Fixing Finances

decade ago, financial management at most federal agencies meant little more than reporting how appropriations were spent. For the most part, agency finance officers concerned themselves with just two questions: Did you spend all the money Congress gave you? And did you spend it on the things Congress told you to spend it on? Agencies followed their own methods for planning and programming funds, and there were few standardized requirements across government-or even within agencies. There were no annual agency financial statements to be audited, no accountability reports to be issued, no strategic plans to be aligned with agency budgets, no performance goals to be measured, no governmentwide accounting standards to follow. If those weren't the good old days, they at least were easier days for federal financial managers.

All that changed in 1990 when Congress passed the Chief Financial Officers Act, which established a new framework for financial accountability. The CFO Act was the most significant law governing federal financial management in four decades. It required the 24 largest agencies, which are responsible for 99 percent of federal spending, to reorganize their financial management staffs and establish chief financial officers who would work to reform accounting and reporting. Subsequent legislation required agencies to reform capital investment practices, measure program performance and produce annual audited financial statements. Also, the Treasury Department was required to produce a report on governmentwide finances, audited by the General Accounting Office.

The new financial reporting and management requirements have had an enormous impact in government. Despite most agencies' inability to fully meet the new requirements-due largely to inadequate finance and accounting systems that were never designed to capture data now needed-the change in management of federal programs is significant and growing. While the bad news of federal mismanagement continues to dominate headlines and congressional hearings, there is surely good news as well.

The majority of agencies are now producing annual audited statements on time, and this year more than half received a thumbs-up from auditors who issued unqualified opinions on the statements. Recognized professional accounting standards are now in use across agencies. And the federal government has made this progress at a much faster clip than state governments, which began similar reforms 10 years earlier, notes Joshua Gotbaum, comptroller for the Office of Federal Financial Management at the Office of Management and Budget.

Clearly, most of the credit for these improvements goes to CFOs, their senior staffs, and the tens of thousands of accountants and finance personnel throughout agencies who have worked hard-in some cases heroically-to capture and report data not previously required. In this special report, you'll learn how CFOs view their role, how much clout they have within their agencies, and what their concerns are for maintaining the workforce necessary to bring reforms to fruition.