Financial Management: Providing a Foundation for Transition - AGA

1Executive summaryIn 2008, 239 federal financial management executivesand managers took part in the 12th annual chief financialofficer (CFO) survey sponsored by the Association ofGovernment Accountants (AGA) and conducted by GrantThornton LLP. Survey respondents are proud of thefinancial management and internal control successes ofthe past 7 years. However, they say that the governmentmust head in a new direction to achieve even greatergains. Future improvements need to focus on how theCFO can add value to missions and programs, not justcomply with regulations.Financial reportingMost survey respondents agree that the way the Federal Governmentprepares, presents and audits annual financial statements is broken. Only5 percent of citizens are satisfied with the federal financial information theyreceive, according to another 2008 AGA survey. Designed for industry, thecurrent financial reporting model costs too much and delivers little usefulinformation to government decision makers. Needed are new modelsthat are more transparent to citizens, relevant to decision makers andappropriate for government. The Executive Branch can make some of thechanges required for such models. Also, federal entities can reduce the costand improve the quality of the current model or other models by using arisk management approach.Accounting and auditing standardsMost executive respondents think the approach used by federal auditors forfinancial reports adds value to government management. Nonetheless, halfcalled for changing federal accounting standards and 60 percent for newaudit standards. They want the standards to be more relevant to the business,goals and purpose of government. In essence, the standards shouldguide reporting on performance in areas that matter to program managersand citizens, not just to auditors.Internal controlThree out of four executives in the survey are positive about the WhiteHouse Office of Management and Budget’s (OMB) December 2004revision of Circular A-123, Management’s Responsibility for InternalControl. They think that the circular has helped improve controls overfinancial reporting. However, the respondents say that more mustbe done to improve and monitor controls on program efficiency andeffectiveness—mission success is more importantthan getting the financial numbers right.Consolidation and integrationConsolidating and integrating the many financeandcontrols-related mandates placed on federalentities by Congress and OMB could reducethe work of complying with them. On theirown, entities can combine compliance activitiesto save time and money. This will also help tointegrate controls on processes that cut acrossorganizational boundaries. One way to achievesuch integration is for CFOs to become theirentities’ chief accountability officers, responsiblefor risk management, tracking return on investmentand providing support to programs.Future CFOsIn the future, the quintessential federal CFOwill have a relationship of mutual trust withdepartmental and agency leaders and be skilledin developing and retaining an effective financialteam. Such CFOs will understand the federalbudget process, have accounting acumen, knowthe business information needs of programmanagers and be skilled in selling a budget toOMB and Congress, internal control to programmanagers and the benefits of integrated financialand performance information to everyone.All signs point toward a bleak fiscal future forthe Federal Government. Massive deficits and thecosts of overseas conflicts mean fewer resources forprograms and some tough budget decisions. If CFOsstay on the present path of financial management,they will be of little use in making those decisions.With the course corrections suggested by currentCFOs in this report, future CFOs can providethe integrated financial and performance analysisdecision makers need. They will also be better ableto help program managers to develop more costeffectiveoperations. In short, future CFOs will addmore value than ever before, if they follow the rightpath to success.