This is the accessible text file for GAO report number GAO-06-242T 
entitled 'CFO Act of 1990: Driving the Transformation of Federal 
Financial Management' which was released on November 18, 2005. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Testimony Before the Subcommittee on Government Management, Finance and 
Accountability, Committee on Government Reform, House of 

United States Government Accountability Office: 


For Release on Delivery Expected at 2:30 p.m. EST Thursday, November 
17, 2005: 

CFO Act of 1990: 

Driving the Transformation of Federal Financial Management: 

Statement of Jeffrey C. Steinhoff: 
Managing Director, Financial Management and Assurance: 


GAO Highlights: 

Highlights of GAO-06-242T, a testimony before the Subcommittee on 
Government Management, Finance, and Accountability, Committee on 
Government Reform, House of Representatives 

Why GAO Did This Study: 

In 1990, the Chief Financial Officers (CFO) Act, heralded as the most 
comprehensive financial management reform legislation in 40 years, was 
enacted. The Act’s goal is to improve management through reliable, 
useful, and timely financial and performance information for day-to-day 
decisionmaking and accountability. This testimony outlines the 
legislative history of the CFO Act, and its key elements, progress to 
date in implementing the Act, and the challenges for the future. 

Prior to passage of the CFO Act, the seemingly never ending disclosures 
of fraud, waste, abuse, and mismanagement in federal programs painted a 
picture of a government unable to manage its programs, protect its 
assets, or provide taxpayers with the effective and economical services 
they expect. The enactment of the CFO Act represented a broad-based 
recognition that federal financial management was in great need of 
fundamental reform. 

The Act mandated a financial management leadership structure; required 
the preparation and audit of annual financial statements; called for 
modernized financial management systems and strengthened internal 
control; and required the systematic measurement of performance, the 
development of cost information, and the integration of program, 
budget, and financial systems. 

What GAO Found: 

In the 15 years since the enactment of the CFO Act, the federal 
government has made substantial progress in strengthening financial 
management. The past 3 administrations have all made financial 
management reform a priority. Improved financial management has been 
one of the cornerstones of the President’s Management Agenda from the 
outset of the current administration. There has been a clear cultural 
change in how financial management is viewed and carried out in the 
agencies and a recognition of the value and need for good financial 
management throughout government, which was not the case in 1990. There 
are now qualified CFOs across government, who bring to the job proven 
track records in financial management. Financial management systems and 
internal control have been strengthened. Generally accepted government 
accounting standards have been developed. For fiscal year 2005, 18 of 
24 CFO agencies received clean audit opinions on their financial 
statements, up from just 6 in fiscal year 1996. This year’s audited 
financial statements were issued in just 1½ months after the close of 
the fiscal year as opposed to 5 months, which is the deadline in the 
Act. Agencies are also now preparing performance and accountability 
reports that tie together financial and performance information. Though 
not yet auditable, primarily because of problems in the Department of 
Defense, comprehensive annual consolidated financial statements are 
being issued in 2½ months as opposed to the 6-month timeframe allowed 
in the Act. 

While there has been marked progress in the past 15 years and the CFO 
Act has proven itself as the foundation for financial accountability, 
GAO has identified five principal challenges to fully realizing the 
world-class financial management anticipated by the CFO Act. The need 

1. modernize and integrate financial management systems to provide a 
complete range of financial and cost information needed for 
accountability, performance reporting, and decision making, with 
special emphasis on the Department of Defense, which has deeply-rooted 
systems problems, 

2. build a more analytic financial management workforce to support 
program managers and decisionmakers, 

3. solve long-standing internal control weaknesses, 

4. enhance financial reporting to provide a complete picture of the 
federal government’s overall performance, financial condition, and 
future fiscal outlook, and 

5. ensure that financial management reform is sustained given the 
leadership changes that occur at the end of any administration and the 
long-term nature of many of the ongoing reform initiatives. 

The continuing strong support of the Congress has been a catalyst to 
the important progress that has already taken place and will be 
essential going forward. 

What GAO Recommends: 

To view the full product, click on the link above. For more 
information, contact McCoy Williams at (202) 512-6906 or 

[End of section] 

United States Government Accountability Office: 

Washington, DC 20548: 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today on the 15th anniversary of the enactment 
of the Chief Financial Officers Act of 1990[Footnote 1] (CFO Act) to 
discuss the effect of this groundbreaking legislation as well as the 
challenges that still remain. Having worked closely with the members of 
Congress on passage of the CFO Act, I can attest first hand that while 
many challenges still exist, the state of federal financial management 
has come a long way since 1990. Nearly all the CFO Act 
agencies[Footnote 2] have made marked improvements in financial 
management and have shown that issuing timely audited financial 
statements can become a routine part of doing business at the federal 
level. At the same time, there are opportunities to take federal 
financial management to the next level, which will be important as the 
federal government faces difficult fiscal challenges that will require 
reliable financial and performance information to support timely 
decisions on spending, and pressures to address fraud, waste, abuse, 
and mismanagement will only intensify. Also, certain material 
weaknesses in internal control and in selected accounting and financial 
reporting practices have continued to prevent the GAO from being able 
to issue an opinion on the consolidated financial statements of the 
U.S. government. These weaknesses which hinder management's ability to 
manage day-to-day operations, most notably at the Department of 
Defense, need to be resolved. 

Today, I would like to: 

* highlight the legislative history of the CFO Act; 

* summarize the key elements of the CFO Act; 

* outline progress made to date in implementing the CFO Act; and: 

* provide our views on the challenges remaining. 

CFO Act Enacted to Address Longstanding Problems: 

Prior to passage of the CFO Act in 1990, the seemingly never ending 
disclosures of fraud, waste, abuse, and mismanagement in federal 
programs painted a picture of a government unable to manage its 
programs, protect its assets, or provide taxpayers with the effective 
and economical services they expect. As the Comptroller General pointed 
out around the time the CFO Act was passed,[Footnote 3] the problems 
that existed were not limited to a few agencies or a few programs; 
rather, all of the major agencies had serious problems. For years, GAO 
and the Inspectors General had reported a litany of problems that 
resulted in wasteful spending, poor management, and losses totaling 
billions of dollars. In some cases, the government's ability to carry 
out crucial programs had been severely hampered. 

The financial management environment was in such disarray that not only 
were audited annual financial statements not required, most in the 
federal financial management community did not even see the value of 
annual financial reporting. The need for federal financial statements 
was an area of major disagreement. Budgeting was what financial 
management was all about, and accountability for how the money was 
being spent was not the priority. Federal managers in the government 
were more concerned with the budget and did not focus on improved 
financial management. 

Concerned about the ever-growing problems in federal financial 
management and the need for a more integrated, comprehensive, and 
systematic approach to reform, in 1985 the Comptroller General issued a 
two-volume report entitled, Managing the Cost of Government: Building 
an Effective Financial Management Structure.[Footnote 4] This report 
laid out the nature and scope of the problem and provided the 
conceptual framework for the reforms needed to improve the federal 
financial management and therefore, manage the cost of government. 
Problems included the poor quality of financial management information 
and antiquated financial management systems, with recommended reforms 
such as strengthened accounting, auditing, and financial reporting and 
the systematic measurement of performance. In addition, GAO and the 
Office of Management and Budget (OMB) conducted separate studies of 
"high risk" programs that demonstrated breakdowns in internal control 
affecting hundreds of billions of dollars. Since January 1990, GAO has 
designated certain federal programs and operations as high risk because 
of their greater vulnerabilities to fraud, waste, abuse, and 
mismanagement. The increased awareness of the nature and extent of high-
risk programs further bolstered the need for broad-based congressional 

While the federal government had not made concerted progress in 
reforming financial management, state and local governments had moved 
beyond the federal government in this area because of key factors 
including federal legislation such as the Single Audit Act of 
1984.[Footnote 5] The Single Audit Act of 1984 established financial 
audit requirements for state and local governments that receive federal 
financial assistance in excess of certain dollar thresholds in any 
fiscal year. The Single Audit Act also included a requirement for 
independent auditors to review whether state and local governments have 
adequate internal control over federal funds. The need to comply with 
this law prompted states and local governments to focus on improving 
financial management and accountability. In the 1980s, many states 
began producing financial reports based on generally accepted 
accounting principles to provide a more complete picture of their 
financial situation. Consequently, in 1990, many in the financial 
management community believed that state and local governments were 
ahead of the federal government.[Footnote 6] 

To address the underlying problems that plagued federal financial 
management in March 1986, Senator William Roth introduced S.2230, the 
Federal Management Reorganization and Cost Control Act of 1986. Over 
the ensuing 4½ years, the concepts in S.2230 were refined and 
debated.[Footnote 7] What resulted was the CFO Act of 1990. The CFO 
Act, with bipartisan and bi-cameral support, had as its principle 
sponsors Senators John Glenn and William Roth and Representatives John 
Conyers and Frank Horton. Signed into law by President George H.W. Bush 
on November 15, 1990, the CFO Act was the most comprehensive and far- 
reaching financial management improvement legislation since the Budget 
and Accounting Procedures Act of 1950. The CFO Act established a 
leadership structure, provided for long-range planning, required 
audited financial statements, and strengthened accountability 

The CFO Act was the beginning of a series of management reform 
legislation to improve the general and financial management of the 
federal government, and laid the foundation for other key legislative 
reforms that followed a common thread of increased accountability and 
better management practices. The first legislation that followed the 
CFO Act was the Government Performance and Results Act of 1993[Footnote 
8] (GPRA), which requires agencies to develop strategic plans, set 
performance goals, and report annually on actual performance compared 
to goals. GPRA was followed by the Government Management Reform Act of 
1994[Footnote 9] (GMRA), which made permanent the pilot program in the 
CFO Act for annual audited agency-level financial statements, expanded 
this requirement to all CFO Act agencies, and established a requirement 
for the preparation and audit of governmentwide consolidated financial 
statements. The Federal Financial Management Improvement Act of 
1996[Footnote 10] (FFMIA) built on the foundation laid by the CFO Act 
by reflecting the need for CFO Act agencies to have systems that can 
generate reliable, useful, and timely information with which to make 
fully informed decisions and to ensure accountability on an ongoing 
basis. The Clinger-Cohen Act of 1996[Footnote 11] (also known as the 
Information Technology Management Reform Act of 1996) sets forth a 
variety of initiatives to support better decision making for capital 
investments in information technology, which has led to the development 
of the Federal Enterprise Architecture and better-informed capital 
investment and control processes within agencies and across government. 
The Accountability of Tax Dollars Act of 2002[Footnote 12] (ATDA) 
required most executive agencies that are not otherwise required, or 
exempted by OMB, to prepare annual audited financial statements and to 
submit such statements to Congress and the Director of OMB.[Footnote 
13] Lastly, the Department of Homeland Security Financial 
Accountability Act of 2004[Footnote 14] added the Department of 
Homeland Security (DHS) to the list of CFO Act agencies. 

As shown in figure 1, if successfully implemented, these reforms 
provide a solid basis for improving accountability of government 
programs and operations as well as routinely producing valuable cost 
and operating performance information. 

Figure 1: Federal Financial Management Reform Framework: 

[See PDF for image] 

[End of figure] 

The CFO Act Mandated Numerous Changes: 

The enactment of the CFO Act represented a broad-based recognition that 
federal financial management was in great need of fundamental reform. 
Key elements of the CFO Act require centralized financial management 
leadership, both governmentwide and at the agency level, and as 
expanded by GMRA, agency-level and governmentwide annual audited 
financial statements. To facilitate stewardship and accountability at 
executive branch agencies, the CFO Act designated CFOs with broad 
responsibility for modernizing financial management systems, financial 
reporting, asset management, and strengthened internal control 
practices. The systematic measurement of performance, the development 
of cost information, and the integration of financial management 
systems are some of the financial management practices called for by 
the CFO Act that, if properly implemented, will significantly improve 
financial management throughout the federal government. Furthermore, 
the Act statutorily designates the 24[Footnote 15] executive 
departments and agencies covered. These 24 departments and agencies 
represent 95 percent of net outlays in fiscal year 2004. 

Strong centralized leadership is essential to solving the government's 
long-standing financial management problems. The CFO Act provided for 
such leadership by giving OMB broad new authority and responsibility 
for directing federal financial management, modernizing the 
government's financial management systems, strengthening financial 
reporting, and internal control. The CFO Act also created a new 
position in OMB, the Deputy Director for Management, who serves as the 
government's chief official responsible for financial management. In 
addition, the CFO Act established a new Office of Federal Financial 
Management (OFFM) in OMB to carry out the government-wide financial 
management initiatives and responsibilities. To head this office, the 
CFO Act established the position of Controller, an individual who must 
possess demonstrated ability and practical experience in accounting, 
financial management, and financial systems. This individual has 
responsibility for handling the day-to-day operations of OFFM to ensure 
that financial operations are being properly carried out government- 

Executive-level leadership is a critical success factor for building a 
foundation of control and accountability that supports external 
reporting and performance management, which is needed to achieve the 
goals of the CFO Act. For this reason, an agency CFO must be a key 
figure in an agency's top management team. The CFO Act stipulates that 
the CFO is a presidential appointee or appointed by the agency head and 
is assisted by a Deputy Chief Financial Officer. Both the CFO and the 
Deputy CFO generally must possess demonstrated ability in accounting, 
budget execution, financial and management analysis, systems 
development, and practical experience in financial management practices 
in large governmental or business entities. Among the CFO's 
responsibilities are developing and maintaining integrated accounting 
and financial management systems, directing, managing, and providing 
policy guidance and oversight of all agency financial management 
personnel, activities, and operations, and overseeing the recruitment, 
selection, and training of personnel to carry out agency financial 
management functions. In addition, each CFO for the 24 agencies serves 
on the Chief Financial Officers Council, which regularly meets to 
advise and coordinate the activities of the agencies of its members on 
such matters as consolidation and modernization of financial systems. 
The CFO Act created the council and specified that the council will be 
chaired by OMB's Deputy Director for Management. Other members will be 
OMB's Controller and the Department of the Treasury's Fiscal Assistant 

The CFO Act, as expanded by GMRA, required that annual financial 
statements be prepared and audited for each CFO Act agency covering all 
accounts and associated activities of each office, bureau, and activity 
of the agency.[Footnote 16] The CFO Act also requires that the 
financial statements prepared pursuant to the act be audited in 
accordance with applicable generally accepted government auditing 
standards. These audits are the responsibility of the Inspectors 
General, but may be conducted by, and at the discretion of, the 
Comptroller General, in lieu of the Inspectors General. Inspectors 
General may contract with independent public accountants to conduct 
financial statement audits. 

Important Progress Made to Achieving CFO Act Goals: 

The federal government has made substantial progress in financial 
management in the 15 years since the enactment of the CFO Act. If I 
were to summarize in just a few words the environment in 2005 as 
compared to 1990, financial management has gone from the backroom to 
the boardroom. 

Achieving Cultural Change--Perhaps most importantly, we have seen true 
cultural change in how financial management is viewed, this has been 
accomplished through a lot of hard work by OMB and the agencies and 
continued strong support and oversight by Congress. As I previously 
discussed, federal financial management had suffered from decades of 
neglect and an organizational culture that for the most part, had not 
fully recognized the value of good financial management--as a means of 
ensuring accountability and sound management. 

Although the views about how an organization can change its culture 
vary considerably, the organizations we and others have 
studied[Footnote 17] identified leadership as the most important factor 
in successfully making cultural changes. Top management must be totally 
committed in both words and deeds to changing the culture and the 
fundamental way that business is conducted. At the top level, federal 
financial management reform has gained momentum through the committed 
support of top federal leaders. For example, improved financial 
performance is one of the six governmentwide initiatives in the 
President's Management Agenda (PMA). Under this initiative, agency CFOs 
share responsibility--both individually and through the efforts of the 
CFO Council--for improving the financial performance of the government. 
To achieve the goals of the financial performance initiative, agencies 
must now have more timely and reliable financial information, improve 
the integrity of their financial activities, and have sound and 
dependable financial systems. In conjunction with the other 
governmentwide program initiatives of the PMA, the federal government 
is improving its financial reporting practices and overall 

Establishing a Governmentwide Leadership Structure--As established by 
the CFO Act, OFFM, the OMB organization with governmentwide 
responsibility for federal financial management, has undertaken a 
number of initiatives related to improving financial management 
capabilities ranging from requiring the use of commercial-off-the-shelf 
financial systems to the promotion of cost accounting. In addition to 
assessing agency financial performance for the PMA, OFFM has issued 
financial management guidance to agencies. Some of OFFM's initiatives 
are in collaboration with the CFO Council and are broad-based attempts 
to reform financial management operations across the federal 
government. While reforming federal financial management is an 
undertaking of tremendous complexity, it presents great opportunities 
for improvements in financial management and related business 
operations. In their efforts to continue financial management 
improvement, OFFM has recently collaborated with the CFO Council on 
initiatives in the following areas: 

* internal control, 

* full implementation of FFMIA, 

* asset management, 

* improper payments, and: 

* control over federal charge cards: 

Selecting Qualified CFOs--The CFO Act established CFOs at the major 
departments and agencies and established minimum qualifications for 
CFOs. Measured in terms of coming to the job with a proven track record 
in financial management, the background of individuals selected for 
these positions has improved tremendously over the past 15 years. For 
example, the CFO at the Department of Labor has held a range of CFO and 
CFO-related positions in the private sector and government over a 30- 
year career that included serving as Treasury's CFO in a previous 
administration. Testifying with me today, Dr. Linda M. Combs, the 
Controller at OMB, brings impeccable credentials and extensive 
experience to the federal government's financial management leadership 
and policy-setting organization and exemplifies today's federal CFO. 

Improving Financial Management Systems and Operations--Since 1990, 
progress has been made towards improving financial management systems 
in the federal government. Improved agency financial management systems 
and operations are essential to support management decision making and 
results-oriented activities as addressed by the CFO Act. At a minimum, 
federal managers must have financial information that is reliable, 
useful, and timely to support this effort. Federal financial management 
systems requirements for the core financial system, managerial cost 
system, and 12 other administrative and programmatic systems, such as 
grants, property, revenue, travel, and loans, which are part of an 
overall financial management system, have been developed. Beginning in 
1999, OMB required agencies to purchase commercial-off-the-shelf (COTS) 
software that had been tested and certified through the Joint Financial 
Management Improvement Program (JFMIP)[Footnote 18] Program Management 
Office[Footnote 19] against the systems requirements that I just 
mentioned as well as the standard general ledger issued by the 
Department of Treasury. With these requirements, the federal government 
has better defined the functionality needed in its financial management 
systems which has helped the vendor community understand federal 
agencies needs. Concurrently, there has been an evolving realization 
that agencies need to change their business processes to adapt to the 
practices embedded in commercially available software versus modifying 
the software to accommodate their existing practices. 

Looking at financial management systems from another perspective, the 
federal government has acted on opportunities to consolidate 
operations. For example, a number of agencies perform accounting or 
business operations on behalf of others, consequently, the number of 
agencies processing payroll has been dramatically reduced from 22 to 4. 
According to OMB, through these initiatives, millions of dollars will 
be saved through shared resources and processes and by modernizing on a 
cross-agency, governmentwide basis. Further, OMB had established agency 
task forces that focused on developing Centers of Excellence to (1) 
reduce the number of systems that each individual agency must support, 
(2) promote standardization, and (3) reduce the duplication of efforts. 
If we were to compare the state of financial management systems today 
to where agencies were 15 years ago, the evolution has been dramatic. 
On the other hand, systems are at the top of our list in terms of 
remaining challenges for the future. As I will discuss later, agencies 
continue to struggle with developing and implementing integrated 
systems that achieve expected functionality within cost and timeliness 

Preparing Auditable Financial Statements--Most CFO Act agencies have 
obtained clean or unqualified audit opinions on their financial 
statements. Unqualified audit opinion for CFO Act agencies financial 
statements have grown from 6 in fiscal year 1996 to 18 in fiscal year 
2005. Improvements in timeliness have been even more dramatic this 
year. Agencies were able to issue their audited financial statements 
within the accelerated reporting time frame--all of the 24 CFO Act 
agencies issued their audited financial statements by the November 15, 
2005 deadline, set by OMB, just 45 days after the close of the fiscal 
year. The CFO Act calls for agency financial statements to be issued no 
later than March 31st, which is 6 months after the fiscal year end, and 
in the earlier years some agencies were unable to meet that timeframe. 
OMB has incrementally accelerated the financial statement issuance date 
to address the timeliness of the information provided by the financial 
statements. Just a few years ago, most considered this accelerated 
timeframe unachievable. While the increase in unqualified and timely 
opinions is noteworthy, we are concerned about the number of CFO Act 
agencies that have had to restate certain of their financial statements 
to correct errors. I will discuss these issues in more detail later in 
this statement. 

Preparing Performance and Accountability Reports--Another clear 
indication of progress to date is the preparation of the annual 
Performance and Accountability Reports (PAR) by CFO Act agencies. The 
PARs provide financial and performance information that enables the 
President, the Congress, and the public to assess the performance of an 
agency relative to its mission and to demonstrate accountability. These 
reports summarize program, management, and financial performance data, 
including the Annual Performance Reports required by GPRA with annual 
financial statements and other reports, such as agencies' assurances on 
internal control, accountability reports by agency heads and 
Inspectors' General assessments of agencies' most serious management 
and performance challenges. These reports serve as the federal 
government's report to the American public and provide an accounting 
for the return on the taxpayers' investment. This information is also 
provided to decision -makers who are interested in CFO Act agencies' 
performance, such as OMB and the Congress. Furthermore, the Association 
of Government Accountants recognizes federal agencies for their high- 
quality performance and accountability reports by its annual awarding 
of the Certificate of Excellence in Accountability Reporting (CEAR). 
For the most recent evaluation of 21 agencies performance and 
accountability reports, 10 agencies were recognized for achieving 
excellence in their reports. Of particular note, the Social Security 
Administration and Department of Labor have received the CEAR award for 
the past 7 and 5 years, respectively. As part of our effort to be a 
model agency, GAO has been awarded the CEAR award since it first 
applied in 2001 and for the 19th consecutive year, independent auditors 
gave our financial statements an unqualified opinion with no material 
weaknesses and no major compliance problems. 

Strengthening Internal Control--Accountability is part of the 
organizational culture that goes well beyond receiving an unqualified 
audit opinion; the underlying premise is that agencies must become more 
results-oriented and focus on internal control. In December 2004, OMB 
revised its Circular No. A-123, Management's Responsibility for 
Internal Control, to provide guidance to federal managers on improving 
the accountability and effectiveness of federal programs and operations 
by establishing, assessing, correcting, and reporting on management 
controls. Requiring federal managers, at the executive level, to focus 
on internal control demonstrates a renewed emphasis on identifying and 
addressing internal control weaknesses. Based on our 2005 assessment of 
high-risk programs,[Footnote 20] three programs previously designated 
as high-risk, largely due to financial management weaknesses, were 
removed from the list. The Department of Education's Student Financial 
Aid Programs, the Federal Aviation Administration's Financial 
Management, and the Department of Agriculture's Forest Service 
Financial Management all sustained improvements in financial management 
and internal control weaknesses and thus warranted removal. Further, as 
I testified[Footnote 21] before this subcommittee earlier this year, 
thousands of internal control problems were identified and fixed over 
the past two decades, especially at the lower levels where internal 
control assessments were performed and managers could take focused 
actions to fix relatively simple problems. But again as I will discuss 
later, this type of work is far from complete. 

Developing New Accounting Standards--Another definitive example of 
progress made to date as well as a critical component of improved 
financial performance is the establishment of the Federal Accounting 
Standards Advisory Board (FASAB). In conjunction with the passage of 
the CFO Act, the OMB Director, Secretary of the Treasury, and the 
Comptroller General established FASAB to develop accounting standards 
and principles for the newly required financial statements and other 
federal entities. FASAB is comprised of a 10-member advisory board of 4 
knowledgeable individuals from government and 6 non-federal members 
selected from the general financial community, the accounting and 
auditing community, and academia to promulgate proposed accounting 
standards designed to meet the needs of federal agencies and other 
users of federal financial information. The mission of FASAB is to 
develop accounting standards after considering the financial and 
budgetary information needs of congressional oversight groups, 
executive agencies, and other users. These accounting and reporting 
standards are essential for public accountability and for an efficient 
and effective functioning of our democratic system of government. To 
date, FASAB has issued 30 statements of federal financial accounting 
standards (SFFAS) and 4 statements of federal financial accounting 
concepts (SFFAC).[Footnote 22] The concepts and standards are the basis 
for OMB's guidance to agencies on the form and content of their 
financial statements and for the government's consolidated financial 
statements. The standards developed by FASAB have been recognized by 
the American Institute of Certified Public Accountants as generally 
accepted accounting standards for federal entities. 

Challenges Remain to Fulfilling the Objectives of the CFO Act: 

While there has been marked progress in financial management, as I have 
just highlighted, a number of challenges still remain. The principal 
challenges remaining are (1) modernizing financial management systems, 
(2) improving financial reporting, (3) building a financial management 
workforce for the future, (4) addressing long-standing internal control 
weaknesses, and (5) ensuring the continuity of financial management 
reform. Fully meeting these challenges will enable the federal 
government to provide the world-class financial management anticipated 
by the CFO Act. While there continues to be much focus on the agency 
and governmentwide audit opinions, getting a clean audit opinion, 
though important in itself, is not the end goal. The end goal is the 
establishment of a fully functioning CFO operation that includes (1) 
modern financial management systems that provide, reliable, timely, and 
useful information to support day-to-day decision-making and oversight 
and for the systematic measurement of performance; (2) a cadre of 
highly qualified CFOs and supporting staff; and (3) sound internal 
controls that safeguard assets and ensure proper accountability. 

Financial Management Systems: 

First and foremost, agencies must take full advantage of modern 
technology and develop financial management systems that are integrated 
with the range of other business systems. The federal landscape is 
littered with far too many unsuccessful financial management system 
implementation efforts. Most notable has been the Department of Defense 
(DOD) where billions of dollars have been invested in financial 
management systems with little return on the investment. DOD has 
historically been unable to develop and implement business systems on 
time, within budget, and with the promised capability. For example, we 
recently reported[Footnote 23] that the Department of Navy spent 
approximately $1 billion for four largely failed pilot Enterprise 
Resource Planning (ERP) system[Footnote 24] efforts, without marked 
improvement in its day-to-day operations. The Navy now has underway a 
new ERP project, which early Navy estimates indicate will cost another 
$800 million. While the new project, as currently envisioned, has the 
potential to address some of the Navy's financial management 
weaknesses, it will not provide an all-inclusive end-to-end corporate 
solution for the Navy. Further, there are still significant challenges 
and risks ahead as the project moves forward, such as developing and 
implementing 44 system interfaces with other Navy and DOD systems and 
converting data from legacy systems into the ERP system. 

The results of the fiscal year 2005 assessments performed by agency 
inspectors general or their contract auditors under FFMIA show that 
these problems continue to affect financial management systems at most 
of the 24 CFO Act agencies. While the problems are much more severe at 
some agencies than at others, the nature and severity of the problems 
indicate that overall, management at most CFO Act agencies do not yet 
receive the complete range of information needed for accountability, 
performance management and reporting, and decision making. 

As we recently testified in September 2005[Footnote 25], managerial 
cost accounting essentially entails answering very simple questions 
such as how much does it cost to do whatever is being measured, thus 
allowing assessments of whether those costs seem reasonable. In other 
cases, it could involve establishing a baseline for comparison with 
what it costs others to do similar work or achieve similar performance. 
To date, accumulating and analyzing the relevant financial and 
nonfinancial data[Footnote 26] to determine the cost of achieving 
performance goals, delivering programs, and carrying out discrete 
activities has proven difficult to do. Among the barriers standing in 
the way of this enhanced data are nonintegrated financial systems, lack 
of accurate and timely recording of data, inadequate reconciliation 
procedures, noncompliance with accounting standards, including the cost 
management standard, and failure to adhere to the U.S. Government 
Standard General Ledger (SGL). 

What is most important is that the problem has been recognized. Across 
government, agencies have efforts underway to implement new financial 
management systems or to upgrade existing systems. Agencies expect that 
the new systems will provide reliable, useful, and timely data to 
support day-to-day managerial decision making and assist taxpayer and 
congressional oversight. Whether in government or the private sector, 
implementing and upgrading information systems is a difficult job and 
brings a degree of new risk. Organizations that follow and effectively 
implement accepted best practices in systems development and 
implementation (commonly referred to as disciplined processes) can 
manage and reduce these risks to acceptable levels, organizations that 
do not typically suffer the consequences. For example, our work at 
DOD[Footnote 27] and the National Aeronautics and Space 
Administration[Footnote 28] this past year has shown that these 
agencies, which have experienced significant problems in the past in 
implementing new financial management systems, were not following the 
necessary disciplined processes for efficient and effective development 
and implementation of such systems. As I mentioned earlier, NASA is on 
its third attempt to implement a new financial management system. The 
first two attempts, which cost $180 million, failed and the current 
system initiative which is expected to cost close to $1 billion, has 
experienced problems. As we pointed out in recent testimony[Footnote 
29] before this subcommittee, many of the problems NASA has been 
experiencing with its financial management system stemmed from 
inadequate implementation of disciplined processes. As the federal 
government moves forward with ambitious financial management system 
modernization efforts to identify opportunities to eliminate redundant 
systems and enhance information reliability and availability, adherence 
to disciplined processes is a crucial element to reduce risks to 
acceptable levels. 

Financial Reporting: 

In the area of financial reporting, we see two challenges: (1) the 
elimination of restatements and (2) greater transparency in financial 
reporting. Many CFO Act agencies have obtained clean or unqualified 
audit opinions on their financial statements, but the underlying agency 
financial systems and controls still have some serious problems. This 
manifested itself last year when a number of CFO Act agencies had to 
restate their financial statements. As we have previously 
testified,[Footnote 30] at least 11[Footnote 31] of the 23[Footnote 32] 
CFO Act agencies restated their fiscal year 2003 financial statements, 
and 5[Footnote 33] CFO Act agencies restated their fiscal year 2002 
financial statements. The restatements to CFO Act agencies' fiscal year 
2003 financial statements ranged from correcting 2 line items on an 
agency's balance sheet to numerous line items on several of another 
agency's financial statements. The amounts of the agencies' 
restatements ranged from several million dollars to over $91 billion. 
Nine[Footnote 34] of those 11 agencies received unqualified opinions on 
their financial statements originally issued in fiscal year 2003. Seven 
of the 9 auditors issued unqualified opinions on the restated financial 
statements, which in substance replace the auditors' opinions on their 
respective agencies' original fiscal year 2003 financial statements. 
For 2[Footnote 35] of these 9 agencies, the auditors not only withdrew 
their unqualified opinions on the fiscal year 2003 financial statements 
but also issued other than unqualified opinions on their respective 
agencies' restated fiscal year 2003 financial statements because they 
could not determine whether there were any additional misstatements and 
the effect that these could have on the restated fiscal year 2003 
financial statements. We have reported[Footnote 36] on some of these 
agency restatements and have work ongoing[Footnote 37] at a number of 
other agencies to more fully understand the issues surrounding these 
restatements. We have not yet had a chance to look in any depth at 
restatements for fiscal year 2005 because fiscal year 2005 financial 
statements, which would identify any such restatements, were just 
issued by the deadline of November 15. We did note though, that there 
were a number of restatements. 

The second challenge is that current financial reporting does not 
clearly and transparently show the wide range of responsibilities, 
programs, and activities that may either obligate the federal 
government to future spending or create an expectation for such 
spending. The current financial reporting model provides information on 
financial position and changes in such position during the year, as 
well as budget results. However, more important than current and short- 
term deficits, we face large and growing structural deficits in the 
future due primarily to known demographic trends, rising health care 
costs and relatively low federal revenues as a percentage of the 
economy. Our nation's current fiscal path is unsustainable and failure 
to highlight, analyze and appropriately respond to the resulting long- 
term consequences could have significant adverse consequences on our 
future economy and standard of living. While the Statement of Social 
Insurance will provide long-term information for those specific 
programs, in our view, more comprehensive reporting is necessary to 
fully and fairly reflect the nation's longer-term fiscal challenges. 
Consequently, a top priority should be communicating important 
information to users about the long-term financial condition of the 
U.S. government and annual changes therein. Furthermore, FASAB 
recognized that tax expenditures, which can be large in relation to 
spending programs that are measured under federal accounting standards, 
may not be fully considered in entity reporting. Reporting information 
on tax expenditures would ensure greater transparency of and 
accountability for such expenditures.[Footnote 38] 

Financial Workforce: 

Changing the way business is done in a large, diverse, and complex 
organization like the federal government is not an easy undertaking. 
According to a survey of federal CFOs,[Footnote 39] federal finance 
organizations of the future will have fewer people, with a greater 
percentage of analysts, as opposed to accounting technicians. However, 
today, most functions within federal finance organizations are focused 
primarily on (1) establishing and administering financial management 
policy; (2) tracking, monitoring, and reconciling account balances; and 
(3) ensuring compliance with laws and regulations. While they recognize 
the need for change, according to the CFOs surveyed, many questions 
remain unanswered regarding how best to facilitate such changes. When 
it comes to world-class financial management, our study[Footnote 40] of 
nine leading private and public sector financial organizations found 
that leading financial organizations often had the same or similar core 
functions (i.e., budgeting, treasury management, general accounting, 
and payroll), as the federal government. However, the way these 
functions were put into operation varied depending on individual entity 
needs. Leading organizations reduced the number of resources required 
to perform routine financial management activities by (1) consolidating 
activities at a shared service center and (2) eliminating or 
streamlining duplicative or inefficient processes. Their goal was not 
only to reduce the cost of finance but also to organize finance to add 
value by reallocating finance resources to more productive and results- 
oriented activities like measuring financial performance, developing 
managerial cost information, and integrating financial systems. 

The federal financial workforce that supports the business needs for 
today is not well-positioned to support the needs of tomorrow. A JFMIP 
study[Footnote 41] indicated that a significant majority of the federal 
financial management workforce performs transaction support functions 
of a clerical and technical nature. These skills do not support the 
vision of tomorrow's business that will depend on an analytic financial 
management workforce providing decision support. The financial 
management workforce plays a critical role in government because the 
scale and complexity of federal activities requiring financial 
management and control is monumental. Building a world-class financial 
workforce will require a workforce transformation strategy devised in 
partnership between CFOs and agency human resource departments, now 
established in law as Chief Human Capital Officers, working with OMB 
and the Office of Personnel Management. Agency financial management 
leadership must identify current and future required competencies and 
compare them to an inventory of skills, knowledge, and current 
abilities of current employees. Then, they must strategically manage to 
fill gaps and minimize overages through informed hiring, development, 
and separation strategies. This is similar to the approach that we 
identified when we designated strategic human capital management as a 
high-risk area in 2001 recognizing that agencies, working with Congress 
and OPM, must assess future workforce needs and determine strategies to 
meet those needs, especially in light of long-term fiscal 
challenges.[Footnote 42] Achieving the financial management vision of 
the future will be directly effected by the workforce who support it. 

Internal Control: 

Earlier, I noted that while important progress in strengthening 
internal control has been made, the federal government faces numerous 
internal control problems, some of which are long-standing and are well-
documented at the agency level and governmentwide. As we have reported 
for a number of years in our audit reports on the U.S. government's 
consolidated financial statements, the federal government continues to 
have material weaknesses and reportable conditions in internal control 
related to property, plant, and equipment; inventories and real 
property; liabilities and commitments and contingencies; cost of 
government operations; and disbursement activities, just to mention a 
few of the problem areas. 

As an example, consider DOD which has many known material internal 
control weaknesses. Of the 25 areas on GAO's high-risk list, 14 relate 
wholly or partially to DOD, particularly its financial management 
problems. Overhauling DOD's financial management controls and 
operations represents a challenge that goes far beyond financial 
accounting to the very fiber of DOD's range of business operations, 
management information systems, and culture. Although the Secretary of 
Defense and several key agency officials have shown commitment to 
transformation, as evidenced by key initiatives such as the Business 
Management Modernization Program[Footnote 43] and the Financial 
Improvement and Audit Readiness Plan, little tangible evidence of 
significant broad-based and sustainable improvements has been seen in 
DOD's business operations to date. For DOD to successfully transform 
its business operations, it will need a comprehensive and integrated 
business transformation plan; people with the skills, responsibility, 
and authority to implement the plan; an effective process and related 
tools, such as a business enterprise architecture;[Footnote 44] and 
results-oriented performance measures that link institutional, unit, 
and individual personnel goals and expectations to promote 
accountability for results. 

As I testified before you in February 2005, we support OMB's efforts to 
revitalize internal control assessments and reporting through the 
December 2004 revisions to Circular No. A-123. These revisions 
recognize that effective internal control is critical to improving 
federal agencies effectiveness and accountability and to achieving the 
goals established by Congress. They also considered the internal 
control standards issued by the Comptroller General,[Footnote 45] which 
provide an overall framework for establishing and maintaining internal 
control and for identifying and addressing major performance and 
management challenges and areas at greatest risk of fraud, waste, 
abuse, and mismanagement. 

Effective internal control, as envisioned in the newly revised Circular 
No. A-123, inherently includes a successful strategy for addressing 
improper payments. Our prior work[Footnote 46] has demonstrated that 
attacking improper payment problems requires a strategy appropriate to 
the organization involved and its particular risks. We have found that 
entities using successful strategies to address their improper payment 
problems shared a common focus of improving the internal control 
system--the first line of defense in safeguarding assets and preventing 
and detecting errors and fraud. Moreover, as we testified[Footnote 47] 
before this subcommittee in July of this year, even though progress has 
been made, certain agencies have not yet performed risk assessments of 
all their programs and/or estimated improper payments for their 
respective programs. 

I pointed out in my February 2005 testimony, six issues critical to 
effectively implementing the changes to Circular No. A-123, 
specifically, the need for: 

1. development of supplemental guidance and implementation tools to 
help ensure that agency efforts are properly focused and meaningful; 

2. vigilance over the broader range of controls covering program 

3. strong support from managers throughout the agency, and at all 

4. risk-based assessments and an appropriate balance between the costs 
and benefits of controls; 

5. management testing of controls in operation to assess if they are 
designed adequately and operating effectively, and to assist in 
formulating corrective actions; 

6. management accountability for control breakdowns. 

Since that time, in July 2005, the CFO Council, in collaboration with 
the President's Council on Integrity and Efficiency (PCIE)[Footnote 48] 
and OMB, issued an implementation guide to assist departments and 
agencies in addressing the Circular No. A-123 requirements related to 
internal control over financial reporting. As I mentioned earlier, this 
is a positive first step to helping the federal government clearly 
articulate its objectives and criteria for measuring whether the 
objectives of Circular No. A-123 have been successfully achieved. 
Equally important will be the rigor with which these criteria are 

Continuity of Leadership: 

The federal government has always faced the challenge of sustaining the 
momentum of transformation because of the limited tenure of key 
administration officials. The current administration's PMA has served 
as a driver for governmentwide financial management improvements. It 
has been clear from the outset that the current administration is 
serious about improved financial management. We have been fortunate 
that, since the passage of the CFO Act, all three administrations have 
been supportive of financial management reform initiatives. And, as I 
discussed earlier, we've seen a positive cultural shift in the way the 
federal government conducts business. Given the long-term nature of the 
comprehensive changes needed and challenges still remaining to fully 
realize the goals of the CFO Act, it is unlikely they will all occur 
before the end of the current administration's term. Therefore, 
sustaining a commitment to transformation in future administrations 
will be critical to ensure that key management reforms such as the CFO 
Act are fully attained. 

In closing, over the past 15 years, we have seen continuous movement 
toward the ultimate goals of accountability laid out in the CFO Act. I 
applaud the CFO and audit communities for the tremendous progress that 
has been made. While early on some were skeptical, the CFO Act has 
dramatically changed how financial management is carried out and the 
value placed on good financial management across government. Sound 
decisions on the current results and future direction of vital federal 
programs and policies, while never easy, are made less difficult when 
decision makers have timely, reliable, and useful financial and 
performance information. Across government, financial management 
improvement initiatives are underway, and if effectively implemented, 
have the potential to greatly improve the quality of financial 
management information. Proper accounting and financial reporting 
practices are even more essential at the federal level than they were 
15 years ago given the difficult spending challenges and the long-term 
fiscal condition of the federal government. 

Further, I want to reiterate the value of sustained congressional 
interest in these issues, as demonstrated by this subcommittee's 
leadership. It will be key that going forward, the appropriations, 
budget, authorizing, and oversight committees hold agency top 
leadership accountable for resolving remaining problems and that they 
support improvement efforts that address the challenges for the future 
I highlighted today. The federal government has made tremendous 
progress in the past 15 years, and sustained congressional attention 
has been and will continue to be a critical factor to ensuring 
achievement of the CFO Act's goals and objectives. 

Mr. Chairman, this completes my prepared statement and I want to thank 
you for the opportunity to participate in this hearing and for the 
strong support of this Subcommittee in addressing the need for 
financial management reform and accountability. I would be happy to 
respond to any questions you or other members of the subcommittee may 
have at this time. 

Contacts and Acknowledgments: 

For information about this statement, please contact Jeffrey C. 
Steinhoff at (202) 512-2600 or McCoy Williams, Director, Financial 
Management and Assurance, at (202) 512-6906 or 
Individuals who made key contributions to this testimony include 
Felicia Brooks, Kay Daly, and Chanetta Reed. Numerous other individuals 
made contributions to the GAO reports cited in this testimony. 

[End of section] 

Appendix I: Chief Financial Officers Act Agencies: 


The Department of Agriculture. 

The Department of Commerce. 

The Department of Defense. 

The Department of Education. 

The Department of Energy. 

The Department of Health and Human Services. 

The Department of Housing and Urban Development. 

The Department of the Interior. 

The Department of Justice. 

The Department of Labor. 

The Department of State. 

The Department of Transportation. 

The Department of the Treasury. 

The Department of Veterans Affairs. 

The Environmental Protection Agency. 

The National Aeronautics and Space Administration. 

The Agency for International Development. 

The Federal Emergency Management Agency. 

The General Services Administration. 

The National Science Foundation. 

The Nuclear Regulatory Commission. 

The Office of Personnel Management. 

The Small Business Administration. 

The Social Security Administration. 

The Department of Homeland Security. 

[End of section] 

Appendix II: Key Concepts of World-class Financial Management: 

[See PDF for images] 

[End of figure] 

[End of section] 


[1] Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990). 

[2] The CFO Act agencies are the executive branch agencies listed at 31 
U.S.C. §901(b). See Appendix I. 

[3] GAO, Financial Management Reform, GAO/T-AFMD-90-31 (Washington, 
D.C.: Sept.17, 1990). 

[4] GAO, Managing the Cost of Government: Building an Effective 
Financial Management Structure, GAO/AFMD-85-35 (Washington, D.C.: 
February, 1985). 

[5] Pub. L. No. 98-502, Stat. 1510 (Oct. 19, 1984). 

[6] The Single Audit Act was later amended by the Single Audit Act 
Amendments of 1996. Pub. L. No.104-156. 110 Stat. 1396 (Jul. 5, 1996). 

[7] See H.R. Rep. No. 101-818, Part 1 (1990). 

[8] Pub. L. No. 103-62, 107 Stat. 285 (Aug. 3, 1993). 

[9] Pub. L. No. 103-356, 108 Stat. 3410 (Oct. 13, 1994). 

[10] Pub. L. No. 104-208, div. A., sec. 101(f), title VIII 110 Stat. 
3009, 3009-389 (Sept. 30, 1996). 

[11] Pub. L. No. 104-106, div. E, 110 Stat. 186, 679 (Feb. 10, 1996). 

[12] Pub. L. No. 107-289, 116 Stat. 2049 (Nov. 7, 2002). 

[13] ATDA agencies are not required to comply with FFMIA. 

[14] Pub. L. No. 108-330, 118 Stat. 1275 (Oct. 16, 2004). 

[15] As shown in appendix I, initially, 23 agencies were designated as 
subject to the CFO Act. Upon its establishment as an independent 
agency, the Social Security Administration was added in 1994. The 
Federal Emergency Management Agency, one of the original CFO Act 
agencies, was transferred to the Department of Homeland Security in 
2003. The Department of Homeland Security Financial Accountability Act 
of 2004 added DHS to the list of CFO Act agencies thus bringing the 
number of CFO Act agencies again to 24 for fiscal year 2005. 

[16] The CFO Act initially called for pilot financial statements from 
selected agencies that covered all of the offices, bureaus, and 
activities of that department or service. 

[17] Grant Thornton LLP and the Association of Government Accountants, 
CFO Survey: Preparing for Tomorrow's Way of Doing Business, 
(Alexandria, Virginia: March 1998) and GAO, Executive Guide: Creating 
Value Through World-class Financial Management, GAO/AIMD-00-134 
(Washington, D.C.: April 2000). 

[18] JFMIP was originally formed under the authority of the Budget and 
Accounting Procedures Act of 1950 and was a joint and cooperative 
undertaking of the Government Accountability Office, the Department of 
the Treasury, OMB, and the Office of Personnel Management (OPM), 
working in cooperation with each other to improve financial management 
practices in the federal government. In a December 2004 memorandum, OMB 
announced a realignment of JFMIP's responsibilities for financial 
management policy and oversight in the federal government. 

[19] Under the realignment of JFMIP's responsibilities announced in 
December 2004, the Program Management Office will continue its software 
certification process. Also, systems requirements will be issued by 
OFFM. Therefore, JFMIP ceased to exist as a separate organization, 
although the Principals will continue to meet at their discretion. 

[20] GAO, High-Risk Series an Update, GAO-05-207 (Washington, D.C.: 
January 2005). 

[21] GAO, Financial Management: Effective Internal Control is Key to 
Accountability, GAO-05-321T, (Washington, D.C.: Feb. 16, 2005). 

[22] Accounting standards are authoritative statements of how 
particular types of transactions and other events should be reflected 
in financial statements. SFFACs explain the objectives and ideas upon 
which FASAB develops the standards. 

[23] GAO, DOD Business Systems Modernization: Navy ERP Adherence to 
Best Business Practices Critical to Avoid Past Failures, GAO-05-858 
(Washington, D.C.: Sept. 29, 2005). 

[24] An ERP solution is an automated system using commercial off-the- 
shelf (COTS) software consisting of multiple, integrated functional 
modules that perform a variety of business-related tasks such as 
payroll, general ledger accounting, and supply chain management. 

[25] GAO, Managerial Cost Accounting Practices: Departments of Labor 
and Veterans Affairs, GAO-05-1031T (Washington, D.C.: Sept. 21, 2005) 

[26] Nonfinancial data measures the occurrences of activities and can 
include, for example, hours worked, units produced, grants managed, 
inspections conducted, or people trained. 

[27] GAO, Army Depot Maintenance: Ineffective Oversight of Depot 
Maintenance Operations and System Implementation Efforts, GAO-05-441 
(Washington, D.C.: Jun. 30, 2005). 

[28] GAO, Business Modernization: Some Progress Made toward 
Implementing GAO Recommendations Related to NASA's Integrated Financial 
Management Program, GAO-05-799R (Washington, D.C.: Sept. 9, 2005). 

[29] GAO, National Aeronautics and Space Administration: Long-standing 
Financial Management Challenges Threaten the Agency's Ability to Manage 
Its Programs, GAO-06-216T (Washington, D.C.: Oct. 27, 2005). 

[30] GAO, Fiscal Year 2004 U.S. Government Financial Statements: 
Sustained Improvement in Federal Financial Management Is Crucial to 
Addressing Our Nation's Future Fiscal Challenges, GAO-05-284T 
(Washington, D.C.: Feb. 9, 2005). 

[31] Departments of Agriculture, Defense, Health and Human Services, 
Justice, State, and Transportation, and the General Services 
Administration, National Science Foundation, Nuclear Regulatory 
Commission, the Office of Personnel Management, and the Small Business 

[32] At the time of our review there were only 23 CFO Act agencies 
because as we discussed earlier, FEMA was no longer required to prepare 
and have audited financial statements under the CFO Act, leaving 23 CFO 
Act agencies for fiscal years 2003 and 2004. 

[33] Departments of Agriculture, Health and Human Services, the 
Interior, Transportation, and the Treasury. 

[34] General Services Administration, National Science Foundation, 
Nuclear Regulatory Commission, Office of Personnel Management , and the 
Departments of Agriculture, Health and Human Services, Justice, State, 
and Transportation. 

[35] Nuclear Regulatory Commission and the Department of Justice. 

[36] GAO, Financial Audit: Restatements to the Department of State's 
Fiscal Year 2003 Financial Statements, GAO-05-814R (Washington, D.C.: 
Sept. 20, 2005). Financial Audit: Restatements to the Nuclear 
Regulatory Commission's Fiscal Year 2003 Financial Statements, GAO-06- 
30R (Washington, D.C.: Oct. 27, 2005). 

[37] Departments of Agriculture, Health and Human Services, Justice, 
and Transportation, the General Services Administration, National 
Science Foundation, and Office of Personnel Management. 

[38] GAO, Government Performance and Accountability: Tax Expenditures 
Represent a Substantial Federal Commitment and Need to be Reexamined, 
GAO-05-560 (Washington, D.C.: Sept. 23, 2005). 

[39] Grant Thornton LLP and the Association of Government Accountants, 
CFO Survey: Preparing for Tomorrow's Way of Doing Business, 
(Alexandria, Virginia: March 1998). 

[40] GAO, Executive Guide: Creating Value Through World-class Financial 
Management, GAO/AIMD-00-134 (Washington, D.C.: April 2000). Appendix II 
includes a synopsis of the key concepts discussed in the study. See 
Appendix II. 

[41] JFMIP, Building a World Class Financial Workforce, The Federal 
Financial Management Workforce of the Future, (Washington, D.C.: 
September 2003). 

[42] GAO-05-207. 

[43] GAO, DOD Business Systems Modernization: Long-standing Weaknesses 
in Enterprise Architecture Development Need to Be Addressed, GAO-05-702 
(Washington, D.C.: Jul. 22, 2005) 

[44] A business enterprise architecture is a well-defined blueprint for 
operational and technological change. 

[45] GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington D.C.: November 1999). 

[46] GAO, Financial Management: Effective Implementation of the 
Improper Payments Information Act of 2002 Is Key to Reducing the 
Government's Improper Payments, GAO-03-991T (Washington, D.C.: Jul. 14, 

[47] GAO, Financial Management: Challenges in Meeting Governmentwide 
Improper Payment Requirements, GAO-05-907T (Washington, D.C.: Jul. 20, 

[48] The PCIE is an interagency council comprised principally of the 
presidentially appointed and Senate-confirmed IGs, which is governed by 
Executive Order No. 12805 (1992), to coordinate and enhance the work of 
the IGs. The Deputy Director for Management in OMB serves as the chair.