Enterprise Risk Management. Hardy Karen

of public service could not have been more evident than during the 2013 government shutdown. When a group of veterans was not able to get full access to visit the War Memorial in the nation’s capital, a renewed respect for the level of service that federal employees provide to the nation resonated throughout the country. The federal workforce remains engaged and committed: over 90 percent of employees continue to be willing to put in extra effort, are constantly looking for new ways to do their jobs better, and feel their work is important.9

      Given this scenario, there is every indication that the public sector has the right stuff to get the job done during times of ever-increasing change, and that the workforce is ready to manage the risks and opportunities that come with its responsibilities.

      Challenges for Public Administrators

      Leading scholars define public administration as “all processes, organizations, and individuals associated with carrying out the laws and other rules adopted or issued by legislatures, executives, and courts.”10 As the arena in which government employees work, public administration itself has changed in response to complex and often uncertain national and global political environments.11

We can clearly see how government’s role has expanded exponentially. This includes its involvement in civil and voting rights “and extended presidential powers needed to respond to natural disasters, cope with economic downturns, reduce federal spending, and respond to military crises.”12 As noted by Milakovich and Gordon, “The challenges facing administrators accountable for implementing public programs today have become even more daunting – requiring more effective expenditures of scarcer public resource and increased commitment from all public servants.”13 The task won’t be easy, so organizations such as the American Society for Public Administration (ASPA) will need to play a key role in helping to navigate the ethical framework for the public administration professional. Established in 1939 to help government employees navigate the political and managerial aspects of government operations, ASPA advances excellence in public service through a code of ethics to develop the spirit of responsible professionalism and increase awareness and commitment to ethical principles and standards (see Table P.1). While there are similar organizations advancing the practice of public administration, ASPA’s well-defined list of guiding principles serves the public sector workforce well as they oversee and execute government performance.

Table P.1 American Society for Public Administration Code of Ethics

      Source: American Society for Public Administration. Reprinted with permission.

      The Political and Budget Environment

      Scholars have noted that “the politics of administration involves agency interactions with those outside the formal structure as well as interactions among those within administrative agencies.”14

      Arguably, two of the biggest risks that public servants face stem from the political and budget arenas, where interaction is a key ingredient to agency success. Politically, the consistent gridlock of Congress over the past few years has made the government worker’s task more unpredictable. The level of uncertainty in funding programs and projects and the cuts to the levels of discretionary spending continue to make budgets a moving target, making it harder for agencies to nail down agency-specific goals and objectives. While the push-and-pull dynamics of congressional inner workings may be temporary, the realization of long-term financial constraints is not.

      At the end of fiscal year 2012, the total federal debt was about $16.1 trillion.15 In its Fiscal Update for 2012, the Government Accountability Office (GAO) acknowledged that addressing the long-term federal fiscal challenges will likely require difficult choices affecting both government revenue and spending – challenges for which there are no quick or easy solutions. GAO noted that many of the long-term drivers, including health care cost growth and the aging population, have already begun to affect the federal budget.16 Within its simulations of long-term federal deficits, GAO projected that spending for the major health and retirement programs will increase in coming decades, putting greater pressure on the rest of the federal budget. The GAO reported that for the first few decades this spending is driven largely by the aging of the population, with the oldest members of the baby boom generation already eligible for Social Security retirement benefits and for Medicare. The number of baby boomers turning sixty-five is projected to grow in coming years, from an average of about 7,600 per day in 2011 to more than 11,000 per day in 2029.17

      Another budgetary risk that continues to have a profound impact on government performance and operations is that of continuing resolutions (CR). Annually, Congress faces difficult decisions on what to fund, with the available resources, among competing priorities and interests. When these decisions aren’t agreed upon within a certain time frame, CRs are used as a stopgap measure to keep the government operating. Historically, continuing resolutions have created budget uncertainty; they have complicated agency operations as well as produced inefficiencies. Because CRs provide funding only until agreement is reached on final appropriations, they create uncertainty for agencies about both when they will receive their final appropriation and what level of funding will ultimately be available. In all but three of the last thirty years, Congress has passed CRs to provide funding for agencies to continue operating until agreement is reached on final appropriations. The biggest risks to agencies when CRs are enacted stem from the provisions and restrictions that prohibit agencies from beginning new activities and projects. This forces agencies to take only the most limited funding actions and makes it difficult to pursue their missions and plans for the future. Though the effects of CRs vary by agency and program, overall the residual impacts have been disruptive, resulting in operational challenges such as delayed hiring, a shifting of grant and contract award cycles, and the need to perform additional work to manage CR constraints.18

      The Upside of Risk

      Not all change in government has been negative. There have been positive outcomes as well as opportunities to expand missions and ensure sufficient services for American citizens. In the middle of the twenty-first century’s first decade, the merging of several intelligence agencies (for example, the FBI, CIA, U.S. Marshal’s Service) was proposed to Congress to create what is now the Department of Homeland Security (DHS). The DHS was established in response to a national safety and security breach, but it also brought with it bountiful opportunities to create a more streamlined agency responsive to threats and natural disasters. Over time, the biggest benefit anticipated from the restructuring was a reduced risk of terrorism for the nation.

      The transition to a more effective homeland security approach was also part of a larger transformation that the government needed to undertake to meet the expectations of the American people for timely, high-quality, and cost-effective public services. Within nine months of the events of September 11, 2001, the Bush administration and Congress responded with important and aggressive actions to protect the nation. The establishment of DHS was seen as a remedy to long-standing issues and concerns in the government’s domestic security functions by instituting greater consolidation and agency coordination. Given the global challenges the government will face in the coming years, the consolidation was considered a unique opportunity to create an extremely effective and performance-based organization to strengthen the nation’s ability to protect its borders and citizens against terrorism.19

      INTRODUCTION

      Since the first introduction of this material in 2009, the practice of risk management and, more so, that of enterprise risk management (ERM), has expanded in the federal space. For example, the Association for Enterprise Risk Management (AFERM) has been

9

Ibid.

10

Milakovich and Gordon, Public Administration in America, p. 11.

11

Ibid., p. xv.

12

Ibid.

13

Ibid.

15

U.S. Government Accountability Office. “Debt Basics.” http://gao.gov/special.pubs/longterm/debt/debtbasics.html.

16

U.S. Government Accountability Office. The Federal Government’s Long-Term Fiscal Outlook: Fall 2012 Update. Report No. GAO-13–148SP. Washington, DC, 2012.

17

U.S. Government Accountability Office. Budget Issues: Effects of Budget Uncertainty from Continuing Resolutions on Agency Operations. Report No. GAO-13–464T. Washington, DC, 2013.

18

U.S. Government Accountability Office. “Homeland Security: Proposal for Cabinet Agency Has Merit, But Implementation Will Be Pivotal to Success.” Report No. GAO-02–886-T. Washington, DC, 2005.

19

U.S. Government Accountability Office. High Risk List 2013. Washington, DC, 2013.