Extreme makeover for financial management?

Platts works to streamline laws, directives for federal agencies

Twenty-three years have passed since the Federal Manager's Financial Integrity Act introduced financial best practices to the federal government.

"What we see is 23 years' worth of layered laws and directives," said Edward Kearney, managing partner at the accounting firm Kearney and Co.

All those laws and directives have created confusion, Kearney said last week during testimony before the House Government Reform Committee's Government Management, Finance and Accountability Subcommittee. The hearing was a first step toward identifying areas in which federal agencies might benefit from new legislation to simplify financial management.

Rep. Todd Platts (R-Pa.), the subcommittee's chairman, plans to introduce a bill that would streamline layers of financial management laws and eliminate those that are no longer necessary. Subcommittee members had asked the National Academy of Public Administration to make recommendations, and the hearing provided a first look at the preliminary findings of a NAPA task force.

G. Edward DeSeve, a task force member, said the Treasury Department should not be limited to a small role in governmentwide financial management. DeSeve, a former Office of Management and Budget controller, is now a managing partner at Governmentum Partners, a consulting firm.

When the Chief Financial Officers Act of 1990 was under consideration, OMB and Treasury were in the midst of a turf battle over which organization would lead the CFO Council. OMB won, DeSeve said. Treasury, however, "can provide strong leadership, if provided the opportunity," he added.

Lawmakers should also resolve a potential statutory conflict between federal CFOs and chief information officers about who is responsible for financial management systems, DeSeve said. "If the two of them aren't working well together, there is a potential core problem, so we need to do some ironing out," he said.

In addition, financial managers need to expand their focus beyond producing unqualified agency financial statements, DeSeve said. That focus has detracted from efforts to give project managers real-time financial data so they can make better decisions, he said.

"We don't have actionable information in the federal government for program managers," he added.

During the hearing, Platts announced the formation of a congressional management caucus to highlight management issues in new legislation. Despite the importance of good management in achieving the intent of legislation, the caucus' prospectus states that management issues "are often overlooked, underappreciated or simply ignored."

Many laws are on the books

When lawmakers try to simplify financial management for federal agencies, they will encounter layers of laws and directives.

Here are some of the major financial management laws and directives.

  • The Federal Manager's Financial Integrity Act of 1982 requires agencies to institute internal controls and accounting systems. The Office of Management and Budget recently revised the circular that implements this act, adding requirements for agencies to document and test financial standards.
  • The Chief Financial Officers Act of 1990 establishes the position of CFO at major federal agencies and controller at OMB and requires annual independently audited agency financial statements.
  • The Government Performance and Results Act of 1993 mandates the development of long-term strategic plans, annual performance plans and an annual report comparing performance goals with actual performance.
  • The Government Management Reform Act of 1994 requires the comptroller general to compile and audit annual financial statements created to comply with the CFO Act.
  • The Federal Financial Management Improvement Act of 1996 strengthens the consistency of government accounting by adopting the Federal Accounting Standards Advisory Board's standards for capturing projects' costs. Agency leaders must provide negative assurance of compliance with this act as opposed to positive assurance. The latter would require more comprehensive audits and testing procedures. Congressional auditors have argued to switch to the positive assurance standard.
  • The Debt Collection Improvement Act of 1996 centralizes the collection of delinquent debt owed to the federal government in the Treasury Department.
  • The Accountability of Tax Dollars Act of 2002 obligates every federal agency to produce audited financial statements every fiscal year.

— David Perera

About the Author

David Perera is a special contributor to Defense Systems.

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