Government CFOs Risk Missing Upcoming OMB A-123 Milestone Unless They Embrace Real Property Asset Management
Herndon, VA (24 FEBRUARY | 2006) - Government financial officers are at risk of missing an important accounting milestone if they have not yet incorporated real property asset analysis into their financial management policies and procedures.
By the end of March, the Office of Management and Budget (OMB) will require federal agencies to summarize test plans to demonstrate internal controls for financial reporting. This milestone is part of compliance with OMB Circular A-123 (OMB A-123), which tasks federal managers with improving the accountability and effectiveness of Federal programs and operations through enhanced, documented management controls.
Under OMB A-123, policies and procedures are to be established regarding program results; use of resources to support agency missions; safeguards from waste, fraud, and mismanagement; and collection and maintenance of reliable and timely data for decision making.
Unfortunately, many federal agencies have not yet articulated a policy for understanding the financial impact of their real property holdings on their organizations. Without that understanding, it is nearly impossible to safeguard the organizations' finances from waste, fraud or mismanagement.
"Real property is typically the second largest operations budget line item after human resources," explained David Baxa, CEO and President of VISTA, a Herndon, VA-based consultant in real property asset management for government. "Unless an agency's real property holdings - owned or leased - are placed in the context of mission requirements, there can be no clear understanding of the financial impact of those holdings. Consequently, the financial reporting procedures for agencies that have not yet adopted real property asset analysis must be called into question."
Real property asset management is required of executive agencies under Executive Order 13327 (EO 13327), which is itself a key component of the President's Management Agenda. Asset Management Plans (AMPs) are required of each agency as a means of tracking how those agencies plan to utilize existing real property assets and dispose of surplus holdings. (In a hearing in mid-February, it was estimated that as much as $9 billion worth of federal real property may be surplus, or in excess of mission fulfillment requirements.)
At this writing, the overwhelming majority of agencies affected by EO 13327 had not seen their AMPs approved by OMB.
From a financial perspective, the impact of real property is continuing to be a subject of close scrutiny. At a recent conference by the Association of Government Accountants, Linda M. Combs, Controller in the OMB's Office of Federal Financial Management, underscored the value of EO 13327.
The President's Management Agenda (PMA) and Results.gov help establish a solid foundation, Combs explained. Along with other programs (such as the Improper Payments initiative and management of government charge cards), EO 13327 is an essential part of enabling government agencies to be more efficient and more effective at delivering services to the American people.
After the March deadline to summarize testing plans, OMB has set a June 30 deadline for the next phase of compliance with OMB A-123. By that date, agencies must submit a management assurance statement that will explain each agency's internal financial controls how those controls are documented to ensure their effectiveness. The management assurance statement will accompany each agency's fiscal 2006 financial report.
"It's nearly past time to start thinking about the role of your agency's real property assets in your overall financial performance," explained VISTA's Baxa. "If you haven't begun already, you'll find yourselves running to catch up by the time OMB requires its management assurance statement this summer."
About VISTA
VISTA transforms real property from a must pay bill to a bottom line benefit. VISTA eliminates unnecessary spending in real property, delivering at least 100-to-1 return on investment in its management, information technology and real property consulting services. By comparing an organization's mission, budgets, workforce trends and owned or leased property, VISTA creates solutions that cut costs, eliminate waste and improve workplace efficiency. For more than 20 years, VISTA has enabled its clients to become leaders in complying with real property regulations and legislation - protecting their cash positions while becoming more fiscally responsible. For more information, visit www.vistatsi.com.
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