Christine Shafik is director of the Office of Risk Management for the U.S. Department of Energy. In this role, she is responsible for the oversight of the department’s financial resource planning, as well as the management of the department’s Financial Management Oversight Program. She also plays a vital role in the implementation of an effective internal control program and in the management of the department’s audit resolution and follow-up activities. Finally, Shafik is responsible for providing a corporate financial review and analysis to the CFO of the department.
We had the chance to talk to her about the Recovery Act funds because the Department of Energy received around $40 billion to create more clean-energy jobs, as well as make the country less dependent on foreign oil. We learned how the Department of Energy has gone above and beyond OMB requirements, what forward-looking risk management means, and how Shafik manages an extremely large amount of information on a day-to-day basis.
ExecutiveGov: You’ve been working to translate OMB guidance and make sure the Recovery Act funds are being used appropriately. How has the Department of Energy gone above and beyond the OMB requirements?
Shafik: The OMB requirements were fairly comprehensive. They required risk plans for Recovery Act projects that were deemed medium and high risk projects. At the Department of Energy, because we wanted to have a special focus on the Recovery Act, we went above and beyond and required Recovery Act risk plans for some projects deemed slightly lower risk. We also conducted many site visits to state governments since so much of our Recovery Act funds actually went to the states. Over the past summer, before any of the Recovery Act funds were executed, we went to several states including the sub-grantees and many of the agencies that were going to be recipients of the Recovery Act funds, to ensure that they had appropriate internal controls and risk management plans of their own before any of their funds were released. We also wanted to assist the states in addressing any concerns so that Recovery Act funds could be spent appropriately and expeditiously once received.
“Having very strong senior leadership support, that would be the No. 1 area that I would focus on.” – Christine Shafik
ExecutiveGov: Transparency and accountability are a hot topic and the time has come for risk management. So, if other agencies were thinking of coming into this direction, what advice would you give to them and what steps could they take, or what are some lessons you’ve learned?
Shafik: One of the most important aspects of having an effective risk-management program is to have senior leadership support, where it is really embedded in the culture of the agency. I think in the business world and the private sector, risk management is a given, and in the federal government it is a newer phenomenon, especially on the financial side. Having very strong senior leadership support, that would be the No. 1 area that I would focus on. Secondly, I would also ensure that the staff has the appropriate skill sets. Risk management, even on the financial side, is very broad, and we interpret it to be much more than just looking at the numbers. We focus on what the numbers really telling us and what are some early indicators or early warning signs of financial risks. So the first is definitely leadership support and then second is having very strong, diverse skill set amongst the staff who perform this work.
ExecutiveGov: Can you tell us what forward-looking risk management means to you? How does this better the mission of the office?
Shafik: Our focus every day is to ensure that taxpayers’ dollars are being spent appropriately. So, again, we look for early indicators, so we analyze financial statements, external audit reports and we constantly seek various sources of information to try to predict what is coming next. What is really the risk? What are some hidden costs that are growing or escalating or very volatile that are not readily apparent to people who do not do financial analysis every day? Really, we try to be proactive in terms of giving the senior leadership in the department the information that they need, proactively before something becomes a crisis, trying to identify those areas of risk and mitigate them.
ExecutiveGov: What areas do you pay the most attention to in terms of risk management, or you predict will get the most attention, with this push for green energy and energy conservation?
Shafik: In terms of risk management, we obviously follow the money. In terms of the Recovery Act specifically, most of the funds went to exactly what you have here: energy conservation, energy efficiency, renewable energy and green energy. That is where the bulk of the Recovery Act dollars were and we have staff who are focused exclusively on those programs. In terms of what else we pay attention to, not related to Recovery Act, are things in the department such as costs that are escalating or that appear to be very volatile. We use the financial statements and we do variance analysis, to see anything that has increased significantly over the previous year. We also use a variety of other reports looking for any variance, significant variances, not just from the previous year, but over maybe a five-year period to look at trends. We do a lot of trending in this office and those are usually good indicators of issues that we need to watch out for. We also track regulatory changes that could have material impacts on the department.
ExecutiveGov: You were talking about reports of trending, so you look at so many different numbers and reports and audits, it must be an extremely large amount of information, so how do you go about handling all this information? What is the key to remain organized?
Shafik: Actually, that is a very good question because it is, you are absolutely right, it is a huge amount of information. We have literally hundreds, if not thousands, of audit reports that we look at constantly. In addition, we conduct our own reviews and we get information from the field sites, so that is actually one of our largest challenges: is how do we mine all that information to make sure that we are connecting all the dots appropriately? We have several different databases that collect each one of these pieces of information, but our challenge is that they are not linked; they are not connected yet. We are looking to see if we can find some technology to help us in that area, in terms of being able to consolidate that data and really conduct comprehensive searches. In the meantime, until we get such a solution, the key is constant communication. We sometimes have daily meetings with the staff where we just get together for a few minutes every day to touch base on what issues everyone is seeing, especially in related programs. We have a very open office structure and everyone is encouraged to be working in teams and keep each other informed of daily events because everything that we do is related. It all really goes back to making sure that the tax payer dollars are spent appropriately, so it is very important that everyone is constantly aware of any issues as they come up in real time. I think simply good communication; we have a very strong team environment here and the importance of communication cannot be over emphasized.
ExecutiveGov: What drives your passion to work in the public sector? What gets you excited about coming to work every day?
Shafik: My passion to work in the public sector actually goes all the way back to college. I knew I had wanted to have a career in the government; I felt that that was a great place to really make a difference. I have to say, when I started working for the government, it was not quite as cool as it is right now. Nonetheless, I started volunteering for the Internal Revenue Service when I was in college and as soon as I graduated went to work for the Resolution Trust Corporation. I am really very attracted to the idea of really being able to make a difference and I think with hard work and focus, there is no better place than the public sector to really have a big impact. Right now, specifically, being at the Department of Energy, it is a transformational time and it is a really unique time in our nation’s history. Especially right now, I cannot imagine being anywhere else other than the public sector and having an opportunity to really make an impact and make a difference. I think the point that you made earlier, about making sure that taxpayer dollars are used appropriately, that gets me really excited about coming to work every day. There are so many opportunities to really improve the financial management and implement good financial management practices in the government. Tax payers may not always realize that we are doing this, but it is a great feeling to know that we are able to make sure that tax-payer dollars are used as efficiently as possible. I find that very rewarding.
ExecutiveGov: When you get a second to breathe, what is your favorite pastime or hobby to do in your free time?
Shafik: My free time, the very little that I have, I love to read, I love to travel and go running.
ExecutiveGov: Is there anything else you wanted to add?
Shafik: In closing, I think risk management is absolutely a critical part of operations and really should not be seen as something that is an afterthought but really on the front-end of the planning. I feel fortunate to be in an environment that values risk management, and where it is becoming a part of the culture and way that the Department of Energy does business. I think that is the most effective way to use it, to really have it on the initial planning and that is the best way to ensure the tax-payer money is spent appropriately is to consider the risks and mitigate those upfront versus after the fact.