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Improving Financial Management

ADOPT GOOD BUSINESS PRACTICES

FM08: REDUCE FINANCIAL REGULATIONS AND REQUIREMENTS

BACKGROUND

Every agency rewrites and interprets the central management agencies' requirements into its internal guidance. These requirements are usually more restrictive and do not provide managers with the flexibility to use reasonable judgment and to consider the cost of their actions. Several examples of such regulations, requirements, and processes follow:

--Agencies spend a lot of time interpreting and enforcing travel regulations that are paperwork intensive. In addition to the many regulations put out by the General Services Administration (GSA), most federal agencies rewrite their own regulations. For example, the Federal Travel Regulations are about 200 pages, and one agency issued a 300-page manual to implement these rules. In addition, the agency developed a simple help guide for its employees because the manual was too complicated.

--Treasury prohibits agencies from having their own bank accounts but allows the use of third party drafts. A third party draft is a check-like instrument drawn against, and paid by, an outside-the-government contractor.[Endnote 1] Third party drafts are checks that can be used for small purchases, travel advances, and travel reimbursements. Essentially agencies pay someone else to have a bank account for them because they aren't allowed to have their own. This process is often slow and procedurally difficult to follow.

--The General Accounting Office's (GAO) Title 7, "Concepts of Federal Accountability and Responsibilities of Accountable Officers," discusses the use of fast pay and alternative pay.[Endnote2] Both methods are for agencies to improve their ability to pay bills more quickly. Generally, alternative pay defers the verification of the receipt and inspection on the condition that they be performed on a sample basis after the payment. Effective control over certified disbursements ordinarily requires prepayment examination and approval of vouchers before they are certified for payment. However, to use the alternative pay option, a detailed plan must be developed and submitted to GAO for approval, thereby discouraging its use.

--OMB Circular A-50, "Audit Follow-Up," provides the policies and procedures for use by executive agencies when considering reports issued by the Inspector General (IG), other executive branch audit organizations, GAO, and non-federal auditors when follow-up is necessary. The current circular gives no consideration to the significance of the findings.

--Some agencies' time and attendance systems currently require the submission of paper time cards for each employee every two weeks. Specifically, a time card is prepared by a timekeeper in each work unit recording hours worked, leave taken, and overtime worked, if any. Once the time card is filled out by the timekeeper, the employee must sign-off or initial for any leave taken, and the supervisor in the work unit is required to approve the time card. The timekeeper is then charged with the responsibility of ensuring that time cards are transmitted to the appropriate payroll office for processing or entering the data into the payroll system.

NEED FOR CHANGE

Change is needed to give managers flexibility to do their job. The difficulty with eliminating or modifying many of the rules and requirements is that they were brought about by poor decisions or mistakes that people made. However, government needs to determine the cost associated with blindly following many of these rules.

Travel. In addition to duplicating the travel regulations that GSA issues, most, if not all, agencies have staffs that reissue and interpret the travel regulations and spend time requesting decisions from the Comptroller General (CG) for very minimal travel dollars. In addition, the CG must research and respond back to the agency. For example, in a three-page CG decision, a special agent-in-charge represented an agency at a retirement banquet honoring a local police chief and presented him with a plaque and commendation letter. The CG was asked to determine if the employee could be reimbursed for the cost of the banquet. The CG determined that the meal was incidental to the ceremony, therefore, the agent may be reimbursed for the $35 cost .[Endnote 3] Also, during a visit by the Vice President to the Department of the Interior, an employee explained that she had volunteered to travel on government business with a free frequent flier ticket that required her to stay over on a Saturday night, in effect adding a sixth workday to her week. But when she filed for her per diem allowance for that Saturday, her $38 claim was rejected.

THIRD PARTY DRAFTS Third party drafts were initiated to improve the control aspect over the government's funds and for cash management reasons. However, the same controls could exist with commercial checking accounts or the government commercial purchase card known as IMPAC (International Merchant Purchase Authorization Card).

Cash in every office is counterproductive to any sound cash management program, because millions of dollars lie dormant in safes and cash boxes. Moreover, imprest funds have been prone to fraud, as low-graded, poorly paid and trained employees are asked to handle substantial sums of money. Major benefits exist through the use of checking accounts and the IMPAC card. For example:

--Commercial checking accounts would decrease the risk of loss through fraud or theft, eliminating the need for cash and the risk involved in maintaining cash. Electronic fund transfer capabilities could be used to expedite the replenishment of the fund, thereby eliminating the middleman. Some of the cash management concerns could be eliminated by requiring the use of interest-bearing accounts.

--IMPAC cards are also an alternative to third party drafts and need to be greatly expanded in the agencies. These cards are convenient and easy to use for major purchases. A number of unique controls have been developed for the IMPAC Program that do not exist in a traditional credit card environment. These controls ensure that the card can be used only for specific purchases and within specific dollar limits. Controls for audit purposes can be stronger and more timely with checking accounts and the IMPAC card than with imprest fund cash and third party drafts.

ALTERNATIVE PAY. Alternative pay is a payment mechanism that can save money by lowering administrative costs, prompt pay interest, and penalties, as well as allowing more discounts to be taken, since payments can be made more quickly. This payment plan is based on making payments, on a not-to-exceed amount, without the receipt of a receiving report. To obtain GAO approval, even on a pilot basis, it is necessary to perform a major study that would present a specific plan for its implementation. A detailed study requires taking individuals out of their daily functions, thereby backlogging their own workload. According to GAO, very few agencies have filed for this approval. For example, one agency has piloted its plan for years. Agencies need to improve payments without going through a bureaucratic process of developing detailed plans on how they will make payments. Many agencies may not have asked for approval because of the complex preparation process for the plan.

AUDIT THRESHOLDS. Establishing audit thresholds can save time and money and efficiently use resources. The Department of Education, for example, has adopted a threshold policy for monetary audit findings below which extensive audit resolution processing is minimized. Prior to the adoption of this policy, the agency applied the same comprehensive resolution procedures to all monetary audit findings, irrespective of the dollar amounts involved. With the adoption of the threshold policy, audit findings are screened for significance. For example, in fiscal year 1992, the agency received a audit report with a total of $9 in questioned costs. While no recoveries would have been requested on the $9 audit report, approximately 16 work hours would have been expended to put the report through the required resolution processing steps. Under the agency's threshold policy the resolution of the finding was expedited in less than one hour. In times of scarce resources, it makes good management sense to establish a threshold for monetary and non-monetary audit findings below which extensive resolution processing could be minimized.

TIMEKEEPING. Sign-in and sign-out sheets for salaried employees working a standard work week, and time cards, are both a signal of distrust and inefficiency. As a result of continual technological breakthroughs and increased software applications, it is clear the current time and attendance system is ripe for revision. Time and attendance systems should be automated to eliminate the need for submitting most time cards. Also, the system should deal with exceptions such as annual leave and sick leave and not require entering attendance data for a normal work week. For example, the Department of Labor's (DOL) time and attendance system results in: (1) completing a piece of paper for each of the over 18,000 DOL employees nationwide to record their time and leave usage during the pay period; (2) duplicating each submitted time card so that each timekeeper will have a record of what has been submitted; and (3) routing the completed time cards to the appropriate payroll. A preferred approach would be to have timekeepers enter data to an electronic file of employees in a work unit and the supervisor to provide a single certification covering all data forwarded to the payroll office. For example, time cards were eliminated by the Comptroller of the Currency (OCC). OCC developed an automated time entry system that requires time and attendance data to be recorded on an exception basis. This system also stores data electronically but it currently does not allow for electronic signatures. DOL is also in the process of eliminating paper time cards. By January 1994, the Department will implement an automated timekeeping system.

More efficient use of existing hardware and software for recording time will free up those charged with timekeeping responsibility throughout the government from manually completing and approving time cards. This could save significant time and ensure maximum utilization of existing technology.

Changes in policy related to each of these areas would reduce workload, improve overall agency operations, and allow agencies to set priorities for managing scarce resources.

ACTIONS

1. Allow the use of commercial checking accounts. (1)

The Secretary of the Treasury should consider eliminating the use of third party drafts and allow federal agencies to use commercial checking accounts for small amounts of money.

2. Give agency heads the flexibility to determine when to do alternative pay and work out any problems with the vendor. (2)

The Director of OMB should specify reasonable criteria to give the agencies the flexibility in making some payments without receiving reports; however, the ultimate solution is to have agencies develop electronic receipt and acceptance systems.

3. Revise Circular A-50 to incorporate an audit resolution threshold. CFOs should establish these thresholds with their inspectors general or heads of audit. (2)

4. Eliminate time sheets and time cards, and use technology to enter payroll data on an exception basis. (1)

Federal agencies should review their payroll systems for employees with a standard work week and (1) eliminate sign-in and sign-out sheets, (2) eliminate the use of time cards, (3) move to automated systems that require data to be entered on an exception basis, and (4) use existing technology to enter and approve time and attendance data electronically.

CROSS-REFERENCES TO OTHER NPR ACCOMPANYING REPORTS

Reinventing Support Functions, SUP07: Simplify Travel and Increase Competition.

Reinventing Federal Procurement, PROC09: Lower Costs and Reduce Bureaucracy in Small Purchases Through the Use of Purchase Cards.

ENDNOTES

1. U.S. Department of the Treasury, "Third Party Drafts," Treasury Financial Manual, Vol. I, p. 4-3000 (Washington, D.C., undated).

2. U.S. Code, Title 31, "Money and Finance,"Section 351.

3. Comptroller General Decision, B-249249, December 17, 1992.

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