A man with a vision: bringing modern management skills into the federal government

September 1986
Journal of Accountancy
By Stephen H. Collins

The problem with the federal government, according to Congressman Joseph J. DioGuardi (R-N.Y.), is that there are too many lawyers and too few accountants. Having spent 22 years with Arthur Andersen & Co., 12 as a partner, and now serving as a freshman congressman, he should know what he is talking about.

DioGuardi believes fervently that more CPAs should be brought into the federal government and has frequently “lectured” his fellow congressmen on the need for modern management skills in federal government activities. “My colleagues ask me to take off my green eye-shade, but I tell them I’m not going to trade my green eyeshade for blinders,” he said. The federal government “would be better off if there were more sets of green eyeshades around here and fewer pairs of blinders.”

Interviewed recently by the Journal in his White Plains office, DioGuardi, one of four CPAs in congress, realizes he has a wealth of accounting experience, including auditing and tax work that is invaluable.

“Maybe I’ve already proven, in less than a term, that the profession needs representation on the inside,” DioGuardi continued, pointing to the recent congressional activities that have brought the profession into the spotlight. “The profession has to work within the political framework; we have to be present,” he added.

“There’s a fraternity of lawyers that sends signals out to each other and they understand what’s right and wrong in their own language,” he said. However, the accounting profession “right now doesn’t have that kind of collegiality or fraternity because so few CPAs have ever seen the inside of Congress and so few congressmen understand what the profession is all about.”

Seeing himself now as a member of two professions—a CPA and a member of Congress—DioGuardi urged more accounting firms to groom partners to enter public careers by accommodating their desires for early retirement. A number of firms, he said, have partners in their early fifties with “the personality, the energy, the inclination and the dedication to do something like this. I did it in my early forties.”

Born in New York in 1940, he received a B.S. degree from Fordham University in 1962. While working his way through college, he interned at Arthur Andersen & Co., becoming a CPA in 1965. Admitted as a partner in 1972, he dealt with tax matters, particularly nonprofit charitable organizations.

“I had elected early in my career to be an outside partner with Arthur Andersen. I was on the boards of many charities,” explained DioGuardi. “I got my biggest kicks giving speeches around the community, whether on professional topics or community issues.” Engaged in many fund-raising activities, DioGuardi’s most notable contribution in this area was his work on the “Athlete of the Decade Award and Dinner,” benefiting the American Cancer Society.

“Little by little, this brought me in touch with the key people in the community,” said DioGuardi, noting that his charitable activities also benefited Arthur Andersen by bringing in new business. “I felt that later on in my life I might want to consider a career where I could devote my time to public service. DioGuardi, taking advantage of the plan, announced his candidacy for U.S. Congress in April 1984, having no previous experience.

Looking back, DioGuardi says now that he has no “qualms” about his decision to leave public accounting for the halls of Congress. “I like what I am doing,” he notes, adding that “he feels like a better person for doing it.”

Agenda of Accountability

Looking ahead to a second term, DioGuardi says he would like “to reaffirm his legislative agenda of accountability—that is, the government’s accountability to the people.” Having spent a career poring over the books of private corporations, DioGuardi began, as a freshman congressman, studying the books of the federal government.

“I’m appalled at the way we account for government spending,” said DioGuardi, his voice rising with indignation. Warming up to the subject, he explained: “we’re using a Mickey Mouse, cash-basis accounting system.” Federal departments and agencies, he added, “are a veritable jungle of special purpose, incompatible, antiquated accounting systems producing unreliable, incompatible and often irrelevant financial information.”

Citing the need for more accurate and uniform federal financial data, DioGuardi, in late March, introduced the Federal Financial Management Improvement Act (see JofA, June86, p. 60). “It is incredible to me,” he said, “that the federal government tries to manage approximately $1 trillion without putting anyone in charge and without any centralized mechanism.” Briefly, the central management structure proposed by the measure would

• Establish an independent Office of the Chief Financial Officer of the United States within the President’s Executive office to provide “government-wide direction and coordination of financial management activities.”
• Establish an Office of the Assistant Secretary for Financial Management within each executive agency.
• Create a Federal Financial Management Council chaired by the chief financial officer and made up of the assistant secretaries for financial management of the major executive agencies.

In urging consideration of the measure, DioGuardi said that “there is a missing link in the federal government. The linchpin of financial discipline is nowhere to be found.” Added the Congressman: “I believe the implementation of this legislation would put some teeth in federal financial management and could significantly assist in the overall effort to alleviate waste and inefficiency.”

DioGuardi, noting the recent hearings by the House Energy and Commerce Subcommittee on Oversight and Investigations, which looked into proposals relating to the performance of independent auditors (see JofA, Aug86, p.56), said that Congress also should be aware of its own responsibilities as fiduciaries of the public’s funds. “At a time when Congress is conducting oversight hearings on the accounting profession because of a feeling that the public is not being served, the government is selling billions of dollars’ worth of bonds every week, and there’s not one piece of paper that we can put our hands on to see what the financial condition of the government is,” he said.

“I want to see us as fiduciaries; Congress is the real board of directors,” DioGuardi said, questioning whether “we are really doing our job in accountability to the public when you see the amount of money being given to us and the amount of waste that is going on.”

Another measure aimed at improving federal financial management functions was a bill, introduced more recently (see JofA, Aug86, p.62) by Senate Governmental Affairs Committee Chairman William V. Roth (R-Del.), which would establish an Office of Financial Management (OFM) in the Office of Management and Budget. The bill (S 2230) contains several management and cost-control programs and requires agencies to produce annual financial statements that will be subject to independent, external audits.

The proposal would also mandate that the financial systems of all executive agencies conform to the accounting standards and internal control requirements issued by the comptroller general within two years after the bill’s passage.

“Roth’s bill,” said DioGuardi, “is broader, in that he’s looking at overall management.” Added the congressman, who believes that his measure has “a very good chance” for passage this year: “It’s going to boil down to financial management this year and perhaps, overall management next year.”

Looking at government spending and financial reporting through the eyes of an accountant, DioGuardi said that “the public is ready to know more about the word ‘accountability’ and I can’t think of a better person to tell them than a CPA.”

Acting as a Bridge

Turning to another area of accountability, this time on a municipal level, DioGuardi mused about the structure of state and local governments and citizen involvement. “Can’t local citizens who have financial backgrounds screen and pick the auditor? Then, that auditor couldn’t be fired by an elected official.” This type of approach, he added, “would go a long way to getting better audits in the public sector.” He urged that auditors of governmental entities “not be held captive to the political process.”

Municipal audits should be given “higher priority because it’s the public’s money,” DioGuardi said. Referring to his work as a member of the House Committee on Government Operations, chaired by Congressman Jack Brooks (D-Tex.), DioGuardi noted that hearings were recently held by the committee’s Legislation and National Security Subcommittee to review the quality of audits of federal grant recipients performed by CPA firms. The hearings focused on a study by the General Accounting Office on the quality of these audits, which “documented serious and widespread deficiencies in CPA audits of federal funds,” according to Brooks.

No matter what the price is, DioGuardi said that the profession “is obligated to do quality work.” He noted that the profession is considering ways to improve the quality of these audits, studying the options available and reporting back to Congressman Brooks.

“This is the role that I want to play,” said DioGuardi, “come up with creative ideas and get the legislators to understand that these legal prescriptions alone are not enough. We need solutions that make sense,” said the congressman who ran for election as “the commonsense candidate.”

In sum, DioGuardi believes that CPAs need to play a bigger part in the political process, emphasizing that he sees himself as “a bridge between the profession and Congress.”

A key problem in the past, he added, is “that the profession has not been as active in asserting itself at the grass roots, in the legislative process.” Members of Congress, moreover, “do not understand fully what CPAs do” so that the profession faces the task of education. More CPAs in congress could expedite this educational process, concluded DioGuardi.