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.

Richard L. Gregg interview

Monday, November 29th, 1999 - 20:00
Phrase: 
"We have gone from traditional accounting transaction type work to a lot more analytic work. And so the knowledge that we need to be able to do our job today is much different than it was 10 or 15 years ago."
Radio show date: 
Sat, 01/01/2000
Guest: 
Intro text: 
Gregg discusses how FMS is working to make sure that its more than 950 million payments to the American people are on time and accurate. He talks about how FMS distributed payments from the Federal Emergency Management Agency to the victims of Hurricane...

Gregg discusses how FMS is working to make sure that its more than 950 million payments to the American people are on time and accurate. He talks about how FMS distributed payments from the Federal Emergency Management Agency to the victims of Hurricane Katrina as well as how FMS is working with other government agencies to eliminate erroneous payments and attempting to streamline the federal government’s debt-collection process. Gregg also describes how FMS works with other parts of government to compile a governmentwide financial statement.

Gregg also describes FMS’s efforts to automate all of its payment disbursement and collection operations. In addition, he talks about how FMS effectively collaborates with other federal agencies. Financial Management; Managing for Performance and Results; Innovation; Leadership

Complete transcript: 

Arlington, Virginia

Mr. Lawrence: Welcome to The Business of Government Hour: Conversations with Government Leaders. I am Paul Lawrence, a partner at PricewaterhouseCoopers and a co-chair of the PricewaterhouseCoopers Endowment for the Business of Government.

We created the Endowment in 1998 to encourage discussion and research and to new approaches to improving government effectiveness. Find out more about the Endowment and its programs by visiting us on the Web at endowment.pwcglobal.com.

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our special guest tonight is Mr. Richard Gregg, commissioner of the U.S. Department of Treasury's Financial Management Service. Welcome, Dick.

Mr. Gregg: Thank you.

Mr. Lawrence: Well, let us start out by finding out about the Financial Management Service. Can you tell us what FMS does?

Mr. Gregg: We are the financial management arm for the government. We have four primary missions. We make about 85 percent of the government payments, amounting to about 850 million payments per year.

We also have responsibility for the Centralized Debt Collection program. Agencies, after they are unable to collect debts that are owed to the government, forward those to the Financial Management Service.

Our third program is dealing with all the government's collections, funds coming in to the government. We collect in the neighborhood of about two trillion dollars per year.

Our fourth program is governmental accounting responsibility, which means that we are the central repository for accounting with all the government agencies on a central governmentwide basis.

Mr. Lawrence: Perhaps you can tell us a little bit about your interesting career. I understand that you joined Treasury in 1970. Can you tell us about your career trajectory since then?

Mr. Gregg: Yes. Actually I started at the Financial Management Service in 1970 and was a banking analyst at that time. In 1976, I was offered a position at the Bureau of Public Debt and went to Public Debt and ran their Office of Financing, which is responsible for conducting the auctions to do all the government's borrowings.

A few years later, I was named to the position of deputy commissioner of Public Debt and was there until 1987, at which point I was named the commissioner of the Bureau of Public Debt and was there for 10 years as commissioner.

Mr. Lawrence: I was kind of interested to learn about your career because I would have thought with all this money running through your career you would be an accountant or have a financial background, yet you are a lawyer. How does that add up?

Mr. Gregg: I am not sure any of it adds up. I was out in Washington going to graduate school and knew that I was going to get married fairly soon and decided that I better find a job. I started looking in Treasury and started with what was in the Bureau of Accounts, later became the Financial Management Service and have really a background in history and political science. While I was working at FMS and then when I transferred to Public Debt, I was going to law school at night so I finished by degree but I continued my career in government.

Mr. Lawrence: You indicated that you have been in Pubic Debt for quite sometime. What did you do there and what were some of the management challenges you faced?

Mr. Gregg: I started off in the Office of Financing, which is a small office that, every week, borrows tens of billions of dollars through auctions. I was there for about five years and ran a small office where the most important thing was making sure that we had the contracts right to sell the securities and that we did the auctions correctly and all that went off without a hitch.

In, I guess it was 1981, I was named the deputy commissioner, with the responsibility to run day-to-day operations of the Bureau. I think that some of the challenges I faced there was, first of all, I was fairly new to managing that size of operations so there was quite a bit of learning going on in my case. But we had an organization that was, I think, fairly conservative, and we were struggling some in doing data processing so there's quite a bit of work that I did, along with others who worked there to try to change the way we did business.

When I became Commissioner in 1987, like any organizations we had a lot of challenges but one of the things � and probably the biggest that I have faced while I was there � was the decision we made to relocate most of our operations from Washington, D.C. to Parkersburg, West Virginia.

We'd had an office in Parkersburg for quite a few years and the more we looked at it and saw the potential cost savings from making that move we decided that even though we knew it was going to be a huge challenge, to go ahead and switch that operation and we did that over a period of years. That was very challenging. It was very difficult to deal with all the issues: trying to find jobs for employees who decided not to relocate; making sure that work continued without any interruption; managing the process of a major transformation. We didn't want to just take the office as it was in Washington and transport it to West Virginia. We really wanted to look for opportunities to streamline and find other ways to do business. So that was both very challenging but also very rewarding.

Mr. Lawrence: I see you have also served in the United States Air Force. Could you tell us about that experience and how would you compare that to working in the non-military part of our government?

Mr. Gregg: The experience in the Air Force was first of all right out of high school. I graduated in 1962 and decided that rather than go directly to college that I would spend a few years in the Air Force. I spent most of my time overseas. I was in Japan for a couple of years and Taiwan for a little over a year.

There, I did not have many management responsibilities. I was an analyst while I was there. The management responsibilities were not very onerous and it was a growing up time for me. I did a lot of travelling that I otherwise wouldn't have done and had experiences, and it prepared me more than anything, when I did get out of the Air Force, to go back and I was very anxious at that time to get through college and to get on with a career.

I came back out of the service and went to undergraduate school at the University of South Dakota and then came out to Washington and went to a graduate program at George Washington University.

Mr. Lawrence: Upon reflection, which of these positions do you think provided you the best opportunity to develop as a leader?

Mr. Gregg: I learned, I think, in every position. Probably the one that gave me the biggest opportunity was when I was commissioner at Public Debt. It was an organization that did not have as much teamwork as we needed. Different parts of the organization had walls built up and there was not as much working together as there should be and that was a very high priority to change that.

We, I think, also struggled from being too cautious. It was an organization that, I think, was quite conservative, and if it was not invented there, then it probably was not a good idea. We worked on changing that.

Certainly the transformation and the issues surrounding the move to Parkersburg were challenging and I am sure that I learned some things that maybe I�d just as soon not learn. But it was challenging to accomplish that and deal with the concerns that local congressmen had with their constituents and also to make sure that we did what we said we were going to do for the employees.

So I think probably the job of the commissioner was the most challenging and I learned the most from that. And the most rewarding.

Mr. Lawrence: Interesting. Well, it is time for a break. We will be right back with more from The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I am Paul Lawrence, a partner at PricewaterhouseCoopers. Tonight's conversation is with Mr. Richard Gregg, commissioner of the U.S. Department of Treasury's Financial Management Service.

In this second segment, let us talk about your experience at FMS. How has it changed since you have become commissioner?

Mr. Gregg: I think it has changed and it is still changing. I think that is the nature of business or government today. I would probably name three things that have been, at least in my opinion, the most profound changes.

One is, we have spent quite a bit of time working on the culture of the organization and by that I mean changing the expectations to make sure that people are working together as a team. To me that is the hallmark of what makes an organization work or not work and the emphasis that I've put on it and Ken Popi, my deputy, has put on it, I think has started to pay off and we're seeing some good teamwork around the organization.

It also means communicating, sharing information. It is not something that you should put in the vault someplace but you should share throughout the organization to let people know what is going on; to share expectations, directions, priorities and goals and we need to do that, not only within FMS but since virtually every program that we deal with affects all the other government agencies we also need to do that across government. While that is all very challenging it is also something that, to me, is absolutely essential if we are going to be successful.

Another area that I think we have made some change in is the decision making process. I am a fairly firm believer in getting things decided and moving on and getting them implemented. I think all too often people can identify two or three good alternatives and then months and months are spent analyzing which of the three are the best.

My philosophy is more, if you have three that will work then make some informed judgment about which of the three you think is the best with the information you have and implement it rather that spending another six months studying the three proposals. And then if you need to make some refinements to the one you chose, that's fine but I think the pace of decision making and the reduction in the bureaucracy of how much paper you need to make some decisions is something we have stressed.

I think it brings a sense of urgency to the organization and it lets people who are very interested in implementing something that they are responsible for to get on with the business of implementing it rather than having countless meetings and presentations.

A third area that we have spent a lot time working on is what I would call the nuts and bolts of government. It is easy to get excited about some of the e-commerce things we are working on. They are very important but the things that don't make the headlines, which don't get as much attention, but are equally important.

We have a governmentwide accounting responsibility. It is essential for not only the Treasury and FMS but for other government agencies and we need to do that and do that well. We recently launched a project to rethink how that work is done. It has not been re-examined for nearly 40 years. We have automated processes, we have taken advantage of some new technologies but we have not sat back and said to ourselves along with other government agencies, is this the right way to do this business? Aren't there some better ways?

We handle the check claims process for checks that are sent out. That is essential for the people who have their checks stolen or they have become lost. We need to do it well. Those sort of things are, I think, critical for us to be able to do our job even though we know that unless we really screw up, they are not going to get the attention and publicity. They, I think, are important to give the organization a sense that the work is essential for individuals and for government and to make sure that we have the processes in place, the controls, the right kind of accounting to do that work and do it right.

So we spent a lot of time emphasizing the day-to-day nut and bolts of running the operation and doing a good job and trying to recognize the individuals that are in those areas that what they do is essential and they need the recognition that they deserve when things are going right.

Mr. Lawrence: Let me go ahead and ask you about one of those e-commerce ideas. I understand that FMS uses e-commerce to do the financial transactions and one example is the smartcard pilot used in Bosnia. Can you tell us how the smartcard works?

Mr. Gregg: This is just one of many examples of the use of new technology that not only FMS is going through but others in government and businesses. The smartcard is a way to get rid of the cash and currency that was being shipped to the bases in Bosnia. Not only was that expensive for the Department of Defense but it was also kind of saturating the local economy with U.S. dollars.

So by putting in smartcards and having the troops in Bosnia be paid by a re-loadable smartcard device that they can use anyplace on base to purchase goods at the commissary, to take care of haircuts, any essentials that they need. It has really been a successful program and we have it implemented now in all the bases in Bosnia.

I think that the estimate is that the Department of Army has reduced their currency by at least 70 percent and maybe that is higher than that by now.

The use of this kind of technology is, I think, a turning point for government and for business. The opportunities that are there to do things a different way, to use technology in a way that makes sense and saves money and provides better accounting is there and all of us need to take full advantage of that.

Mr. Lawrence: That is fascinating. It is time for a break. We will be back in just a few minutes with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I am Paul Lawrence, a partner at PricewaterhouseCoopers. Tonight's conversation is with Mr. Richard Gregg, commissioner of the U.S. Department of Treasury's Financial Management Service.

In this segment I would like to follow up on something you mentioned at the outset which is that FMS collects debt owed the government. I am particularly interested to know about the Treasury's offset program. Could you tell us about that and how that works?

Mr. Gregg: Yes. If you look at it this way, all the government agencies have debt, and if you are unable to collect it, it becomes delinquent debt. You have that on one side and on the other hand you have FMS that makes 85 percent of the government payments.

What we are doing through the offset program is matching up the debts that are referred to us from all the government agencies with the payments that we make. When there is, in fact, a match between a debtor and someone we are going to make a payment to, we reduce the amount of the payment by that debt or some percentage of it depending on the program.

So it is a very important tool for the government to have in helping collect delinquent debt. Last year we collected $2.6 billion in delinquent debt through the Treasury offset program. Half of that was to cover federal debt and half of it was to cover delinquent child support payments owed by individuals around the various states. So it's not only helping the federal government but also the individuals who are due those child support payments.

Mr. Lawrence: One cannot help but think this is a tremendous tool to use to do the kinds of things you talk about. It certainly leads to a greater efficiency. You cannot help but wonder about the people who actually have this happen to them, the surprise they might experience when it does.

Mr. Gregg: Yes, they are surprised. The other surprising thing is that in many cases were we offset tax payments, tax refund payments, the same people get offset year after year. So some of them are surprised but some of them really aren't that surprised because after a year or two they pretty much know they're going to be offset.

We do have some programs in place to make sure that both the agency that is owed to and FMS lets people know that this is going to happen. There is a lot of notice provided to them and while it doesn't, I am sure, make it any easier when they get their payment reduced, they are, in fact, notified that it's going to happen.

Mr. Lawrence: FMS is really at the forefront of many e-commerce solutions. I have noticed that you have even used digital cash to purchase laptops over the Internet. How does digital cash work?

Mr. Gregg: This is a very new pilot. I think we made our first transaction in March of this year. It is pretty much like having two organizations with currency in their billfolds, except that it is electronic. What it allows us to do is buy and sell between the organizations without going through a financial intermediary.

In this case, we have this pilot set up with Dell Computers. FMS loads, on a very secure hardware device on our PC, amounts of money. We order a PC from Dell and we reach an agreement on the price. They let us know when they are going to deliver the computer. When the computer is ready to be delivered, we send a secure electronic message to Dell, which essentially transfers the value from FMS to Dell directly.

Mr. Lawrence: One would have thought there would have been a lot of security issues surrounding this. I am just wondering how you work through this.

Mr. Gregg: The security is very robust in this case. It is a device that was established by one of the banks that we do business with called Sprocket. It is a lot of encryption. Using this device we are very confident that it is secure and not only to make sure that the values are transferred but that no one can really tamper with it.

Mr. Lawrence: FMS pays out a lot of money and I think it is only natural to think of all these checks to be written but in fact, a lot is transferred electronically, so I am wondering how the move to electronic transfers has changed the way FMS does business.

Mr. Gregg: The volumes that we deal with are so huge that even though now that we are making about 70 percent of our payments electronically, we are still issuing 280 million checks every year, which any place is a lot of checks.

It continues to change the way we do business. The benefits from issuing electronic payments are significant in terms of dollars. We save about 40 cents every time we can make a payment electronically rather than by check.

It is also better for the individuals because they are assured they are going to get paid on time. There is no risk of the check getting lost, stolen, that sort of thing.

Within FMS the benefits are also significant. With the check process there is, by definition, a lot of paper and also in the background a lot of accounting processes that you really do not have to worry about with electronic payments. So it is beyond the surface. Underneath that there are huge accounting and reconciliation issues that essentially go away if you are making payments electronically and we are, of course, continuing to encourage electronic payments but in the meantime, having to deal with a huge volume of paper checks.

Mr. Lawrence: I understand that one of the results of the movement from checks to EFT payment is that FMS is planning to close one of the five regional financial centers later this year. So I am just curious how you are managing this change, particularly the shift in the workforce?

Mr. Gregg: Yes. April of last year we announced that we are going to close the Chicago Regional Financial Center and that was a difficult decision because anytime you are affecting people's lives and livelihood you have to be very careful about doing that. At the same time, given the volume that we're experiencing, with the move to more and more electronic payments it made sense. So we had two primary challenges with that closure.

First of all, to make sure that the employees knew what was going on, why the decision was made and that they had a commitment from myself and from all the rest of management within FMS, that we are going to do everything possible to allow them to land on their feet. That was the first major challenge and I think we have done a good job of doing that. I think if you would ask the employees, they would say that we have lived up to our commitments thus far.

The other challenge of course is to make sure that as you are going through this, that the work that Chicago was doing gets handled properly. The way we have done that is to transfer that work, over the last year, from Chicago to the other regional finance centers.

That has gone very well. They really have not missed a beat. That is always a challenge because people are leaving Chicago and you can never plan out exactly how that is going to work. But it has gone well and we have most of the work now transferred out of Chicago and we're down to about 35 people that we either will try to help find jobs for or they may decide to retire when we close the office in November.

Mr. Lawrence: We have heard a lot tonight about the role of information technology and FMS. How do you attract IT professionals to your workforce and keep them up to date?

Mr. Gregg: This is a challenging area. I do not know of anyone who has an absolute solution. It was very difficult last year when we were going through the Y2K transformation to keep people on board that were being offered positions outside of FMS, outside of government. One of the things that we did was to offer some retention bonuses for individuals that we felt that were just essential to keep a hold of.

Looking ahead, one of the major changes going on with government and industry is a move away from the mainframe computer technology and the people to support that. It is not going to be an immediate change but we are moving more and more towards having people who can develop and maintain systems on the Internet. That's a transformation that we haven't completed. In fact, I'm not sure we've even very successfully started.

It's something that we have to do. We have to provide people with the tools to make that change and to find them challenging, interesting work that makes it exciting to work at FMS and for them to want to stay.

Mr. Lawrence: Well, it is time for a break. We will be right back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I am Paul Lawrence, a partner at PricewaterhouseCoopers. Tonight's conversation is with Richard Gregg, commissioner of the U.S. Department of Treasury's Financial Management Service.

Well, I was just curious. One of the things I know is that FMS partners with a variety of federal agencies. I am curious then, from your prospective, what are the keys to effective interagency collaboration?

Mr. Gregg: This is probably the biggest difference between Public Debt and FMS. At FMS in every one of our programs we deal with virtually every government agency in the United States. It is challenging.

Going back to something I said earlier, I think the key to trying to be successful in this area is to have open communications with the agencies. They have to know what your plans are. They have got to be involved. You have to talk to them. If you do not do that, then I do not think you have a chance at succeeding.

The other thing that you have to do is be open to ideas. We certainly go into projects or initiatives with our own thoughts but you have to receptive to a better idea coming from the agencies. There again, if you are not, then you are going to get a lot of resistance.

Finally, while you are doing all of that, you need to get things implemented. There is a friction there that is undeniable and it is not going to go away, but you need to make progress and to have a sense of urgency of getting things done. So there is always a balance between how much conversation, discussion, you have and someone making a decision and moving ahead with the installing a new system or program.

Mr. Lawrence: We have talked tonight about several cutting edge projects and tools at FMS. What improvements are on the horizon?

Mr. Gregg: I just wrote something recently for our internal paper on this. Looking ahead, I think the opportunities and challenges in FMS are almost overwhelming � not quite, but almost overwhelming.

In every program we have great opportunities and in our payments area we need to continue to move to more and more electronic payments.

In addition, we need to figure out how to provide better information to individuals getting payments. That is something that is priority and we need to do a better job at that.

In the debt collection program I like to say that we have about 60 percent of the program implemented right now. We have to get the rest of the way there to take full advantage of the tools that we have for debt collection and we need to press ahead and get the whole debt collection program implemented.

In governmentwide accounting, as I said before, we are looking at rethinking how the basic structure works for governmentwide accounting. You have a hidden cost around government on the thousands of thousands of reconciliations that take place every day simply because of the way that the current structure is designed. We need to rethink that and do a better job.

In the collections area, currently we are bring in about $1.3 trillion a year electronically. Which sounds terrific. We still have $600 billion that come into the government by way of check.

We have a major initiative underway to change that and one of them and the most exciting one that is on the horizon is something that we call pay.gov which is going to be an Internet portal which will allow individuals coming into government to pull down forms through this FMS developed portal. And also to make payments into government through the Internet. That's something we just announced the 26th of this month and we have plans to get it installed as a pilot later on this fall.

So it's, again, one of those very exciting and very quick initiatives to get something up and running as a prototype and then build from that.

Mr. Lawrence: You have talked about a lot of new ideas and initiatives. Has there been resistance to these new ways of doing business?

Mr. Gregg: I would not say outright resistance to new ways. Any time you are dealing with change, there are people who become concerned; for example, on us moving towards more and more electronic payments. Certainly there are people that are in the payments business concerned about jobs.

On some of the e-commerce initiatives there are always different ideas on the best way to approach things. That is something we struggle with internally and also in dealing with the agencies. You need to be open to their ideas, to be receptive, and hopefully build something that can work for everybody.

Mr. Lawrence: Well, let me ask you, in your 30 years of government service, what qualities have you observed are key to being a good leader?

Mr. Gregg: First and foremost I think it is an interest in people. If you do not have that then I think that people are not going to respond to you and work with you. You have to be interested in them. In this day and age you definitely have to allow new employees to have a say in what is going on.

The days of having a new employee go off to the corner for two or three years and do routine work, I think those days are gone. If today managers are not receptive to having a lot more fluid organization, a lot less formality in the organization then I don't think they stand a chance and that's one of the things that has to occur.

Looking ahead, the leaders have to be aware that change is going to continue and it is probably going to continue at an accelerated pace. The trick is not to react to that but to be proactive and to recognize that and to make that work. I think the leaders of tomorrow will have to be able to do that.

Going back to the individuals, I think if we are going to be successful in the federal government we have to create a workplace that allows a lot more freedom than was there when I started, and a lot more information flow. They want to know what is going on, they want to be a part of it and you can't have the command and control style of leadership that we've had in the past.

I think the decision making is another area that we have to, in government, we have to get crisper at and be willing to make more risks. Everybody talks about risk taking. There is hardly anybody who says, "No you should not take any," but the number of times that people resist that, not by saying, "We shouldn't be taking risks," but indirectly resist it because they make it so difficult to make change and to make decisions and I think that has to change.

In an organization like FMS I think that if I'm going to be responsible for certain things, which I accept, then I also have to have the authority to make the decisions to make that happen.

I think that government has a ways to go in doing that. Just the speed of getting things done, the expectation today when you are looking at something like the system I mentioned, pay.gov, if we had had, at the press conference on July 26th, if we had said, in 3 years we'll have this up as a prototype, people would have looked at us like we were crazy. And that's right, that's the way that things have changed. We announced this on July 26th and we expect to have a prototype up in October. That is the expectation. I think it is on one hand, it is a little scary but it is also I think, good.

You need to have an organization that can respond to that. Because if you want to keep those people that you hired and value so dearly, the worst thing you can do is to make it so difficult and so process-driven for them to get things done that they throw up their hands and go look for other work.

Mr. Lawrence: Well, great. I think that is a good point to end on. I am afraid we are out of time. I want to thank you very much, Dick, for spending time with me tonight. I have enjoyed our conversations very much. This has been The Business of Government Hour.

I am Paul Lawrence, a partner at PricewaterhouseCoopers and a co-chair of the PricewaterhouseCoopers Endowment. To learn more about the Endowment's program and research visit us on the Web at endowment.pwcglobal.com. See you next week.

Richard L. Gregg interview
01/01/2000
"We have gone from traditional accounting transaction type work to a lot more analytic work. And so the knowledge that we need to be able to do our job today is much different than it was 10 or 15 years ago."

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