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THE IBM CENTER FOR
THE BUSINESS OF GOVERNMENT
Assistant Director of the Finance Division and Chief Financial Officer
Federal Bureau of Investigation
Mr. Keegan: Welcome to another edition of The Business of Government Hour. I'm your host, Michael Keegan and managing editor of The Business of Government magazine.
The Federal Bureau of Investigations has a critical mission: Managing its resources efficient and effectively is key to FBI's successfully meeting that mission. With us to discuss his efforts in this area is Rich Haley, Assistant Director of the Finance Division and Chief Financial Officer of the Federal Bureau of Investigation. Rich, welcome to the show.
Mr. Haley: Thank you. It's good to be here, Michael.
Mr. Keegan: Also joining us from IBM is Angela Carrington, partner in IBM's Federal Financial Management Practice. Angela, welcome.
Ms. Carrington: Thank you, Michael.
Mr. Keegan: Rich, I'd like to start by providing our listeners with some context about the FBI. Could you briefly discuss the mission and evolution of the Federal Bureau of Investigation?
Mr. Haley: Absolutely. The Federal Bureau of Investigation, the FBI, it's a national security organization. We're uniquely positioned. The FBI has an intelligence community role and also a traditional law enforcement role. Obviously our mission is to defend and protect the American people and we do this against terrorism, foreign intelligence threats, our traditional law enforcement criminal type of issues; violent crime, gangs.
But in addition we provide leadership to our partners, our state, local, as well as our international partners and our other federal agency brethren that we work with.
Mr. Keegan: What about the scale of the FBI? Could you give us a sense of how it's organized, its geographical footprint, its budget, the number of employees?
Mr. Haley: It's a very complex organization from a CFO's perspective. We have over 30,000, approaching 33,000 employees in addition to our headquarters' function which we have about 11,000 people here in the D.C. area. We've also got 56 field offices and each of our field offices have satellite offices that we call resident agencies. We have over 400 of those. There's a good chance that if you're living out there anywhere in the country there's a FBI office in your local town or most likely in some of our rural areas where we often times are the only federal law enforcement present in that area.
But in addition we have an international presence as well. We're in over 70 cities around the world, those are aligned to 62 offices we call legal attaches where we work with our international partners on everything from bombings going off to criminal matters that our countries share interest in.
Ms. Carrington: Very interesting. Now that you've provided us with a sense of the larger organization, perhaps you can tell us more about your area of responsibility within the FBI, your specific responsibilities and duties as the Chief Financial Officer at FBI. What mission support functions are under your purview and how does your division support the overall mission of the bureau?
Mr. Haley: So I call it a full body shop. What I do in terms of my role. I have budgeting functions and that's everything from formulating the budgets that we send to the Department of Justice so it gets reviewed by the Office of Management and Budget, Director of National Intelligence and then ultimately go up to our appropriators.
We also have the execution roles within our budgeting side where we load the funds, we distribute those funds to over 75 different program offices, monitor those funds to ensure that they're being executed efficiently. And then the acquisitions of those, which is really the area for us is the most critical. It's putting out the resources, being good stewards in terms of the acquisition of services, equipment, and other products that we're purchasing on behalf of the operational support functions.
And then on the back end of that is the accountability. It's being good stewards and making sure our financial statements -- which we do just like a corporation and other government agencies -- it's tracking inventory. We have over 500,000 pieces of inventory that we're accountable for and we monitor and ensure that those are being maintained properly.
Several years ago the corporations incorporated what's known as Sarbanes-Oxley which are internal control mechanisms and we have a similar A-123 effort which are internal controls within the federal government and we also oversee that.
I have a lot of other functions that travel. Anybody that's traveling in the FBI and we do over 200,000 travel vouchers a year, we oversee all of those activities.
Ms. Carrington: Regarding your responsibilities and such a complex organization, I know that you have faced a lot of challenges. Can you talk about kind of the top three challenges that you've faced and how you address those?
Mr. Haley: If you look at the FBI resources in mid-1970s we were about a billion dollars, we had just hit a billion dollars. It took us 25 years to get up to $3 billion, so we grew over a 25 year period by $2 billion.
Since 9/11 our organization has grown to almost $8 billion today. So phenomenal growth in a short period of time and I think one of main challenges for the finance division and for me as the CFO is to stay relevant with the organization's transformation.
So as we've added programs and we've stood up a national security branch and we've created a Director of Intelligence and our roles have both as an intelligence agency as well as law enforcement agencies, how do I provide our customers -- the director, our executive management, our field offices -- a relevant product? And that requires us to look at our own processes and our own systems and making sure that we're being able to provide resources in a timely manner, forecasting and other activities.
The second area on that is we have a 30-year-old financial system. We're still using a Cobalt system that was designed a number of years ago when the organization had about six or seven different divisions on it. Now we have -- just at headquarters -- we have over 25 different major organizations. And how do you take that legacy technology and still provide financial statements as well as the other accountabilities that are required to be good stewards of the resources?
And then finally one of the areas that historically we haven't done a good job on is training and working on our workforce's ability to handle these complex issues. So we have a major initiative now of providing not only training for people to be able to do their day-to-day work, but prepare them for leadership roles and prepare them for supervisory roles going forward.
I think those are three major areas that kind of capture, on a day to day basis, the challenges that I'm dealing with and my management team also trying to do.
Ms. Carrington: Great. So we've talked about the FBI organization. Let's talk a little bit more about you and your kind of career path. Can you talk a little bit about how you began your career and what brought you to your current leadership position?
Mr. Haley: Well my background starts out, I was a military intelligence officer. I find a lot of common threads between being an intelligence officer doing analytical work and what I do today as a CFO and then coming up through the financial side in terms of the analytics and the forecasting and the projecting where we're headed.
But after I got out of military, went back, got a Masters of Public Administration. I came into the federal government through the Presidential Management Intern program, now the Presidential Management Fellow program.
I was fortunate to end up at the Immigration Naturalization Service, had no training or any background, really, in immigration. But I was drawn to the organization by the financial management team that they had in place, if looked like a challenging organization. And I was given a lot of opportunities at INS in terms of being able to not only get engaged but to take on complex issues. And I think a lot of where I'm at today, to that team that was in place at INS that gave me those chances to succeed.
From there I went to the Justice Management Division at the Department of Justice, oversaw all the FBI account from the outside which gave me a lot of perspective and understanding of the organization that I would eventually come over to be the Chief Financial Officer for.
Following that I went to the Department of Commerce where I worked for NOAA, National Oceanic Atmospheric Administration working on financial matters there. And again, that gave me additional insight into how other organizations do their financial management where you pick up best practices as well as pick up things that you see where, across government, improvements are needed.
And then went back to Justice Management Division where I oversaw all the law enforcement components at Justice. So it gave me the opportunity to see not only the FBI, but Drug Enforcement Administration and a number of the other administrations like the Bureau of Prison.
And when I actually came over to the FBI which was back in 2005, I'll be there for five years this February. I think all of those experiences and those opportunities have allowed me to achieve a position on end, perhaps nothing more important than the mentoring. I've been very fortunate in each of those organizations to have the opportunity to work with super people that gave me the chance, not only to succeed, but when I did fail, allowed me the chance to pick myself up or move forward with an additional solution.
Mr. Keegan: Rich, given your experience, what makes an effective leader and how has your previous experience influenced your leadership style?
Mr. Haley: I think it's to be willing to hand off some of those issues. And this month's Fortune Magazine there's an article about how CEO's allow their management team to get engaged and to be challenged. And I was given that opportunity and I try to do that every day with my own people.
I think one of the key aspects is to allow staff to participate in decision making discussions where they can see decisions being made, strategy being set. You know, even as the CFO I'm constantly telling people that work for me, "I don't have all the answers, I don't have the solutions." And being willing to acknowledge that and have your people around you mobilize and try to come up with ideas on their own.
Because there are great ideas out there and I think often times as leaders, trying to find a solution so quickly that we forget that there are other perspectives and other ideas around us that can actually add value. And being able to tap into that and help implement that. So it's being somewhat humble in terms of the way you go about it.
The other thing is that one of the challenges that we're going through, again, I mentioned earlier, is you've got to give as much emphasis to training and to development of individuals as you do to achieving the mission. And if you're not balancing those two aspects you can be spending all your time trying to get the mission accomplished and what you're really doing, is long-term, I think jeopardizing your team's ability to do that on a consistent basis going forward.
Mr. Keegan: Wonderful perspective. How is the FBI using financial data to inform its decision making? We will ask Rich Haley, Chief Financial Officer at the FBI to share with us when our conversation continues on The Business of Government Hour.
Mr. Keegan: Welcome back to The Business of Government Hour, I'm your host, Michael Keegan and today's conversation is with Rich Haley, Chief Financial Officer at the FBI. Also joining us from IBM is Angela Carrington.
Rich, guiding the development of FBI's budget strategy are six enterprise-wise capabilities that FBI needs in order to perform its various missions. First, would you outline those end-state capabilities, but more importantly, would you elaborate on the extent to which the FBI links its budget, planning process, to its strategic vision to ensure investments are made correctly?
Mr. Haley: Sure. And I think this is probably when I go around and talk about the FBI and how we've evolved and some might call it more revolutionary change with the events following 9/11. I think this is one of the areas where corporately we're very proud of.
If you look at the FBI, we're 101 years old. We celebrated our 100th anniversary last year, pretty cool to be part of that, an organization that started out with a handful of agents doing land fraud and anti-trust evolving forward to the bootlegging. It was done in the G-man days of gangsters and up through World War II where you had espionage cases and then civil rights, counter intelligence during the Cold War, counter terrorism cases with the domestic terrorism on something like Oklahoma City as well as the first World Trade Center bombing, up to 9/11. You have the director taking over the organization just a week before the 9/11 events occur, and the transformation of that where we really have had to focus on national security terrorism being our top area of priority.
And out of that, and especially over the last seven or eight years, we've had to address the issue of we're not a series of stove pipes where your criminal activities and your counter terrorism activities and your counter intelligence activities can stand on their own, and how do you link that together?
And I have what I call our "Olympic rings," which you've referred to as our end-state capabilities and it's the six areas that are all somewhat dependent, the first one being what we call domain and operations. And this is the thread that goes through everything is for each of our field divisions to know their domain, know what's going on in their domain. And that's our intelligence activities and it's all of those operational things that are required and how do we support those through the budget process in terms of where we need to go. You can't exclusively look at national security at the expense of the criminal divisions or else you have a lop-sided organization.
Beyond that the other end-states for us are surveillance. What the FBI does and what an intelligence organization does has a lot to do with where we're getting our information. And for an organization like ours, it's through court-ordered wire-taps, it's through physical surveillances that we do.
And when the world changed from what was within the Cold War where we were doing a lot of activity with finite targets, it's a very asymmetrical world now where we're out there having to look at a lot of different type of targets for a lot of different thread areas. And surveillance is a huge initiative of us and for an end-state it's what resources do we need over a period of time? We can't have them all today. We couldn't absorb them if we got them. But what are those resources over a period of time that we need to integrate? And with that we can establish what risks go along with that.
And the other one's partnerships. I think one of things that came out of 9/11 is the information sharing and the coordination with our federal, state, and local partners as well as our international partners. That's a key initiative that we track in terms of end-state capabilities to make sure we're putting the right resources towards partnerships.
Another big one for us is leveraging technology, whether it's on cybercrime or technologies that we would put in place to do different technical operations. But also we do fingerprints for the country, we do name checks. And those systems that allow us to provide those to our customers are critical in the technology area.
And then just as important as those operational ones and some of the operational support ones are the workforce. And workforce is a key end-state for us in terms of training, in terms of bringing on specialty type of positions like linguists. Having a linguist that can do multiple and different languages that we encounter is critical.
And finally, infrastructure. Because whether or not you have all the agents that you need or all the surveillance resources, if you don't have the infrastructure, the computer systems, the facilities, and when you have over 400 facilities around the country you can imagine the different issues that may come up in terms of the security for those facilities, the utilities for those facilities and all of those type of activities.
The FBI, I like to tell people that it wasn't too long ago that we were an organization that was made up of different locations with gray desks and gray file cabinets and you may have had a telephone in the room. But today with our computer systems and our need to be able to communicate and not with just ourselves but with other organizations, that infrastructure is a key part of that and those end-state capabilities are at the heart of that.
Mr. Keegan: How has the Bureau extended the use of financial data to inform its decision making? And more importantly, how have you used your office as a driving force in that regard?
Mr. Haley: It has a lot to do with the partnerships that have been forged within the Federal Bureau of Investigation. We have a sister organization called our Resource Planning Office that oversees strategy, corporate strategy.
We work very closely with them and several years ago the director implemented a balance scorecard. Our balance scorecard is called the strategic management system. We have a corporate scorecard and it has all the key requirements, initiatives, if you will, we have to address to be successful.
And then under the corporate model, each of our decisions has a strategy map that tie up to the corporate map. What we've done is align all of our resources within the FBI to the strategy map. So we can look at, if you look at collections, for example, how many resources are going towards our overall collection activities? Not just in one division but across all of the different organizations?
Working closely with our planning office we've aligned what those resources are for each of those categories, and then we go through what I call spend plans. We do approximately 24 of these with our headquarters' divisions. And at the heart of that is something we call the baseball card. And the baseball card is quite frankly that. It's a set of metrics for each of our divisions and we put the picture of the executive management from that division and their name and that creates an ownership. And oftentimes when you have that ownership you get more attention to the metrics that are coming out of that.
And from these cards we then have, for each of these divisions, about two and a half hours of discussion in terms of are they aligning to priorities? Are there different initiatives tracking to the overall director priorities and the strategy? Are we executing our resources effectively? We look at those acquisitions and accounting metrics as well to make sure that we are being good stewards to the resources.
And that has given us a lot of viability back to the operational side of the house. It's not enough to just track the finances, it's how do you put that back into a way where our special agents, our executive management, ultimately the director and our deputy and actually use that or leverage that to make decisions across the organization.
Ms. Carrington: Rich, the FBI's adopted a multi-year budgeting cycle. Could you tell us how this enhances business planning and analysis of out-year impacts of current budget decisions? Also, how does this approach improve your ability to coordinate with the Director of National Intelligence and the other intelligence agencies?
Mr. Haley: Well, as a civilian agency within the federal government, we, like most of our counter parts, brethren agencies, use an annual budgeting process. We've done this for years. And when you're going through transformations such as we have over the last seven or eight years where you're getting a large influx of resources, some of those are capital expenditures. It's very hard on an annual process to determine, you know, this year we might have to do some architectural work on a facility, the next year we may need to first tranche (phonetic) a funds to start building, but that may be a three or four year process in terms of getting all the resources and actually being able to move forward with a complex facility construction or even an IT system.
The Intel community, the Department of Defense for a number of years, have used multiyear, five year budgeting. And we incorporated -- this will be our fourth year using a multiyear budgeting approach which is geared towards us not only looking at the threats today, but trying to better anticipate what threats or what risk mitigation we need to be putting in place today to be prepared for activities in the future.
I think the economic crisis is a good example of that. If you just look in terms of how quickly what happened in the mortgage fraud area and what happened in some of the financial crime situations that we're dealing with today, those came up quickly. But our ability to try to forecast and get in front of those, so we have those resources in place. Right now we're trying to bring on the resources, many of which had been redirected towards national security over the last seven or eight years and had reduced our ability to do criminal cases, white-collar crime cases, we're having to build back those resources.
And by using a multiyear budgeting approach, not only as you said, allows us to better communicate with our Intel partners because it's a similar model that they're using, but it also allows us to look for those next potential crime waves or threats that we may be facing so we can be building for them today.
Ms. Carrington: So moving on from talking about budgeting to talking about financial statements, I understand that the FBI has received an unqualified opinion on its principal financial statements which demonstrates a clear pattern of financial accountability. So can you kind of talk about what the significance is of obtaining a clean opinion and what you think the keys are to successfully achieving a timely and clean opinion?
Mr. Haley: I very much appreciate you asking that question. I'm very proud of my guys in terms of our efforts this year. We've had an unqualified opinion for a number of years. What's significant for us this year is it's the first time, after 14 actual unqualified opinions, where we not only have an unqualified opinion, we have new material weaknesses which are very high-level problems that have been identified by independent auditors. But we also have no significant deficiencies.
So in other words, we have an unqualified opinion, which in the accounting world is important to show that you're being good stewards and you're being accountable for all your resources. It's a huge significance, especially when you take into account that we have a 30-year-old financial system. I think it would be very easy for us to basically "ride out" until we get a new financial system in place saying it's just too hard to achieve those type of results.
I think it's a tribute to the staff I have but it's more than just the finance division. A lot of times people think that because they're financial statements it's the finance division that's exclusively dealing with it. We have a lot of other partners within the FBI, our facilities office, our human resource division, our CIO's office, that contribute to the success of that.
And I think if you put it in context to again, the financial investigations that we do as an organization and the white-collar crime activities, us being the ones that are responsible, the lead agency to investigate those type of crimes, you want the organization that's doing that, outward, to have as clean of an opinion as possible and in terms of our ability to have pulled that off with the current conditions has been a phenomenal activity.
And as we go forward I think that our ability to kind of wave the flag to some extent in terms of us being good stewards also goes a long way with our external partners that you know, if you do put resources into the FBI, we're going to make sure that they're accounted for and we're going to ensure that there isn't waste, fraud, and abuse going on with those resources.
Ms. Carrington: Congratulations on that. That is a significant achievement. And speaking of external sources, OMB, the Office of Management and Budget has indicated that the federal government made $98 billion in improper payments this fiscal year. So obviously reducing improper payments is critical.
First, what are improper payments, could you talk about that a little bit? And then talk about how you successfully has successfully and managed and reduced improper payments within the FBI?
Mr. Haley: So this is one of our main areas within my responsibilities on the accounting side that we watch very closely.
Improper payments, for us, could be anything from an erroneous payment, you're paying the wrong vendor, you're paying a vendor the wrong amount. Having a manual system where we're still using carbon copies for a number of our invoices and accounting functions and our acquisition functions, often times for us it's as simple as you may have a payment of $535,000 and you get the numbers twisted up and it's $353,000.
They are 100 percent support, the efforts that Director Orszag and OMB are taking in terms of highlighting this. Our portion of that $98 billion is less than three-one hundredths of a percent. We're talking several million dollars out of three and a half billion dollars that we execute.
But even with that, the processes that we've put in place, the internal control mechanisms, even if an improper payment -- and again, for us it's usually where numbers have been misinterpreted when they've been keyed in from a manually filled out form or something like that -- we will continue to follow-up.
And last year, for example, out of several million dollars that were identified as improper payments, we have chased each of those down in terms of reconciling that. So it is a zero-sum game for us but I think we're very much ahead of where organizations of our size are often at.
In addition to improper payment, you know one of the other areas or several of the areas that I also track in that same metric or proper payment penalties. And these are penalties that you pay just like it was own bills where you don't pay the bill on time you incur an interest payment. For three and a half billion dollars our entire payment penalty in 2009 was about $294,000.
Another area in terms of that same focus that OMB has put on that is our inventory. I mentioned we have over 500,000 pieces of equipment. When I got to the FBI it was about 96 percent that we were accountable for. That meant we were losing or having stolen about four percent of our inventory. Today it's up to 99.8 percent which has a lot to do with the top-down approach from the director and our executive management across the organization in terms of being able to achieve those type of results which we think are again, critical in order for us to effectively say that we're being good stewards of our resources.
Mr. Keegan: Rich, picking up on the good steward concept, tracking cost and managing cost is essential to being a good steward. What steps has the Bureau taken to track and manage costs, such as the cost of investigations?
Mr. Haley: That is a huge effort, as you can imagine, very complex because even if you can track something like the amount of time we're spending for agents to do a case. So let's say we have a personnel cost, all of the other costs that go along with that. The cost of operating the case, the infrastructure cost, the CIO or the IT costs that go along with that. It's very hard to get our arms around that.
The approach that we've taken on that over the last 10, 15 years, we've used activity-based costing with our user fees. Our user fees are revenue sources that we receive for the fingerprint operation that we run as well as our name-check operation. And we've used activity-based costing to give us a total cost of those activities.
And we've recently expanded that activity-based costing focus to several of our other entities, training division for us in terms of how much does it cost? It's always been a question of how much does it cost to train an agent at our Quantico FBI Academy or an Intel analyst that's going through training.
We've taken this activity-based costing model which does capture these total costs and we've implemented a model for the first time that gives us a very good understanding of what it costs to train an agent, train an intelligence analysts, our training division initiated that. And now we're going the next step of taking that activity-based costing approach, implementing it into all of our support functions as well as our operational division.
So when you look at something like a cybercrime case, what is it, on average that it does require us to do a case like that, and how do we align resources and have some forecasting ability to say if we do 10 cases it's going to cost approximately this much? And it will give, I think, another factor in terms of executive management, making decisions in terms of how to prioritize and where to put resources by going forward with that.
The baseball cards I mentioned earlier, are also another area where I think we've identified in terms of pulling out, teasing out if you will, the cost of doing business. We show all of the programs within each of our divisions and then we rank each of those programs corporately in terms of how much funding each program's taking, we can then compare, not only counter-terrorism cases to other national security cases but we can compare them to our criminal cases, we compare them to all of our other support functions.
And it gives us a mechanism where we can provide to the director and provide to executive management, what it's costing to run the organization. And that then creates a whole set of policy and procedural discussions in terms of are we putting all of our resources to our highest priorities or are there things that we can shift around to try to make as effective use as possible of our base resources before we go out and ask for additional enhancements.
Mr. Keegan: Terrific. What are some of key procurement challenges facing the FBI? We will ask Rich Haley, Chief Financial Officer at the FBI to share with us when our conversation continues on The Business of Government Hour.
Mr. Keegan: Welcome back to The Business of Government Hour, I'm your host, Michael Keegan and today's conversation is with Rich Haley, Chief Financial Officer at the FBI. Also joining us from IBM is Angela Carrington.
Rich, the FBI procures three billion in goods and services annually, largely IT and other high-end equipment. Since the acquisition management function falls under your purview, what are some of the key procurement challenges you folks are facing?
Mr. Haley: Yeah, I think you've identified our number one challenge going forward. Ironically the procurement staff, the contract officers that the FBI has today are less than the number we had back in 2000, 2001. So we've actually grown the budget by several billion dollars on the non-personnel side and we have less people procuring our acquiring assets and that has a lot to do with pay-raise absorptions and decisions that were taken over that period of time.
But I think that the challenge for us is how do you ensure that you're getting the most effective -- that's cost effective – contracts? That you're looking at these at a corporate level and not doing the same type of contracts in 56 different field offices. One of the things that I think we're dealing with is that there's probably all kinds of best practices out there that other organizations are using.
And historically the FBI has, similar to our financial system, we've developed in-house, we've always been an organization that looks for in-house solutions. And I think that one of the things that we've done is to say: what are other practices that have already been invented that are being used out there effectively? And a key component for us has been a relationship with the National Academy of Public Administration where we've brought in former executive experts from the Office of Management and Budget and other agencies and departments across town to form a team to help assist us in terms of putting together an acquisition team for the future.
We have a lot of great contract officers we just don't have enough of them to do all the work. We did over 19,000 acquisition efforts last year within that three billion, three and a half billion that we execute. And there's tremendous amount of efficiencies that I think we can put in place still to ensure that we're getting the best value.
There's a lot of focus from the Office of Management and Budget now in terms of acquisitions, transparency issues as well as ensuring that we're in-sourcing as much as possible and also ensuring that we're trying to save resources. Often times I call them "avoid cost" as opposed to "saving cost" because there's usually not as much as a savings as much as there is in terms of trying to be just more efficient in how those resources are being put out.
You mentioned the IT side. Between our CIO's office, which are the traditional IT technology, computers and servers and mainframes, we also have our science and technology side which is everything from how we do wire taps to how we do some of our unique systems that do fingerprints, name checks. And all of that requires complex acquisitions and having the trained staff as well as the capacity to execute those type of procurements.
And I think a long time ago I had actually a mentor that I worked for that left me with a saying that stayed with me all these years and it's that, "Finance spells backwards spells everything." There's a lot of truth in that when you talk about acquisitions because you can't successfully complete, whether it's the operational mission or it's the service support mission, without having a strong acquisition process in place.
So we take it very seriously, we're doing a lot of things right now in terms of trying to put what will hopefully be, in the next several years, one of the best practices in the government in terms of acquisition management.
Ms. Carrington: The Department of Justice is currently pursuing an overhaul of its core financial management system and I understand that the FBI's preparing to participate in the migration to this Unified Financial Management System. Rich, could you tell us a little more about the Unified Financial Management System or UFMS and how it will shape your future financial management strategy? You talked a little bit about your current system being 30 years old. How will UFMS change kind of your daily operations within the organization?
Mr. Haley: Yeah, I use the allegory, the cave analogy here of that in many ways we are sitting in a situation where we're seeing shapes on the wall. And to get out and actually see the real trees and the real animals is where UFMS will take us.
I have to say in terms of what we've been able to accomplish with our existing financial system is a tribute to those individuals 30 years ago that put together this Cobalt system that we're continuing to use and their vision and ability to put something together that would be able to transcend as the FBI transformed itself.
But with that said, where UFMS will really make a difference for us is in terms of being able to report more accurately, more timely, be able to interface with other systems that the FBI, IT systems that we've developed over the last few years. Something like our case management system that we're developing which we call Sentinel where we'll be able to interface and share case data on a real-time basis between what's being executed by our agents in the field and what's in our financial system.
It will be an ability for us to more accurately forecast in terms of how we're expending resources and drill down into programs which we currently can't do, to look for additional efficiencies and additional ways of either avoiding cost or to be more effective in how we're spending those resources.
So it's a tremendous bump for us. I think one of things that's lost on financial systems though is that when you go to a new financial system that you're going to be able to reduce personnel or that it's going to be cheaper to operate and I think that's one of the things that we don't believe will happen. I think it will change the workforce and we'll go from a lot of data entry and vouchering type of activities to again, more forecasting, analytical type of functions.
What UFMS also means in addition to kind of what I'll call a more nirvana state for us to get to a higher level of accountability, it also means that we need to prepare our workforce to be able to work with this system as we go forward.
Ms. Carrington: You talked about FBI and the 56 field offices, obviously a very decentralized environment. And UFMS will have to be configured for a very large number of users. So a system this large, surely there's going to be lots of obstacles, whether it be what I call "people process" or technology issues. So can you tell us some of the challenges you anticipate and how you intend to mitigate some of those?
Mr. Haley: You know, one of the things that we currently have with the issue we have now is a lot of our workflows have been designed not because they're the most efficient workflows but because they align to the financial system. So we've, in some ways, configured ourselves to working in this current environment. And as we go through a series of process engineering, I think we see opportunities with the new system to be able to put some of those into place.
But I think the opposite side of that is that changing any process, not only in terms of what that means for the work force to kind of reconfigure all your policies and procedures, your internal controls, financial statement, unqualified opinion, all of that is potentially put at risk unless you go deliberately and plan it out ahead of time.
And so I think that many of the procedures that we still have in place today are 25, 30 years old, back when the FBI was executing less than a billion dollars a year compared to what we're doing today.
And I think being able to stay on top of those policies and process reengineering. And then when you look at implementing a system like this, most of these modern systems are using like an Oracle database which is not what our current data is in. So it's transitioning or taking the data we currently have and bringing it into a modern IT language that can be incorporated into our financial system.
Cleaning our data up. One of our major initiatives as we prepare for UFMS is looking at data cleansing. And we don't want to take over bad data so we want to look at that and be sure we're prepared to do those type of complex issues.
Ms. Carrington: So you talked about some of the planning activity such as data clean up. Are there any other kind of pre-planning activities that you're taking on and what have you learned from some of those activities?
Mr. Haley: I think the most important it goes to effective partnership within the Department and also with our other partners in the Intel community. We've spent a lot of time, the Drug Enforcement Administration, who has successfully implemented UFMS, have been very generous, allowing us to be involved with their transformation to UFMS. So we've had members of my staff that have actually been able to sit in and learn from their experiences as well as talking to some of our intelligence community partners that have similar type of systems.
And I think coming out of that for us is first of all, the impact it's going to have on the staff. And what we can do ahead of time to prepare for that. And one of the things that we're doing with our current environment is putting what we call a GUI frontend which is more of a Windows kind of a point-and-click environment versus having to put in all these funky codes that for the most part I can't do myself because you're on this green screen, ancient technology.
So by giving them an environment that will look and feel -- at least on the front end -- is still going to have the legacy system on the back side, but to be able to work in an environment that is going to be more Window's based I think is one of those efforts.
The other thing is one of things our ancestors did for us when they created the current system was not to use standard government accounting codes. So things like what we call object classes which are as simple as buckets for putting equipment or supplies or services for contracts, there's a standard across the government. FBI doesn't use that standard. So it's not a matter of us being able to take these buckets from the legacy system, the existing system, and move them over.
So we're going through an entire process now of trying to -- in the current system -- move to these standard codes and being able to account for it the way the rest of government does it. And these are huge initiatives.
And probably most importantly -- and it's the one that I think has focused me in terms of how challenging this is going to be -- we have a number of different programs that didn't exist when we put our financial system in place 25, 30 years ago. So we're moving to a program, a sub-program organization, we call it a chart of accounts. Tremendous effort to be able to align our resources right now, before we move to UFMS, to a format that's relevant operationally and to our divisions in terms of how they really manage their resources.
And I think these are some of the initiatives that if we're going to be successful at UFMS, if we're going to be successful at transitioning into a new financial system and maintain our own qualified statement which is the expectation, doing these preliminary efforts and getting the workforce ready and getting the data ready and preparing for it, I think those are key aspects.
Mr. Keegan: Rich, given your perspective, how has the role of the government CFO evolved over the last decade, and more importantly, what does that mean for promoting the efficient management of government resources?
Mr. Haley: I think that's a great question. I sit on a number of different groups and organizations made up of CFO's and this question comes up a lot.
I think for me, the one thing that I see is that there isn't any breakpoint anymore. It seemed years ago when I was working in budgeting that you would have these cycles. You'd prepare for your department's submissions, your OMB submissions, your hill submissions.
It's now constant. And you're in an environment where you have accounting challenges, acquisition challenges, the budget process, an appropriation process, and this consistency through the year, where at any given time you may have two or three crisis going on, it really requires CFO's to prioritize.
I have a saying for my staff, I call the "the glass balls." It's those things that we're doing that we absolutely can't drop. Things like getting an unqualified on our financial statement or putting the budget submission in on time to the Department of OMB with the right level of detail information. And how you manage what falls into this glass ball category versus those other things that you're still responsible for. And sometimes those are going to fall. You're going to try to prevent them at all cost.
But if you've got to protect a certain bandwidth that you can maintain, it's making sure you don't drop these glass balls. And I think that's gotten more intense as I talk to my fellow CFO's, a number of colleagues, that we talk about this. I think that's the number one.
Number two, I think that for me, looking internally at the FBI, I think the relevance of financial information for our executive management has become more important. And I think there is an acknowledgment the director down that to make sound operational decisions you have to have an understanding of those financial pieces of information.
And so what that means from my lane is I have to provide that product. I've been able to get, I guess, an invite to the party. But now that I'm there I have to be kind of an interesting guest. And it's not enough that you take the financial statement which is not, quite frankly, all that exciting of a read, but it's taking that information and taking that data and putting it into a format that's relevant to our operational side of the house. That they can understand it and that they can use that within their lines of business.
Mr. Keegan: Wonderful. What does the future hold for the FBI? We will ask Rich Haley, Chief Financial Officer at the FBI to share with us when our conversation continues on The Business of Government Hour.
Mr. Keegan: Welcome back to The Business of Government Hour, I'm your host, Michael Keegan and today's conversation is with Rich Haley, Chief Financial Officer at the FBI. Also joining us from IBM is Angela Carrington.
Rich, I'd like to transition now to the future. Would you give us a sense of some of the key issues that may impact the CFO and budget offices government wide over say the next two to three years?
Mr. Haley: Yeah, I think one of the things that I see, even for an intelligence organization like the FBI, is that there's more and more emphasis on transparency. And I think transparency -- and this is not only being good stewards and saying we're being good steward's -- but it's showing how we're being good stewards of the resources with the American public.
This is everything from publicizing acquisitions online to being more visible in terms of how we're putting our resources to specific programs. And that is a challenge in an Intel agency because some of the stuff we do, obviously, is classified. But I think that transparency.
And I think the challenge is that many times the acquisitions for one project, may be five or six acquisitions and if you only look at one piece of that you don't really get the sense of what the organization's doing. So I mean this in a positive way, there's a storytelling that goes along with it that it's not just a matter of putting this data out, but it's being able to put a message around it to say this is making you safer because we're doing X, Y, or Z. Or here's the logic, to some extent, behind what our efforts are for.
And I think what I see is continual evolution to, on one side, being accountable for the resources, making sure that we're passing our financial statements, implementing new financial systems. And while all that's going on, is ensuring that we're actually integrating that data in terms of being more efficient with the resources, looking at our base resources. Always it's the little Jack Welch of looking at your lower priorities and you know, eliminating ten percent or whatever of your lower priorities each year in terms of putting that towards your highest requirements. And I think those challenges within the CFO community are going to be there for all of us.
The other thing I see, especially here in Washington is we're all trying to recruit and hire the same type of people. So you have a recently publicized Department of Defense's effort to hire new contract officers or bring on contract officers. Likewise, some of the other large agencies bringing in significant numbers. Those are the same type of people that I'm trying to bring in. And how, in this limited market, do we do that?
And I think for us -- and it goes in terms of our continuation of government, what we call our "coup planning," that is if an emergency occurs or if a crisis occurs, how do we ensure that we can continue to operate?
When you're in an organization that has over 400 locations across the country, there's opportunity there that you don't necessarily need to be in D.C. which means a decentralized finance division for me, and how do you work in that type of environment? So we've already started in several instances where we have finance division people that aren't located in our headquarters building, they're across the country.
And I think being able to work in that decentralized type of environment is going to be beneficial, especially in terms of these key human resource areas that many agencies are all kind of focused on trying to bring on the same type of people.
And then finally I think the economic situation that we've gone through in the last few years is, for us, a trend in terms of what growth we have seen over the last seven or eight years is not necessarily going to continue at that same pace. So it's a more scrutiny in terms of our prioritization, in terms of the ability to mitigate risk and how do we make sure that we're putting resources to the highest risk levels. And if we have projects or programs that aren't being as effective as they possibly could, that we either address that or remove those resources to higher priorities.
And I think CFO's are going to have to be more engaged in that. I know that I am in terms of us going forward.
Ms. Carrington: Now that the private sector has worked closely with federal government to assist in improving financial systems and processes by conducting financial statements, audits, and even in some cases performing financial operations, what do you think the private sector can do better to help improve the efficiency and effectiveness of government financial management?
Mr. Haley: You know what? We have a great relationship, and I think there is this initiative effort to move and look at in-sourcing in terms of what government-inherent functions we do ourselves.
But I think from our relationship with our private sector partners, we have a good relationship. Everything from our internal control processes, which are our A-123 processes, to some of the financial system implementations that we're doing, the partners that we're working with in terms of putting the mission requirements and providing a better financial service within the FBI are working out very well.
If you look at the broader private sector I think that in terms of some of the incorporation of Sarbanes-Oxley into our internal control process, I've attended a number of these seminars or sessions at some of the business schools where they're looking at how do corporations become more efficient and effective. I see a lot of similarity here. Our former CFO actually, that hired me, used to compare the FBI to a General Electric or a Proctor and Gamble. If you look at all of the different business lines we have, there's a lot of common similarities.
We have a special advisory program which we hire, recruit, from the top business schools across the country. I have several MBA's that work within the financial division that report directly to me who's full mission is to look at business process reengineering and to look at the different things that we currently do and how can we do them better? And they're charged with trying to break it, and let's see if we can put it back together better than it was.
So I think there's a lot of common issues and challenges that we face. So whether it's the contractors that we work with directly to help put out a better financial product, some of which require technical skills, auditing skills that we don't necessarily have in-house, to compliment our own inherent governmental functions or if it's just trying to look at the ways in which the private sector are doing things or us trying to emulate or pull from their best practices. I think that's not only important but I think that we've done a lot to try to stay relevant in that area.
Ms. Carrington: So you've talked a lot about hiring folks and kind of a little bit about that process. Do you use any sort of flexible compensation strategies to really attract and retain quality employees who have those critical competencies that you need? Or what other strategies do you use for kind of attracting and retaining people?
Mr. Haley: So I mentioned our special advisor program which is a corporate initiative where senior executives like myself will go around to the MBA programs to recruit special advisors. We have, within the finance division and several of our partner divisions, have done the same thing at the undergrad level.
And what we're looking at is a balance. We have a number of very talented individuals within the finance division that have been within the finance division for anywhere from 5, 10, 15, 20, sometimes 30 years. And what we're looking at is what a lot of agencies have going, which is a number of people retiring from key positions over the next five years.
So we've heavily recruited from a number of undergrad programs. This initiative now has taken on a corporate focus where our human resource division is now doing that for all the divisions in terms of focused hiring of undergrads. And we've been tremendously impressed with the talent and with the energy that these individuals bring in.
So it's bringing in those recruits either right out of college or right out of Master's program and balancing that with trying to attract more senior or more experienced level of individuals as well that may have acquisition background or accounting background into the FBI. And we do use, for our undergrads, we use incentives to move them either to D.C. or in some cases student loan repayments which we use quite a bit. You know, taking advantage of rehired annuitant authorities and things like that to bring together the best workforce that we possibly can.
Mr. Keegan: Rich, you are a recent Presidential Distinguished Executive Rank Award winner. Given this recognition and your range of public sector experience, what advice would you give to that person and who is considering a career in public service?
Mr. Haley: I can't emphasize enough how rewarding it is. I have a number of friends that have been in the federal government, have left and it's not that they didn't find the work they were doing rewarding or that they weren't necessarily happy with their decisions, but a number of them have come back to federal government.
And especially in an organization like the FBI which is very much mission-driven which is, for me, very easy to get up in the morning with a mission such that the FBI has with the director, and the leadership he provides, that you get something from federal service in terms of the cause and the service back to the country that I think is hard to find in other places. And I would highly encourage individuals to consider it.
With the Presidential Distinguished Rank Award, I was honored to receive that. Quite frankly, there are a number of people within the organization that equally could've been recipients and so it was an honor that The Executive Management and the organization, you know in terms of nominating me for that.
But I think that there's a tremendous -- in all different segments, whether it's the financial aspects, whether it's our operational side, our information technology side -- a number of opportunities and I think having been in four, five, different federal agencies, I've seen across the board where it doesn't really matter which organization, there's a lot of really great efforts being done on areas that, quite frankly, in many cases, can't be done by the private sector or that the profit pieces aren't there. So the federal government has to do it. And to be a part of that and to be a part of the solution to these complex challenges is I think is rewarding for any of us that do this stuff. And I have all intentions of staying in federal government for a number of years to come.
Mr. Keegan: That's terrific advice. I want to thank you for your time, but more importantly, Angela and I would like to thank you for your dedicated service to our country.
Mr. Haley: Thank you. It's been a pleasure being here. I appreciate your time.
Mr. Keegan: This has been The Business of Government Hour featuring a conversation with Rich Haley, Assistant Director of the Finance Division and Chief Financial Officer at the FBI. My co-host has been Angela Carrington, partner in IBM's Federal Financial Management Practice.
Be sure to join us next week for another informative, insightful and in-depth conversation on improving government effectiveness. For The Business of Government Hour, I'm Michael Keegan. Thanks for listening.
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