Academic journal article The Government Accountants Journal

Financial Management in the Federal Government - A Five Year Progress Report

Academic journal article The Government Accountants Journal

Financial Management in the Federal Government - A Five Year Progress Report

Article excerpt

The federal government has never fully adopted and used generally accepted accounting and reporting standards. Meaningful annual department and government-wide financial statements are not issued, and no independent audits of information published by departments or used by the President or Congress have ever been required."

These were the words the American Institute of Certified Public Accountants used in the Fall of 1989, in a report entitled Discussion Memorandum -- Federal Financial Management -- Issues and Solutions, to alert the public to the deplorable state of the federal government's financial management. Due in part to this report and a similar report published by the Association of Government Accountants (AGA) entitled Strengthening Controllership in the Federal Government -- A Proposal -- in the Fall of 1990, Congress passed the Chief Financial Officers (CFO) Act to establish better financial management in the federal government.

What has happened since? Less than four years later, the Comptroller General, testifying before Congress, stated, "The CFO Act is achieving meaningful progress:" and "The Act's first 3-1/2 years represent a very successful start...."

The AICPA report's four recommendations addressed organization and personnel, accounting standards and systems, financial statements, and audited financial reporting. The AGA report concentrated on the urgent need for a government-wide and agency controllers, and the responsibilities of those positions. The two sets of recommendations represented the heart of the Chief Financial Officers Act. This article describes how the federal government implemented the Act and thereby the AICPA (and AGA) report recommendations, and elicited such favorable comments from the Comptroller General.

Establish a Chief Financial Officer

Organization and personnel are the starting point for any endeavor. The starting point for the CFO Act was the establishment within the Office of Management and Budget of a new position: Deputy Director for Management (DDM) to be responsible for financial management in the United States government. Placing the position in OMB, which is the President's management staff, and designating it as a Presidential appointment to be confirmed by the Senate, provided the position with the necessary "clout."

Recognizing the magnitude of the work that needed to be done, the Act also established within OMB 1) a Controller position--also a Presidential appointee to be confirmed by the Senate, and specified that the appointee had to have demonstrated ability and experience in financial management: and 2) the Office of Federal Financial Management to carry out a host of financial management functions specified in the CFO Act. OMB went one step further. To obtain the continuity that is usually not available with Presidential appointees, OMB created a Deputy Controller position at the senior executive level.

The role of this team was to provide leadership for the establishment of the necessary financial management within the federal government. It did so by conceptualizing an approach and planning the specifics, organizing processes, defining policies, developing programs, providing training and technical assistance, advising on personnel appointments, monitoring performance, and reporting results.

The CFO Act also established Chief Financial Officers and Deputy Chief Financial Officers in 23 Cabinet departments and major agencies, and specified that the selected persons had to have extensive practical experience in financial management practices of large entities. The CFO positions are, for the most part, political appointees, which gives them "clout," but also means their tenure would probably be limited. As one CFO suggested, CFOs are like "the temporary Christmas help. They will be gone after awhile." The continuity comes from the Deputy CFOs. These positions are in the career service.

Shortly after passage of the Act, OMB defined the functions the agency CFOs should be responsible for. …

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