	Budget Process: Ideas for Improvement

Today there is widespread frustration with the budget process. Therefore, it is important for the budget to provide a long-term framework and be grounded in a linkage of fiscal policy with the long-term economic outlook. Appropriations subcommittees provide funding by department and agency in appropriations accounts that do not distinguish between investment and consumption spending. Financial Reporting and Management: The Basis for Future Progress

The budget should be formulated using accurate and reliable financial data on actual spending and program performance. Ideally, we should expect such reports to address (1) the full costs of achieving program results, (2) the value of what the government owns and what it owes to others, (3) the government’s ability to satisfy future commitments if current policies were continued, and (4) the government’s ability to detect and correct problems in its financial systems and controls. That act also mandated an annual consolidated set of governmentwide financial statements—to be audited by GAO—starting for fiscal year 1997. It established a CFO structure in 24 major agencies and the Office of Management and Budget (OMB) to provide the necessary leadership and focus. Based on FASAB’s standards, OMB is making efforts to design new financial reports that contain performance measures and budget data to provide a much needed, additional perspective on the government’s actual performance and its long-term financial prospects. As the federal government continues to improve its accountability and reporting of costs and performance, the more useful and reliable data need to be used to influence decisions. For this to happen, the financial data must be understood and used by program managers and budget decisionmakers. Improving the linkages between accounting and budgeting also calls for considering certain changes in budgeting such as realigned account structures and the selective use of accrual concepts. The Selective Use of Accrual Concepts in the Budget

In addition to providing a new, full cost perspective for programs and activities, financial reporting has prompted improved ways of thinking about costs in the budget.
Why GAO Did This Study

GAO discussed how the federal government could improve its financial management and budgets.

What GAO Found

GAO noted that: (1) over the last 6 years, the government has established a solid framework for improving its financial management through legislative mandates, an accounting standards advisory board, and budget process improvements; (2) the budget process should provide a long-term perspective and link fiscal policy to the long-term economic outlook; (3) the Administration and Congress need to make explicit decisions about investment and consumption spending and identify them within the budget; (4) budget enforcement, accountability, and transparency need to be enhanced, possibly through a look-back procedure and particularly in the areas of deficit and mandatory spending; (5) to enhance budget decisionmaking, agency and governmentwide financial statements audits should provide accurate and reliable financial data on actual spending and program performance; (6) the advisory board has approved eight government accounting standards addressing such areas as budget integrity, operating performance, and systems and control and will complete a stewardship standard by the spring of 1996; (7) the Office of Management and Budget is designing new financial reports to increase information on actual performance and long-term financial prospects; and (8) realigning account structures and selective use of accrual concepts in the budget would link accounting and budgeting and improve budget and management decisionmaking by disclosing the full cost of programs and operations.