Simplify the Financial Reporting Process

Simplify The Financial Reporting Process

Background

Federal financial reporting requirements need to be reviewed and
consolidated, and the amount and type of information requested needs to
be changed or eliminated.

Over the years, legislation and regulations have been developed to
improve financial management in federal agencies. For example, in 1982
the Federal Managers Financial Integrity Act (FMFIA) was passed to
ensure that managers review internal controls. In 1990, the Chief
Financial Officers (CFO) Act was passed; among other things, it requires
federal agencies to have their financial statements audited.  Each new
piece of legislation and regulation has required additional, separate
reports from agencies to the President, Congress, or to a central agency
like the Office of Management and Budget (OMB). The following table
lists the current reporting requirements and their due dates.

These independently prepared reports do not give an integrated
perspective of an agency's performance of its mission or its financial
practices. Additionally, although federal managers spend much of their
time providing multiple reports to central agencies, those agencies--as
well as federal managers and Congress--often indicate that they are not
receiving the information they need.

Agency Reporting Requirements

Sample Format:  (Source) (Reporting Requirement) (Report Due Date)

Inspector General Act IG and Management Reports (OMB Circular A-50) Nov.
30/May 31

Inspector General Act Amendments of 1988 Federal Entity Audit Coverage
Oct. 31

Federal Managers' Financial Integrity Act FMFIA Report (OMB Circular
A-123) Dec. 31

OMB policy based on FMFIA High Risk Report July/Dec. 31

Prompt Pay Act Prompt Payment Report (OMB Circular A-125) Nov. 30

Federal Civil Penalties Inflation Report Adjustment Act of 1990 Civil
Monetary Penalty Jan. 31

Single Audit Act Single Audit Report to Congress May 1

Accounting and Auditing Act of 1950 CFO Act Five-Year Plan Aug. 31

OMB Circular A-11 Budget Exhibits on Financial Management Activities and
High Risk Sept. 1

CFO Act Financial Statements Mar. 31

U.S. Code Title 31 Section 9106 Annual Report Aug. 31


OMB Circular A-127 Financial Systems Plan Aug. 31

Government Performance and Results Act of 1993 To be developed To be
determined

NEED FOR CHANGE

Federal financial requirements need to be reviewed and consolidated, and
the amount and type of information requested needs to be changed or
eliminated. These actions will help provide a complete picture of an
agency's performance and financial accountability in meeting its
mission.

Examples of duplicative or overly detailed reporting requirements abound
in the present system of "single issue" reports:

--The FMFIA requires each agency to prepare a report to determine if its
accounting system conforms to the principles, standards, and related
requirements prescribed by the Comptroller General.[Endnote 1] The CFO
Act requires that 10 pilot agencies have their accounting system
controls evaluated by independent auditors as part of the process of
preparing audited financial statements.  [Endnote 2] Agency reviews of
accounting systems should not be necessary for those agencies that have
audited financial statements to the extent they duplicate the previous
scope.

--The Prompt Payment Report requires over 40 pieces of information,
ranging from the number and dollar value of invoices and a description
of progress made, to problems identified and corrective actions taken in
agency vendor payment systems during the year.  [Endnote 3] The focus of
the Prompt Payment Report should be only on total dollars and the amount
of interest paid.

--Agencies identify and report on high-risk areas and material
weaknesses as part of their annual FMFIA report. Until 1992, OMB
encouraged the inclusion of detailed corrective action plans; it now
offers an alternative reporting format that focuses on key milestones.
Agencies that used the alternative format increased the readability and
significantly reduced the size of their reports.  Additional economies
could be realized by providing a statement on each weakness and
summarizing the results achieved rather than providing detailed
corrective action plans.

Financial reports should provide certain information to enable the
reviewer to make policy and management decisions. The various reports
could be combined and consolidated into two reports, one with planning
information, one with accountability information.

A report that contains planning information could be submitted during
the annual budget submission and would include:

--information on the overall management health of the agency, including
the agency's ability to meet mission requirements and program goals,
plans to improve the agency's mission and management, and the budget
necessary to achieve the improvements;

--how resources are allocated to the programs within the agency; and

--performance measures and standards for evaluation.

An accountability report would be provided after the close of the fiscal
year on the overall performance of the organization and would include:

--information on the agency's financial condition and whether the
disclosures help indicate if program managers are properly carrying out
the programs entrusted to them;

--assurance that controls were adequate to protect resources and that
desired outcomes were achieved;

--assurance that the agency met or exceeded established measures or
standards; and

--supplemental information on such things as prompt payment and credit
management.

CROSS-REFERENCES TO OTHER NPR ACCOMPANYING REPORTS

Streamlining Management Control, SMC02: Streamline the Internal Controls
Program to Make it an Efficient and Effective Management Tool; SMC06:
Reduce the Burden of Congressionally Mandated Reports; and SMC09: Expand
the Use of Waivers to Encourage Innovation.

ENDNOTES

1. Federal Managers' Financial Integrity Act of 1982, section 4.

2. The Chief Financial Officers Act (November 15, 1990), Section 303.

3. OMB Circular A-125, "Prompt Pay."