	Progress Is Being Made

Since the CFO Act’s passage, steady progress has been made in improving federal financial management. For fiscal year 1996, when agencywide financial statements were required across government for the first time, 6 of the 24 CFO Act agencies received unqualified audit opinions. Many people are actively working to resolve federal financial management problems. Our testimony framed the most serious financial management improvement challenges facing the federal government. Our audit of the federal government’s consolidated financial statements and the Inspectors General audits of agencies’ financial statements have resulted in an identification and analysis of deficiencies in the government’s recordkeeping and control system and recommendations to correct them. Ultimately, agency heads and their senior management team have to be accountable for results. Congressional Oversight Is Key

Congressional attention is essential to help sustain the current momentum to implement financial management reform legislation. There are clear indications that the results of financial audits are beginning to attract increasing attention from various congressional committees. This legislation also requires (1) auditors performing financial audits under the CFO Act to report whether agencies comply with these requirements and (2) if agencies do not comply, agency heads are to prepare remediation plans to bring financial management systems into substantial compliance within 3 years. The Congress can build further upon this structure by conducting annual hearings on each agency as part of the regular appropriation, authorization, and oversight process. Based on the circumstances of individual agencies on a case-by-case basis, the Congress could, for example, consider whether (1) in areas of special concern, to require attainment of specified improvements within established milestones before certain funds supporting administrative operations or systems would be available for obligation, (2) to expand, continue, or limit transfer or reprogramming authority depending on the quality of an agency’s financial management, (3) to target, or set aside, needed funding for financial management improvement efforts that are deemed necessary to achieve progress and require periodic status reports on the return for this investment, or (4) to scrutinize funding requests, and perhaps consider limiting funds, in areas where agencies cannot provide satisfactory answers to questions raised about the quality of the data underpinning the request or their ability to properly account for the expenditures. These mechanisms—sustained congressional attention as part of the normal oversight process and agency head accountability—are essential to continue to effectively implement the financial management reform legislative foundation the Congress has established. They are key elements of ensuring that agencies make the investment of time, talent, and resources necessary to achieve needed financial management improvements. With a concerted effort, the federal government, as a whole, can continue to make progress toward ensuring full accountability and generating reliable information on a regular basis. They are also central to assuring taxpayers that their money is being used as intended and helping the government implement broad management reforms called for by the Government Performance and Results Act. U.S. General Accounting Office P.O.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO discussed ways Congress can help to ensure that agencies effectively implement federal financial management reform legislation.

What GAO Found

GAO noted that: (1) an essential foundation to help achieve the goals of implementing financial management reforms is the requirement that the 24 Chief Financial Officers Act agencies annually prepare financial statements and subject them to an independent audit, beginning with those for fiscal year (FY) 1996; (2) additionally, audited consolidated financial statements for the U.S. government are now required annually, starting with those for FY 1997; (3) to further promote needed reforms, the Federal Financial Management Improvement Act calls for agencies to meet various financial management standards and requirements and, if they do not, to prepare remediation plans; (4) these reforms begin to subject the federal government to the same fiscal discipline imposed for years on the private sector and state and local governments; (5) this discipline is needed to correct long-standing serious weaknesses in federal financial management systems, controls, and reporting practices; (6) considerable effort is under way across government to make needed improvements and progress is being made, but a great deal of perseverance will be required to fully attain the legislative goals set by federal financial management statutes; (7) the federal government can continue to make progress in implementing financial management reforms, but the pace and extent of improvement will depend upon the dedication of agency heads and their senior management teams, especially chief financial officers, and the ability to deal with a range of financial management systems issues, as well as continuing emphasis by Congress on financial management reform; (8) broad oversight by Congress will be very important to hold agency heads accountable for needed financial management improvements; and (9) Congress would make a significant contribution to ensuring satisfactory results in this area if the results of financial audits and needed improvements became a routine part of its normal annual appropriation, authorization, and oversight deliberations.