linking budget and performance is extremely difficult. But I don't think we necessarily need new systems to be able to do it. At least maybe in its perfect end state, yes. But in getting there, we don't necessarily have to do that. So, best practices. I think, you know, again, I don't want to go into so much depth that we get off all the other topics.

But the general practice that we're trying to push people towards is first, they have to have a performance report that is strong, and is something that both is acceptable to OMB and to the White House and the administration, but also to folks on the Hill. Again, I'm fortunate that I am CFO of a department that has a very good performance report. And these are the performance reports that were required by GPRA.

For the last 2 years, DOT has had the second rating from the Mercatus Institute for their performance report in government. And this year, we were fortunate enough to have the number one rating. So we start with a very strong base. If you don't have a strong performance report, then I think you need to just, first off, make sure you've got a solid -- go back and look at your strategic plan, and re-evaluate whether or not you have the right performance report. Because I think that's where it all starts.

Then, I think you need to make some hard decisions on looking at your budget items. You can start from the bottom up, which is sort of the way I like to look at it. And look at each of your requests, and ask yourself two questions: what is this request going to do to improve one of your GPRA goals? Now, you might say, well, how can you answer that question for research? How can I answer that question for a long-term capital procurement project that I'm not going to see finished for 5 years? That's a very good question. But then you ask yourself the second question, which is what is the milestones that I am going to see from this additional $100 million, $5 million, take your pick.

So, you kind of have to force yourself to say yes, I know that, in the terminology of performance, we have outcome goals, and you have output goals. I think you have to ask yourself both. What is the output, meaning what is the milestone in the short term, and what's the outcome? So is this investment in fact going to reduce the number of fatalities on highways? And then build up from there.

Mr. Lawrence: That's a very good answer, and a good stopping point. Rejoin us in a few minutes as we continue talking about management with Donna McLean of the Department of Transportation.

What are the biggest management challenges ahead for the Department? We'll ask Donna for her thoughts when 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 Donna McLean, Assistant Secretary for Budget and Programs and the Chief Financial Officer of the U.S. Department of Transportation.

Joining us in our conversation is Dave Abel, another PwC partner.

Well, Donna, in the last segment, you talked about the importance of financial management. And I'm curious. In the future, will program managers assume more responsibility for financial management?

Ms. McLean: I think they have to. I think there are many program managers who definitely have their eye on their budget and their eye on making sure that each dollar they spend is as effective as possible. But I think when you're talking about, again, one of President Bush's big initiatives, which is his Presidential Management Agenda, it's trying to force government into a more businesslike fashion. So that's not -- I've got $20 million to obligate during this fiscal year, because I've got one-year money.

That may be the sort of mindset that we have in government. It needs to be I've got $20 million, how efficiently and effectively can I spend that money to get to my output goal, which would be, you know, again, improving safety, or whatever your -- I always talk about safety in transportation. There's a lot of other areas in Transportation and in other departments.

But so I think that as financial managers, and as the CFO office, we have to encourage program managers to have as much financial information as possible. But we also have to hold people accountable. And that's part of budget and performance integration as well. It's sort of, you know, what did you promise you were going to do with this money? And did you in fact do this? And if you didn't, that needs to be reflected in your performance evaluation.

So if the theory on performance and budget integration really works, it should go all the way down to the program manager and his or her employees, and their, you know, specific program evaluations on an annual and bi-annual basis.

Mr. Abel: So what does the pipeline look like for future financial managers in your office, recruiting them, and how hard do you think it will be to be able to continue to bring in people into this role?

Ms. McLean: Well, I think, again, the Department is going to be at an advantage, simply because we're going to have the Oracle financial system up and running. And I think that's going to be appealing to a lot of folks, that we have, you know, right now state of the art. And because we took the Oracle financials, and we didn't alter it significantly for our needs, we'll be able to upgrade it easily. Because of course, if you customize these computer systems, forget it. As far as upgrades, they're going to be costly and time-consuming, and you'll probably, with budget crunches, end up not in fact doing those upgrades.

So I think the Department is going to be an attractive place to come. But I also think that we have to look at, with the new financial system, we're going to need two kinds of people. We're going to need the important folks who sit there every day, they come into work, they log on, they spend their time in Oracle financials, making sure that the books are right, making sure that we don't over-obligate, making sure that, you know, whatever you have put on the books, you and your program office, whatever you've put on the books is accurate. You know, our hardcore accountants.

But we're also going to need another level. The philosophy of the Oracle financials is that you can pull data out, and you can pull data out easily, and you can pull out data in useful, helpful reports. But the CFO's office has to be the liaison between the accounting information and the program office. And we have to be teachers, and help program managers understand their financial information better, and use it to improve, again, how we manage programs, and how we get progress and best performance out of the money that we spend.

So I see a future sort of workforce in any CFO office is going to have these two layers. And it's the sort of financial management area that I think DOT, in the next couple of years, that's going to be key.

Mr. Lawrence: What big challenges lie ahead for the Department?

Ms. McLean: I think one of the biggest challenges is, of course, we just talked about setting up the Transportation Security Administration. But that now is going to move, or the President is proposing that it move to the Department of Homeland Security along with the Coast Guard, which is part of the Department of Transportation. And so if that proposal is accepted, which it certainly looks as if it will be by Congress -- but I don't want to be presumptuous -- but assuming that in fact occurs, we have to make sure, from a financial management standpoint, that we send both Coast Guard and TSA with the most solid financial system possible.

We've got TSA on Oracle financials, because they just started. So we put them on Oracle financials. But Coast Guard is still on our old customized DAFUS (?) program, which is -- you know, only the experts in the Department that have been working on it for years know about.

So it's unfortunate the timing is such that we're going to be sending two of the biggest chunks, single chunks of the Department of Homeland Security on two different accounting systems. So it's unfortunate, but it's a situation of timing. And then of course, we don't know what's going to happen at the Department of Homeland Security, and what the needs are of that department, and what kind of financial system they'll be putting in place.

Obviously, the other thing that we're going to be making sure, we've got to deliver success to Homeland Security here. And property management in TSA is going to be a big issue. So again, you know, I said that was going to be an issue for our clean audit. But it's also going to be an issue for Homeland Security, too, when we transfer.

So, you know, those are in the short-term, 12-month sort of time frame. In the longer term, I think, again, making performance and budget in fact a reality, and not theory is going to be a big challenge for the long term.

Mr. Lawrence: You mentioned property management, which we covered a little bit when we talked about the clean audit opinion in the FAA. Do the lessons that you learned in recovering your clean audit opinion around property management apply to the TSA? How does that solution relate to what you need to do in TSA?

Ms. McLean: Focus, focus, focus. We have to make sure that absolutely, that we keep track, have a good solid system for tracking that property. And let me just explain what some of the property that TSA will be having to keep track of.

You know, you've got the magnetometers, which is what you walk through at an airport. They're probably not going to move. But you've got all those wands that, you know, we don't -- they're very movable. And if you don't like property, that's very movable, because it's harder to keep track of.

We've got air marshals that are armed. So suddenly, the Department of Transportation, it's new for us to have to keep track of a lot of guns. We've got them in Coast Guard, but that's about it. And we've got, also, explosive detection systems, some of them that are huge, and we will know where they are, because they are the size of SUVs. But we've also got some smaller explosive detection systems that are called trace detectors. And they are more like the size of the top of a table, and can be moved, and will probably, part of the purpose will be to be on rollers, and be able to move them.

So we've got a big challenge on making sure that we keep track of all of that, and of course, any upgrades and valuation to that. So we have set up a property system that should be able to handle that. But it's obviously something that's on my mind and I'm worried about.

Mr. Lawrence: What advice would you give to a young person considering a career in public service in, say, perhaps the Department of Transportation, or even Homeland Security?

Ms. McLean: Well, I think you have to ask yourself, obviously, what makes you happy? And if you decide -- what made me happy before, when I was, you know, in school, in high school, thinking about what do I want to do for the rest of my life? I was a volunteer. And I won't go into all the places.

But it was incredibly rewarding to me. But by definition, you don't get any money out of being a volunteer. So public service I think is probably the best substitution for that. It's incredibly rewarding. And if you have decided that public service is something that you want to do, I would highly recommend getting as much education as you can before you begin your career path.

So if you can get a graduate degree, particularly if you're interested in going to Washington, I think it gives you a huge step up. And then, I'd say take as many -- don't be frightened. Challenge yourself as much as possible. Don't be fearful. I think government actually rewards you for taking challenges, and in fact changing jobs.

You could say, if you look at my career and how many years I've stayed in one career versus another, that I can't keep a job, because I think my longest job was 6 years in one place.

But I think the government is very good to folks who are willing to take challenges, and women and minorities. I think I've been very blessed, looking back on my career. But I think I've had opportunities I might not otherwise have had in the private sector, because government is conscientious about making sure the workforce is diverse.

Mr. Lawrence: Donna, I'm afraid that will have to be our last question, because we're out of time. Dave and I want to thank you for being with us this morning.

Ms. McLean: Thank you. I really enjoyed it. I'm not a radio person, so it's been surprisingly enjoyable.

Mr. Lawrence: And if anybody's interested in some of the things you said, is there a website or anything they could go to to find out more?

Ms. McLean: Yes. Again, you can go to the Office of Management and Budget website. It will have the A-11 guidelines, which will show our approach to getting you to green on our budget and performance integration. Also, the DOT website has some information specifically about our financial office as well.

Mr. Lawrence: Great. This has been The Business of Government Hour featuring a conversation with Donna McLean, Assistant Secretary for Budget and Programs, and the Chief Financial Officer of the U.S. Department of Transportation.

Be sure and visit us on the web at endowment.pwcglobal.com. There, you can learn more about our programs and researches into new approaches to improving government effectiveness. You can also get a transcript of today's very interesting conversation.

Again, that's endowment.pwcglobal.com.

This is Paul Lawrence. See you next week.

Donna McLean interview
09/14/2002
Donna McLean

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