aga richmond chapter--winter seminar february 15, 2011 reflections on the 20 th anniversary of the...

AGA Richmond Chapter--Winter SeminarFebruary 15, 2011

Reflections on the 20th Anniversary of the CFO Act

By Edward J. MazurFirst Controller, Office of Federal Financial Management

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A Key Assertion

Good policy

—once institutionalized—

can have a profound affect on

performance!

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Central Observation

“The passage of the CFO Act in 1990 marked a noble beginning for what was to become the greatest advance forward in modernizing and making more effective the financial management of the Federal Government.”

Edward J. Mazur, Journal of Government Financial Management,

Winter 2010, Vol. 59, Issue 4

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A Brief History

• Factors that led to its drafting• Hopes expressed during its

passage• The first years • What has been accomplished • How the Act can continue to

advance the performance of our Federal departments and agencies

• Significant remaining challenges

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Factors Leading to Passage

• Intergovernmental programs, beginning in the mid-1960’s brought the 3 levels of government together

• Financial failures of certain cities in the 1970’s focused attention on financial reporting by state and local governments

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Important Federal Leadership

• GAO publishes Yellow Book—1970’s• Comptrollers General Staats & Bowsher• AGA’s Comptrollership Task Force—

1983• GAO report, Managing the Cost of

Government: Building an Effective Financial Management Structure—1985

• Arthur Anderson report on Federal reporting practices—1986

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Congressional Leadership

• Senate:– John Glenn, Chair Gov’t Affairs– William Roth, ranking member

• House:– John Conyers, Chair, Gov’t

Operations– Frank Horton, ranking member

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Passage

Signed into law:

November 15, 1990By President George H. W. Bush

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The Early Years

• Support within the Federal financial management community was not assured

• Change impacted:– Required experience and

qualifications– Role adjustments for Federal IG’s– Relationships with OMB’s Budget

side

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Accomplishments Under the Act

General Assessment: Each requirement has been substantively addressed—tools now in place:

- policies and standards- performance measures- systems and technologies -

trained personnel -teamwork among CFOs and IGs.

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Accomplishments (cont’d)

• Reporting standards in place• Audited financial statements issued

45 days after close of fiscal year• Significant reduction of Auditor-

identified material weaknesses among the 24 major CFO Act

• Increasing focus on reporting program performance

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Credit and Acknowledgements

• Dedicated men and women throughout our Federal Government

• Supportive Congress, generally• Wise appointments to leadership

posts• Men and women of the Office of

Federal Financial Management– Woody Jackson, former Deputy State

Auditor of Virginia

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Commitments Going Forward

• Continued elimination of material weaknesses

• That all Federal departments will produce annual financial statements in accordance with established standards

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Significant Remaining Challenges

1. Building readership of financial and performance reports

a. Identify and communicate with agency stakeholders

b. Secretary of Treasury should communicate with Governors

c. Form FASAB users advisory groupNote: Access the “2010 Financial Report of the United

States Government by going to www.fms.treas.gov/fr/index.html

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Remaining Challenges (cont’d)

2. Defend the continued application of the CFO Act, through recognizing:

a. Complexity of Federal governmentb. Reporting as a tool for accountabilityc. Future benefits from “assets”d. Stakeholder reliance on “liabilities” e. Citizen access to data promotes

transparency, but does not equate to full and comprehensive accountability

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3. Protect governmental control functions and staff during period of fiscal stress, to:

a. Ensure accuracy of benefit paymentsb. Timely collection of revenuesc. Reliability of financial informationd. Safeguarding of public assetsExplain and document the risks from

cuts!

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4. Congress must use the financial information being provided!

a. Treasury’s consolidate financial report (CFR) is candid and complete

b. Contents are supported by OMB, FASABc. GAO audits the CFR; IG’s the agenciesd. Department and agency staff exercise

great diligence in providing information

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BUT—the CFR and its warnings about sustainability has not produced a change in direction by Congress Reported debt and obligations were $51.8

trillion at 9-30-2010—which is 351% of GDP 94%of household/nonprofit net worth (Q3 2010)

Foreign interests hold over 50 of U.S. debt National security is at stake Quality of life and opportunity is at risk!

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Intergovernmental Financial Dependency—

Selected StatesKey DependencyMeasurements

VA2008

NC2008

FL2008

Direct Federal Revenues to State (billions)

(VA 2009)

$10.8 $15 $24.5

Percentage of Total State Revenues—All Sources

26.9% 31.8% 28%

Direct Federal Grants to Local governments (millions)

$1,075 $1,799 $4,033

Federal Purchases from State Businesses (billions)

$53.9 $5.8 $16.6

Federal Payments to Individuals-wages, pensions, S.S., Medicare (billions)

$53.9 $47.6 $110.7

Total Direct and Indirect Federal Flows (billions)

$119.7 $70.3 $155.8

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Selected StatesKey

MeasurementsVA

2008NC

2008FL

2008

Real GDP by StateInflation Adjusted to 2000

(billions)$324.5 $329.4 $603.5

Total Federal FlowsGross State Product

36.9% 21.3% 25.8%

Federal Leased/Owned Buildings (millions sq/ft)

As of March 201050.4 4.3 14.0

Federal Debt Securities Held by State (billions)

$6.3 N/A $40.1

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Selected StatesKey

MeasurementsVA

2008NC

2008FL

2008

Military Facilities (9/30/08) 148 124 235

Military Facilities--Present Replacement Value

(9/30/08, billions)$37.6 $20.4 $23.4

Military Facilities--Military and Civilian Personnel (9/30/08, thousands)

181.8 147.2 91.2

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Closing Thoughts

• The governmental financial management community must exert shared leadership, beginning now!• You have the knowledge and understanding• You have access to government leaders• You can anticipate the consequences of inaction• You can lead!

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Resources for Fiscal Reform

Recommendations• President’s Commission on Fiscal Responsibility

and Reform—”The Moment of Truth”• http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/

documents/TheMomentofTruth12_1_2010.pdf

• Bipartisan Policy Center Debt Reduction Task Force—”Restoring America’s Future”• http://www.bipartisanpolicy.org/news/press-releases/2010/11/bipartisan-

policy-center-task-force-unveils-bold-comprehensive-plan-solv

• Peterson-Pew Commission on Budget Reform—”Getting Back into the Black”• http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/

Economic_Mobility/Peterson-Pew_report_federal_budget_process_reform.pdf

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Speaker Contact Information

Edward J. Mazur, CPASenior Advisor for Public Sector ServicesClifton Gunderson LLP

Office 804-270-2200, ext 20102Mobile: 804-240-8672

[email protected]

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