Government-wide Financial Reporting - AGA

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Appendix A CFOs are coming to the job with the proven track records in financial management that the CFO Act envisioned. CFOs now have a “seat at the table” and are focused on functions — not encumbered with a wide range of unrelated responsibilities. Highly qualified deputy CFOs also provide continuity and bring years of experience to the job. While not yet where the CFO community ultimately wants to be, the evolution of financial systems and operations has been dramatic. 44 The number of financial systems has been reduced, and the integration of financial systems with program systems has increased. There has been greater standardization, a dramatic increase in shared services and much less duplication of effort. Technology has enabled greater efficiency and effectiveness, and financial statement audits have pinpointed problems that have resulted in changes to financial systems. Finally, a direct byproduct of the CFO Act was the establishment of the Federal Accounting Standards Advisory Board (FASAB). The FASAB has become a widely recognized standard-setting body and continues its work to institutionalize and refine federal government accounting standards and financial reporting models. With all the progress made in financial management, in December 2011, GAO completed its CFS audit for the fiscal year ending September 30, 2011. For the 15th consecutive year, GAO could not express an opinion on the CFS. 45 GAO cited three major impediments that contributed to its disclaimer of opinion on the CFS. The material weaknesses cited by GAO included problems related to Treasury’s ability to prepare the consolidated financial statements using audited agency information. Treasury, in coordination with OMB, did implement corrective actions during fiscal year 2011 to address internal control deficiencies detailed in GAO’s audit report for the previous fiscal year. But GAO found that the federal government continued to have inadequate systems, controls and Principal Impediments to an Unqualified (“Clean”) Auditors’ Report — 2011 • Department of Defense — Unauditable • Intragovernmental Transactions and Balances • Compilation Process procedures to ensure that the CFS are consistent with the underlying audited agency financial statements, properly balanced and in conformity with U.S. generally accepted accounting principles (GAAP). The problems cited in GAO’s report have been vexing to the federal government since the outset of the GMRA requirement for audited CFS and have adversely impacted Treasury’s ability to prepare CFS that can withstand the scrutiny of an independent audit. The problems transcend Treasury and are a byproduct of financial reporting systems and processes across the federal government, impacting the ability to consolidate audited agency information at a government-wide level. This is in spite of three decades of investments at the agency level in financial systems modernizations, enhanced business process and investments in personnel. A lot is known about the problem, but solutions have been elusive despite hard work by Treasury, OMB and the 150 federal government agencies whose financial results are incorporated into the CFS. 26 AGA Corporate Partner Advisory Group Research
Appendix B: Clarification on Data Format in Statement of Cash As noted in Chapter 3, our discussions revealed little interest in the Statement of Changes in Cash. There are apparent explanations for this. Unlike the Statement of Cash Flows other standard-setters prescribe for the private/nonprofit and state/local sectors, the current Statement is a mixture of gross reporting of cash inflows and outflows — principally debt issued and repayments made on debt held by the public. Many other significant transaction types are reported only on a net basis. The Statement presentation differs substantially from the three types of cash flows FASB mandates for the private/nonprofit sectors (operating, investing and financing activities) and four types of cash flows GASB mandates for the state/ local government sector (operating, investing, capital asset and financing activities). FASB and GASB both encourage gross reporting. The Statement of Changes in Cash would be much more informative if gross cash inflows and outflows for GSEs, TARP and loan activities, for example, were disclosed. We recognize that developing a similar approach for gross cash inflow and outflow information in the absence of an agency requirement to provide such information in its financial statements presents additional challenges in expanding reporting issues for the Statement of Changes in Cash. However, some agencies operating lending, leasing, guaranteeing and similar activities may already have such gross and net cash flow data available. We believe that gross reporting significantly improves understanding of the federal government’s complete cash management activities. For some transaction types, the cash outflows may well exceed those of some of the 35 major federal entities. Government-wide Financial Reporting 27
Page 1 and 2: Corporate Partner Research Advisory
Page 3 and 4: Table of Contents Executive Summary
Page 5 and 6: Executive Summary SUMMARY OF RECOMM
Page 7 and 8: Introduction sound system of accoun
Page 9 and 10: 2. Breakdowns in the Compilation Pr
Page 11 and 12: Breakdowns in the Compilation Proce
Page 17 and 18: 3. Usefulness of the Two CFS Reconc
Page 19 and 20: 4. Structure Overview of the As-Is
Page 21 and 22: Structure to establish an organizat
Page 23 and 24: Structure and accountability. Stand
Page 25: Appendix A Act, much has been accom
Page 29 and 30: Appendix C In two instances, the st
Page 31 and 32: Appendix C Interviews with Federal
Page 33 and 34: Appendix D: Abbreviations and Acron
Page 35 and 36: Appendix E: AGA Treasury Review Sco
Page 37 and 38: Endnotes 1. Treasury’s process co
Page 39 and 40: AGA CPAG Research Reports No. 1, Ma

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