Owen Barwell points out something that, when you think about it, sums up many of the government’s financial and programmatic challenges.
“We understand the budget of everything, but the cost of nothing,” Barwell said. With agencies coping with innovating under non-growing IT budgets, cost understanding is critically important.
As the acting chief financial officer of the Energy Department until this week, Barwell is one of those professionals who toggles between government and industry at the career level. He’s about to depart for the private sector, but he’ll still be around. Barwell has just become managing director of Grant Thornton’s public sector practice, where he’ll work with other federal CIOs in a consulting capacity.
In an interview with FedInsider, Barwell described the complexities of the CFO function at Energy and some of the larger challenges facing all federal CFOs.
At Energy, Barwell said, the first issue is the range of subject the department deals with. “There are a lot of subject matters to get your arms around. The CFO needs to understand the issues and missions.” For Energy, that encompasses everything from nuclear weapons security to windmills. Second: “We use every financial instrument available. We pay federal employees; we award money to Energy labs as government-owned, contractor-operated entities; we do procurements; grants; and loan guarantees.”
That diverse range of programs all involves the CFO’s office. But Barwell said the authorities written into the 1990 CFO Act don’t automatically guarantee the lines of responsibility needed.
“You need good relationships with the organizations. You have to use softer measures,” Barwell said. “The CFO has to develop a culture that is professional – analytic, curious, value-added. You want the best outcomes for your customers, but also be able to say ‘no.’”
The CFO’s office at Energy includes a function that helps make it able to council the technology organization. Besides financial oversight and budget formulation, Barwell said, the CFO office also operates department-wide applications for procurement, HR and business functions. This responsibility, coupled with the financial skill inherent in the office, gives the CFO insight into a top challenge CIOs are facing: How to reduce operations and maintenance costs of legacy applications and infrastructure in order to free up dollars for new, innovative applications.
Are such savings realistic? Barwell said, “The short answer is yes, but not at the scale people might believe.” He added, “It’s imperative to develop a cost baseline. There is rising pressure from the CFO to understand what things cost.” For IT, Barwell said, the big cost drivers include software licenses; duplication of applications; network and back office operations; and security.
He added, “Intuitively, we know going to the cloud for commodity IT makes sense. Telework, mobility in the workforce – the private sector has already figured this out. All of these can reduce transaction costs. But we’re not that advanced in understanding our cost structures.”
A native of the U.K. Barwell is now a U.S. citizen, having come here in 1997. As a Price Waterhouse consultant to NASA when the company merged with Coopers and Lybrand, he joined NASA as a career employee. Barwell worked in NASA’s business transformation office before joining Energy in 2007. Earlier, in the U.K., he worked financial positions in British Railway and electrical utilities, national entities that had been privatized during the Thatcher years.
At Grant Thornton, Barwell hopes to work with public sector CFOs on what he sees as their main challenges in the years immediately ahead. Chief among these is budgetary constraints. Also, what Barwell called a reporting model.
“We spend too much time producing statements, not necessarily meeting the needs of the general public,” he said. That involves figuring out ways, he added, of concentrating on internal controls and simultaneously displaying agency financial information that makes sense to the average taxpayer.
In a larger sense, Barwell thinks CFOs will have to contribute to assessing not just financial risks but also enterprise risks. He reasons, CFOs have an enterprise view of agencies and departments and are in a good position to see risks and challenges six months or two years out.
As an example, he cited budget formulation. “The CFOs can develop scenarios for continuing resolutions, long or short. They can model scenarios and how to mitigate no-year appropriations and the need to manage cash.” He noted the upcoming presidential elections and the uncertainty it brings. “What will transition issues be, the financial and enterprise risks? What about continuity of operations during transitions?” – which can occur in a sense even if the incumbent is re-elected but brings in a new team.
Said Barwell, “The next two to five years will be an interesting time for CFOs. They have a lot of stuff on their plates.”