Reduce Financial Regulations and Requirements

Reduce Financial Regulations and4 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.

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.