WASHINGTON, D.C., June 24, 2008 — Governments around the world are significantly constrained in the area of finance, according to a new Deloitte study, “Mastering Finance in Government: Transforming the Government Enterprise Through Better Financial Management,” one of the largest global surveys ever conducted of government finance officials. Despite progress in streamlining transactional efficiency over the past decade, 48 percent of the public officials surveyed believe that their organizations lack adequate financial management capabilities.

The survey shows that government finance officials must surmount a number of significant, but attainable, hurdles to reach a maturity level that would justify their place at the executive-decision making table.

“Governments often relegate the finance function to ‘back room’ tasks such as paying bills, tracking money and generating standard reports,” said Greg Pellegrino, managing director, Global Public Sector, Deloitte Touche Tohmatsu. “However, many government finance units fail to perform even these basic scorekeeping tasks. Raising the level of finance capabilities is vital to ensuring effective and efficient government.”

The study provides an unprecedented look at the world of finance in more than 200 government departments from 28 countries.  It identifies the lack of risk management as one of the most underserved areas in public organizations. More than half of the officials who participated in the study reported that their organization’s ability to audit its own financial accounts falls at or below an accepted baseline for the finance field. Just over a quarter of respondents reported their organization as having advanced or leading capabilities in identifying, managing or reporting financial risks.

“Our study showed that only 29 percent of the government finance officials surveyed describe their organization’s capabilities as having moved beyond a baseline level in risk management,” said study author William D. Eggers, Global Research Director, Public Sector at Deloitte. “This increases the likelihood of error and fraud and can mask the actual financial health of an organization.”

Eggers, who led the large research effort for Deloitte, says that there is a surprising degree of consensus across countries on how government finance needs to be improved, but also significant gaps between that vision and current reality.

“For guidance they can look to trailblazing public sector finance organizations,” added Eggers. “These organizations have acquired a whole new set of strategic capabilities, helping government agencies determine both what they should do and how they should do it.” 

Another area of concern in government finance is the lack of current data. Close to 68 percent of officials surveyed cited the lack of current information as either a moderate or significant barrier to improving the performance of their organizations. For example, a majority indicated that they did not have enough information on asset costs, to understand the full cost of delivering public services. Most respondents also indicated that did not have the data they needed to measure the return-on-investment (ROI) from government programs.

Recognizing these shortcomings, public officials cite the ability to produce more relevant and up-to-date financial information to support decision making as their number-one priority for improving financial performance in the next three years.

According to the study, rising entitlement costs, balancing the needs of today’s older citizens with future generations, a heightened focus on outcomes and demands for increased transparency require a more sophisticated finance function.  Sixty-seven percent of the respondents see financial management as a stimulus for bringing change to the organization, and 52 percent feel that the finance organization is the unit best placed to move the organization as a whole to a greater focus on value.

“As governments make decisions about programs and policies, they need finance experts to provide strategic support and counsel,” said Robert N. Campbell, III, vice chairman and U.S. State Government Leader, Deloitte LLP. “Right now, that support and counsel is not at a level that it needs to be.”

However, there is reason for optimism:  on top of those respondents who were classified as ‘Finance Masters’ by Deloitte, another 27 percent reported making significant inroads in their finance capabilities.

“Government leaders can improve the way programs function by beefing up the finance function within their organizations,” added Pellegrino.  “There is evidence that progress is being made, and we have found models from around the globe that can be replicated successfully.  There is a profound problem, but there are also governments showing the way to finance mastery.”

For a copy of the survey and photo-ready graphics please visit www.deloitte.com/financetransformationingovernment.  Additional charts/graphics are attached below. If you need additional information please contact Tourang Nazari for U.S. media inquiries.

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