Important Changes in Government To Improve Financial Management

The Comptroller General spoke about changes in Government designed to improve financial management. Citizens and public officials are asking questions about financial management and about the adequacy of financial controls over governmental operations. Improving financial management must become a top priority for Government financial managers, and one of the most cost-effective tools to improve financial management is a strong system of internal controls. To meet this need, Congress has proposed legislation which will permanently establish internal controls as a high priority issue. It would require department and agency heads to report annually to Congress on the quality of agency internal control systems and the means by which the systems are monitored. A second important development in Government financial management is the single audit concept. It emphasizes a review of the internal controls of the entity being audited rather than a detailed audit of each grant. It also provides an improved audit base for performing selective audits to satisfy specific user needs such as those concerning detailed compliance issues as well as economy and efficiency or program results. The reliance on audit as a major accountability mechanism will become increasingly important as greater responsibility and authority is passed on to the State and local level and as traditional forms of Federal agency oversight are deemphasized. A third important development in Government is the establishment of a forum for improved financial reporting. One of the ways of doing this is the establishment and observance of accepted accounting principles and standards. Many agencies maintain marginal systems which do not function the way they are intended, nor provide information needed by financial managers to assist them in controlling and accounting for activities under their direction. Agencies frequently install and operate systems without having them reviewed or approved by GAO. There is now a critical need to establish a mechanism to act as a catalyst to bring about major changes in the budget process since Congress is finding it difficult to use budget information to help assess program results and set national priorities. GAO has also become increasingly concerned about the great potential for ineffective and inefficient use of advanced data processing technology.