Financial Management: Providing a Foundation for Transition - AGA

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4Road to transformationReviewing the results of the 2008 CFO Survey, onesenses a higher readiness for change than in previousyears. On the positive side, the financial executivesand managers in the 2008 survey feel they haveaccomplished much in the last 7 years. Certainly,the Federal Government keeps better books, andits financial information is more accurate than everbefore. Now, the federal financial community is readyto go to the next level of accomplishment. CFOs andother executives in our survey want evolutionaryrather than revolutionary change—but they wantchanges to start now.On the negative side, many of our surveyrespondents question the value of much of thework that they must do, especially in meetingcompliance mandates. This sentiment is particularlyacute among those who believe that thegovernment faces a bleak fiscal future because ofits huge deficits. There are hard decisions aboutbudgets ahead, say these respondents, and theywant the financial communityto help make the right choicesabout programs, defenseand services to citizens.For this to happen, the Federal Governmentmust choose the right route to transformingfinancial management into a valuable tool fordecision making and program improvement. Inthis section, we use the metaphor of a fork in theroad to financial management’s future to discusschoices for financial reporting, internal control,continuing resolutions and compliance.Financial reporting: more than aseal of approvalFinancial reporting is the first fork in the roadtoward transformation, because many surveyrespondents think that it consumes time andresources disproportionate to its value for decisionmaking. One branch of the road leadsto more precise, accurate and timely financialstatements modeled on those used by the privatesector, with an unqualified auditor opinion as aseal of approval. The other branch heads towardmaximizing the usefulness of financial reports,which is where the majority of the financialexecutives we interviewed in 2008want to go.BackgroundThe Chief Financial Officers Act of 1990,as amended by the GovernmentManagement Reform Act of1994, mandated better
5financial accounting and reporting for federalentities like departments, agencies and certainfunds. OMB Circular No. A-136, FinancialReporting Requirements, sets forth the form andcontent of the financial statements in the reports.The annual report also includes an independentauditor’s opinion of the reliability of the processesused to develop the information the statementspresent. Federal entities that are requiredby the CFO Act to have audited annual financialstatements combine them with reports on programand mission performance; the combinedreport is called the Performance and EvaluationReport (PAR). For a more detailed discussionof technical issues on financial reports, see“Financial statements and audits: a closer look”on page 24.For 17 years, the CFO Act helped buildfederal financial management’s ability andcapacity. Audits have become tougheryear after year, but today auditors givemost CFO Act entities unqualifiedor clean opinions on their annualfinancial reports (19 of 24 CFOAct entities received clean opinionsfor their FY 2007 reports).Seventy-two percent of citizens say it is important to receivefederal financial information, but only 5 percent are satisfiedwith what they get.—Association of Government Accountants/ Harris Interactive ®poll, January 2008.Usefulness of financial statementsUnfortunately, few people actually read federalfinancial statements, much less use them formaking decisions. Referring to the good recordof clean audit opinions on these statements, anexecutive says, “We are getting A’s on our testsbut not learning anything.” Most of the CFOsand financial executives in our survey agree.They think that the story of the CFO Act doesnot have to end with financial reporting. Instead,say many, it is time to evolve federal financialinformation into a form that will be more transparentto citizens, relevant to decision makersand appropriate for government.Transparent means that information is clear andthat it matters. Ninety percent of American adultssay that, as taxpayers, they are entitled to transparentfinancial management information fromall levels of government, according to a January2008 Harris Interactive ® poll commissioned bythe Association of Government Accountants.Seventy-two percent of the citizen surveyed saythat it is important to receive federal governmentfinancial information, but only 5 percent reportsatisfaction with what they receive.Relevant means delivering information that isimportant to taxpayers, legislators, an administration’stop leaders, policy makers, executivesand managers. Almost all 120 executives inour survey say that very little of the informationin federal financial reports is relevant to
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Page 4 and 5: 2Table of contentsAbout the Associa
Page 8 and 9: 6government decision making. From t
Page 10 and 11: 8Positive opinions on A-123When the
Page 12 and 13: 10more likely to add value to opera
Page 14 and 15: 12• Better guidance and clearer r
Page 16 and 17: 14Cost/benefit analysis and targete
Page 18 and 19: 16• Many executives say their peo
Page 20 and 21: 18Some CFOs report success in reduc
Page 22 and 23: 20SystemsSurvey respondents listed
Page 24 and 25: 22the top of those that they want c
Page 26 and 27: 24Financial statements and audits:
Page 28 and 29: 26IG office, as it is when the audi
Page 30 and 31: 28ConclusionDesign by www.sparkdesi
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