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2010   Financial Report of the United States Government

Management's Discussion & Analysis

Financial Management Progress and Priorities

The Office of Federal Financial Management (OFFM) within the Office of Management and Budget (OMB) is responsible for the Federal Government´s financial management policy and manages governmentwide financial management priorities. As required in the Chief Financial Officers (CFO) Act (31 U.S.C. 3512), OMB is required to provide an annual report on the status of federal financial management and the goals for improvement17. This section summarizes recent progress and outlines several key initiatives intended to achieve improved results moving forward.

Progress To Date

Since the passage of the CFO Act of 1990, the Federal financial community has made important strides in instilling strong accounting and financial reporting practices. Over the past 20 years, an increasing number of Federal agencies have initiated and sustained disciplined and consistent financial reporting operations, implemented effective internal controls around financial reporting, and have successfully integrated transaction processing and accounting records. These efforts have resulted in improved results on financial statement audits, with 20 out of the 24 major "CFO Act" agencies achieving a clean opinion in FY 2010. In addition, the number of auditor-identified material weaknesses stands at 31, a more than 50 percent decline from the 61 material weaknesses that were identified at the start of this past decade.

The foundations for the accomplishments achieved over the past 20 years are numerous. In particular, and as envisioned by OMB Circular A-123, Management´s Responsibility for Internal Control, the Federal financial management community approached these reporting challenges holistically, integrating both programmatic and financial management disciplines in building successful financial reporting programs. Given the size and complexity of the programs and transactions involved, these results would not have been possible without the advances in Federal financial management.

Ongoing Challenges

Despite the progress identified above, critical gaps in financial management performance remain. Weaknesses in basic financial management practices continue to prevent four major agencies, and the Government as a whole, from achieving a clean audit opinion. The cost of maintaining effective financial operations is increasing, driven largely by the growing and high costs agencies are incurring to modernize agency financial systems. While Federal agencies have mobilized resources to meet the new and growing demand for real-time transparency into where recovery-related and other Federal dollars are going, more work is necessary to sustain these solutions in a cost-effective manner over the long term. Federal agencies reported approximately $125 billion in improper payments in FY 2010 and continue to maintain thousands of unneeded real property assets on their books. These instances of Government waste compromise the integrity of Federal programs, lead to damaging inefficiencies, and erode citizens´ trust in Government.

Improvement Initiatives

It has never been more vital that the Government´s financial managers are performing at high levels to meet these challenges and are maximizing the return on every dollar invested in financial management activities. To do so, three areas emerge as the optimal priority areas for the Federal financial management community:

Eliminating Waste

Closing the Efficiency and Technology Gap in Financial Operations

Promoting Accountability and Innovation through Open Government

The sweeping challenges we face in the Government today require our financial managers to move beyond the status quo and to generate a higher return on investment for our financial management activities. The Financial Management Community has made critical progress- decreasing the Government-wide Improper Payment rate resulting in $3.8 billion less in estimated improper payments, increasing the amount of recaptured improper payments by approximately 300 percent, and identifying $1.7 billion in non-defense saving opportunities with real property. The steps outlined above leverage the tools and capacities in place today, but refocus energies on critical and emerging priorities – cutting wasteful spending, improving the efficiency of our operations and information technology, and laying a foundation for data quality and collaboration as we enter a new era of transparency and open Government.

Footnotes

17 The CFO Act requires OMB to submit to Congress an annual “financial management status report,” the relevant components of which are included in this Financial Report. Specifically, the “Financial Management Progress and Priorities” section of the MD&A updates and outlines the financial management priorities and planned actions associated with these priorities. Also, specific data on the results of Federal agency financial management efforts (e.g., audit results, material weakness totals, etc.) are included in the Other Accompanying Information Section of this Financial Report.(Back to Content)


Last Updated:  December 07, 2011