Partners at Last: CIOs and CFOs 4.0

Chief information officers and chief financial officers haven’t always gotten along. That’s not true anymore.
April 2018
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By Justin Marlowe  |  Columnist
Endowed Professor of Public Finance and Civic Engagement at the Daniel J. Evans School of Public Policy & Governance at the University of Washington

Most government chief financial officers will tell you the most difficult -- and essential -- part of their job is not balancing the books or preparing financial statements. It’s building trust with legislators, taxpayers and their fellow government employees. Fortunately, today’s CFOs have an unlikely ally for trust-building: the chief information officer.

This may strike you as surprising since finance and information technology have had a topsy-turvy relationship in local government. Throughout the 1980s and 1990s most finance folks saw IT as an expensive black hole. It was a strange new subculture, one in which its projects invariably ran over budget. Naturally, CFOs became naysayers, and even worse, they were often handed the blame when IT systems failed. In the parlance of tech, we’ll call this era CFO-CIO Version 1.0.

Then came the aughts, and CFO-CIO fates intertwined. Like money, technology became ubiquitous and essential to every aspect of local government operations. The Government Finance Officers Association formed a technology resource group to develop best practices for finance-IT integration. CFO-CIO 2.0 had arrived.

But by the late 2000s, the group disbanded. Many localities realized they needed specialized IT capacity far beyond what the finance shop could support. For example, when Oakland County, Mich., implemented its enterprise resource planning system a few years ago, it had to integrate 500 “shadow systems.” Permitting, asset management, business licensing and many other departments maintained miniature IT systems to serve their unique needs. With that sort of specialized challenge, many CFOs and CIOs went their separate ways. CFO-CIO 3.0 was here.

But today there’s a new chapter emerging. It all starts with the cloud. Back in the day, IT hardware such as servers, wiring and computers were part of the capital budget. Cities would buy now and pay later. But when IT moves to the cloud, the hardware mostly goes away and IT systems become an operating expense. Operating money is much harder to come by in today’s era of tight budgets.

In smaller jurisdictions that has meant reintegrating finance and IT. Many of today’s big cloud-based technology innovations are designed to streamline back-office functions like payroll and HR. But their most immediate effects are often on core financial processes, such as budget development, procurement and financial reporting. In fact, with the right IT support many smaller cities have launched aggressive new financial transparency initiatives like open checkbooks that were once available only to larger jurisdictions. Of course, these new systems are also expensive and need close scrutiny from the finance shop. So in many smaller places the CFO and CIO are kindred spirits once again.

For larger jurisdictions, this CFO-CIO 4.0 means “separate but symbiotic.” Like many IT departments, Oakland County CIO and Deputy County Executive Phil Bertolini notes, his staff bills other county departments for its services. Local governments often see this billing process as a painful compliance exercise. Bertolini, who believes “personal relationships grow out of trusted business relationships,” sees it as an opportunity to build trust. His shop maintains a state-of-the-art project management system that allows IT staff to track and bill for their time in 15-minute intervals. Gone are the days of the IT black hole. Oakland County is a good example of IT demonstrating precisely the sort of financial transparency that makes the CFO’s trust-building task that much easier.

The CFO can also help bring the CIO’s IT security concerns to life. Most line staff are not focused on malware, Russian hackers and other threats that keep CIOs up at night. The CFO can educate line staff on what they can do to prevent those threats, mostly by showing what it will cost the organization if they don’t. Mike Bailey, technology director for Redmond, Wash., says IT security concerns offer the CFO an opportunity to move beyond their traditional role as “leader of the rescue squad,”  where trust-building is an afterthought.

We’ll see what version 5.0 might hold. But for now, the CIO and CFO are partners in trust-building.