FINANCIAL MANAGEMENT: Changes in Store

Government Leader home > March 2005 issue

March 2005; Vol. 1 No. 1

FINANCIAL MANAGEMENT: Changes in Store

By Jason Miller

Agency chief financial officers have many masters: They have to consider at least 10 different laws—which amounts to a dizzying 800 pages of text—to do their jobs. Rep. Todd Platts thinks that’s outrageous.

The Pennsylvania Republican and chairman of the House Government Reform Subcommittee on Government Efficiency and Financial Management will hold a series of hearings this year and likely introduce legislation by early fall to consolidate the laws and eliminate duplicative requirements, said Mike Hettinger, subcommittee staff director.

“We want to see what is necessary and what isn’t,” he said. “All the laws we oversee are built upon each other, but no one has ever looked at how it all fits together.”

Platts’ initiative follows the Office of Management and Budget’s revision of Circular A-123, which defines management’s responsibility for internal control in agencies. Linda Springer, before leaving her job as OMB comptroller in January, revamped the circular to strengthen the requirements for financial reporting and emphasize the need to integrate and coordinate internal control activities across agencies.

The circular takes effect Oct. 1.

OMB IS REQUIRING AGENCIES TO:

Implement cost-effective internal controls
Assess the adequacy of internal controls for federal programs and operations
Separately assess and document internal controls for financial reporting
Identify needed improvements and take corrective actions
Report each year on internal controls using management assurance statements.

Hettinger said OMB’s decision to revise the circular was partly a reaction to the subcommittee’s financial management bill for the Homeland Security Department.

The law, signed by President Bush in October, requires DHS to have an independent auditor review the department’s financial ledger and offer an opinion on internal controls.

Hettinger said OMB purposely did not require other agencies to have an independent audit unless their own evaluations showed poor controls.

“The strengthening of A-123 follows its weakening that occurred in the 1990s,” he said. “We are moving forward because A-123 had been moved back.”

Hettinger added that the subcommittee will consult with agency CFOs and private-sector experts before writing any legislation.

Platts has not yet approached the administration or the full committee but intends to discuss the plans as they become more concrete, Hettinger said.

“We want agencies to focus on core financial management needs like putting systems in place to generate the data they need instead of just filling out reports,” Hettinger said. “We want to do an analysis to see how much time and effort it takes to comply with all these laws and whether the effort is producing usable information for Congress and other decision-makers.”

THE 10 LAWS that Rep. Platts is looking at