he went into the majority i got to be his ranking member so we are playing musical chairs here but the same commitment of working together for just good government issues so again i am delighted to be reunited with you i am going to offer an abbreviated opening statement a specific issue financial information of the federal government and particularly how that information is reported and then acted upon and specifically the consolidated financial report and how we can make it more useful the question we are asking is  how we take that information and make it more useful not just to congress but to the american people and certainly given the deficit spending that we see year in and year out and a fourteen dollars trillion debt we know the american people care deeply about this issue about how we are handling their money responsibly or not i want to certainly applaud the federal accounting standards advisory board for taking a very important first step in convening a task force to look at the federal financial reporting model and how we can improve that model and make it more beneficial to again the public as well as members of congress delighted to have three wonderful witnesses here today first mister the government accountability office is releasing its biannual high risk list many of the issues identified by gao have to do with sound financial management more likely a lack thereof though this may seem somewhat dry some of the topics  subcommittee will deal with it is incredibly important nothing is more important than being effective stewards of the taxpayers funds particularly in difficult financial times as we see facing our nation today this hearing will set the stage for our agenda over the coming two years and will especially provide us an opportunity as subcommittee members to prepare for our next hearing when we will have treasury omb and gao before us to testify about the consolidated financial reports and what we hope to glean from you is ideas we can share with those witnesses in a few weeks and get their input on your recommendations of how we can make the information more valuable and useful to all parties okay thank you mister chairman all members will have seven days to submit written statements for the record we will now go to our witnesses it is the policy of the subcommittee to always swear in our witnesses if i could ask you to stand and raise your your testimony and again thanks for your presence here and sharing your expertise mister allen thank you very much mister chairman congressman towns i appreciate the opportunity to testify today i want to convey five key messages in my comments the first of those is that citizens want to receive directly information about their governments finances the second of those is that accrual based financial statements do contain information that is a good indication of the current financial health of the government and of future financial health the third issue is that the federal government is such a complex and large organization that it is challenging to convey its financial information in an easily understood manner the fourth key point is that internet tools can help in overcoming these challenges and the other witnesses will talk about that number five the task force develop a series of recommendations that will be considered in the coming months by fasab and others to better improve federal financial reporting exceptional work has gone into improving federal financial reporting the passage of the chief financial officers act in one thousand nine hundred and ninety the federal accounting standards advisory board fasab plays a key role by providing generally accepted accounting principles referred to as gaap standards and has been recognized by the accounting profession as meeting the criteria necessary for a standard setting body accrual based financial reporting standards issued by fasab call for recognizing commitments and obligations as they occur rather than w may flow in or out of the federal government this same measure applies to all companies or organizations in the united states that have audited financial statements since the federal government has for a number of years prepared accrual base financial statements i decided to look back ten years to fiscal two thousand to see if accrual based information was helpful in better understanding the financial condition of the government at that time and to see if that financial information was of predictive value in looking forward as you know fiscal two thousand is remembered as the last of the great surplus years with a two hundred and thirty seven  billion budget surplus and fiscal two thousand was a very positive year when compared to more recent fiscal years however information gleaned from the financial statements and the disclos indicated that even though there were cash surpluses in the years from two thousand and eight to two thousand and ten the debt subject to the debt limit actually increased by one hundred and fifty two  government the real financial stress for the government would come in future years as those intragovernment borrowings needed to be repaid to discover when repayment may be necessary i looked further i looked at the financial statements and back on page fifty six i found stewardship information talking about the present value of long term actuarial projections called it was thirteen dollars trillion in fiscal year two thousand and increasing by an average of two to three dollars trillion each of those years these amounts are not reflected in the balance sheet or operating statement of federal government but they do impact the financial condition of the federal government the financial statements in two thousand included the message from then comptroller david walker noting the unsustainability of those programs and the need to reform them at the earliest opportunity these comments are not to imply any inappropriateness of the above stated transactions or noncompliance with federal gaap but rather to note that there was information to help financial statement readers better understand the broad financial condition of the government at that time including fiscal challenges that would need to be dealt with in the future however citizens and other readers would probably have difficulty in understanding these transactions and what the numbers in those financial statements represented despite the much progress that has been made fasab has recognized the difficulty of communicating often complex federal financial information and the need to improve the understandability of federal financial reporting the question of how to better communicate this financial information has also been a challenge accordingly the federal reporting model project was added to the fasab agenda beginning in the year study we found that citizens do want to know more about the financial health of the federal government but they often did not know that financial statements even existed and when shown the financial statements had trouble understanding what they meant our sponsors from treasury omb and gao are also seeking to better inform citizens regarding the financial condition of the federal government their efforts have resulted in the schedules of key amounts in the financial statement management discussion analysis these schedules are illustrated in my written comments for fiscal year two thousand additional long term projections have been added to the financial report these long term projections help inform readers about the challenge of continuing current financial policy without change the task force provided a list of ten recommendations for consideration by fasab and its sponsors i want to thank them for the expertise they brought together afternoon mister chairman and ranking member towns i am pleased to have the opportunity to testify this afternoon regarding the report of the fasab financial reporting task force late last year the government release annual financial report and although that report presents information that is important to citizens as they form judgments about the fiscal future of the government under current policy it is unlikely that americans are even aware of existence or its availability and because the nation is currently engaged in crucial debates about the appropriate role in the near term and the long term fiscal imbalance the annual financial report is now more relevant than ever before to citizens political leaders and analysts further the recent celebration of the th anniversary of the chief financial officers act offers a clear reminder of the considerable improvement and financial reporting over the past two decades however the challenge of effectively delivering that information to users remains unfinished i served as a member of the fasab task force the objective of that task force was to increase users access their understanding and their use of financial information while avoiding costly requirements that do not add value to do so the task force focused on the consolidated financial report largely because that is where we judged the public would start in order to learn about the fiscal health of the federal government as a whole and the fasab user studies as mister allen indicated showed that citizens and indeed many executives and managers in government have difficulty understanding the information in that report indeed many of whom believe the document is written by accountants or economists  which it is consequently they believe the government should adopt a web based method of communicating information about the fiscal condition and performance of the federal government since four of the t forces recommendations focus on methods to enhance this communication of government wide financial information i want to devote the balance of my remarks just to highlighting those four items the first task force recommendation was to move away from paper based reporting and to adopt an electronic web based reporting method the public relies increasingly on digital devices whether it is blackberrys and other devices which we all are carrying and interactive media to obtain their information on demand accordingly financial reporting information needs to switch from a paper based static reporting model to an electronic dynamic and readily available  online availability the task forces second recommendation urged fasab to explore how to best report additional government wide program performance in the management discussion and analysis or m and a section of the consolidated report or in other electronic government wide presentations the nation is engaged in deliberations to determine the federal governments future role in the economy and society and program performance measures presented in the consolidated report could potentially help inform that debate especially if they were structured to provide such information about the governments effectiveness achieving its planned goals as well as the economy and efficiency of government operations and i should point out that this recommendation now very nicely aligns with the recently enacted gpra modernization act which as you know strengthens the existing requirements for the reporting of performance information and calls upon the office of management and budget to develop a government wide performance plan the third recommendation task force is to present net cost and spending by function the current statement of net costs is presented by agency fasab focus group discussions with citizens indicated that users are much more likely to on the governments functions such as health care social services national security those kind of functions rather than the agencies which are administering them and as you know that is the kind of information which the budget is currently presented and it is a breakdown which many in congress and the federal government are already familiar and use on a regular basis the task forces final recommendation was to establish a central website for federal financial information and to aggressively inform the public of its availability ultimately the success of the previous recommendations requires making the public aware of these financial reports and the information they provide a central website would enable the federal government to take advantage of existing technology and to help identify improvements that may be needed the static paper based reports that the federal government delivers today contain important information about the fiscal health of the federal government however those reports are not presented or available in a way that makes them easy to use or easy to understand thereby limiting their impact the government needs to use modern technology to inform the presentation of that information and adapt to the way users want to receive the information and are much more likely to use that information tha hettinger chairman platts ranking member towns and members of the subcommittee thank you for the opportunity to testify today as you mentioned in your opening remarks i served from two thousand and three to two thousand and six as the staff director of this subcommittee i am currently an executive director with grant thorntons global public sector practice but i am here as a witness today based on my experience serving as a member of the financial reporting model task force to the applaud the committee for holding this hearing today and for your ongoing interest in government efficiency and effectiveness performance and accountability reports the consolidated financial report and other reports provides a sound baseline for decision makers and citizens alike to better understand how the federal government is using their hard earned tax dollars the issu cfr in mid december each year should set off a chain of events where congress the administration and the general public have an opportunity to look at the financial condition of the government prior to the issuance of the presidents budget all too often however among other things led to the development of the citizens guide to the financial report of the u s government this document provides an effective high level summary of the highlights of that years cfr useful for citizens seeking a basic understanding but not necessarily useful for congress or other decision makers last spring fasab conducted a user needs study to assess the financial information needs of the congress this study follows a mid  study by gao the gao federal government reporting study conducted in one thousand nine hundred and eighty six found with respect to legislators that congress needed specialized agency information for the conducting of committee business but summary level information for use in communicating with constituents providing a means for the federal government to demonstrate its accountability the spring two thousand and ten fasab study confirmed that many of these same needs are  and fall into four broad categories budgetary integrity operating performance stewardship and systems and control from my experience these broad categories accurately reflect the information needs of congress members staff attain this information from a variety of sources including the news media agencies directly legislative support organizations such as crs inspectors general or via your own research and oversight there is also a wealth of information contained in statutorily required reports including the cfr as well as agency pars and i believe congress and the general public would benefit greatly from making that information more readily available and understandable with the creation of websites like usaspending gov data gov the federal procurement data system and private websites looking at the financial condition of the government citizens now have access to more information than ever before and clearly more interest in the information contained in those sites ease of use and the relevance of the information housed on these sites drives visitors however the completeness and accuracy of the data contained within is essential for those government owned sites the mission of the financial reporting model task force as jonathan mentioned in his statement to increase users access to and understanding and use of financial information in the cfr while avoiding costly requirements that dont add value sought to address this very issue i was pleased to be a part of this effort because i believe that mission gets to the heart of where we stand on federal financial management twenty years after the enactment of the cfo act we have a great deal of information but that information is not understandable by the general public or useful for decision makers the task force as jonathan also mentioned makes ten key recommendations ranging from adopting a web based reporting model to presenting a functional statement of net cost to establishing  a federal financial information website and raising awareness of the availability of federal financial information recommendation one asking treasury to move away from a paper based reporting model by adopting an electronic web based reporting model is essential if we are move in the direction of improving the availability and transparency of government information this recommendation combined with recommendation ten which calls for the establishment of a federal financial information website to help raise awareness of the governments financial information go a long way toward improving the ease of access to information recommendation three regarding a functional statement of net cost would present net cost and spending by function as jonathan mentioned such as health care rather than by agency such as hhs this recommendation i believe is essential if we are to truly understand the cost of government and there are a number of other recommendations that i have highlighted  in my written statement and i will skip over those because i think they have been addressed by the other witnesses i will close by saying there is a wealth of really important financial information contained in the cfr as well as in agency financial statements all three of you and your written statements will be made part of the record as well i am delighted to have been joined by one of our freshman members congressman gosar from arizona delighted to have you with us on committee and returning senior member mister cooper from role with fasab you certainly in setting accounting standards for the federal government you have to kind of please a lot of different communities the bond rating agencies auditors citizens members of congress federal managers when we talk about some of the recommendations that the task force has made and going to a web based reporting model for financial statements going to that model seems to be kind of mutually beneficial to all communities whether it be members of congress or the public at large but is it different when we talk about how the information that is on that web based model is reported is there a difference in what is going to be useful to the public at large versus how it needs to be presented for members of congress or other policy makers within the federal government are they mutually exclusive in how the information is presented within the web model mister allen clearly as you indicated the needs of somebody who is managing an agency are probably very specific they have to be very timely in fact real time they cant wait until after the end of the year to prepare financial statements so i think the recommendations are very positive in terms of electronic database allows you to actually drill down and access the level of detail that you want there are challenges of getting it real time for some people and others who look at it at the end of the year and say okay here is a broad overview but the efficiencies that need to take place in the federal government that i think would be significant is if we had the same financial statements that provided the information to manage were also the same financial systems that were used to generate the numbers that would prepare the financial statements after the end of the year and would have audit coverage that gives credibility to everyone who is using that system the challenge right now is often that is not the case in agencies so that is one of the things that i would encourage you and your committee to encourage and look forward to but yes the technology and the drill down capacity would be or commerce and get into the nitty gritty of that individual department or agencys financials pretty easily mister allen and even beyond what they are now reporting because what we heard from citizens  example everyone was interested in the cost of defense but what they were interested in is a lot lower detail than anything that is reported now they wanted to know the cost of a war in a particular country or something like that so i think as we gather the data electronically now obviously there is going to be some work in sort of how you cut and dice that information but you would clearly be able to answer the detailed questions people want not too many people say just tell me the total cost of defense and i am happy to know that mister platts is it fair to say that what fasab and the task force recommendations are about is we already have right to know laws and we have a right to know the information but it is getting access to it in a usable time sensitive manner your recommendation is not changing the right to know but the access to what you do have a knowledge that the data is out there for them to get and use consolidated financial report is not a best seller you couldnt go to the local bookstore and find one i recall one of our meetings we looked around and we had a hard time finding one at our meeting so i think the problems are pretty basic they have to do with the availability of that information and then second the presentation the readability and understanding it is a public document full of spreadsheets and are hard printed spreadsheets they are not searchable they are not readily understandable and they are not the kind of thing that an average citizen could quickly lay their eyes on and understand it takes some attention and some skill of anything that is in it what we tried to do as we looked at this electronic reporting model is say okay what can we put at a summary level that citizens will use but then those who are decision makers and others will be able to drill down deeper and  find the type of information they need i think that is what interesting about both the treasury effort i mentioned from five or six years ago as well as the user needs study because there is a balance one of the things we learned in that treasury effort is the bond rating agencies moodys and standard and poors and those folks are actually very interested in the detailed data that is contained in the consolidated financial report your average citizen doesnt want to see the same type of  necessarily a best seller the cfr but it is really one of the most critical reports that is done for the american people when it comes to how we are spending their money and i have joked in the past when i have last chaired subcommittee in getting attention to this issue of the information and access to the information you know i have gotten to the point where i think that maybe we need along with the three of you experts is to have maybe a baseball player who is doing can we do to sort of make this more user friendly so people can sort of understand it in terms of members of congress and the general public in particular what can we do do you have any ideas of some things that we might be able to do to make it a little more user friendly everyone has an interest in when you look at usaspending and some of the other websites that are out there there is very specific information to congressional districts and spending that goes on in those congressional districts and i personally believe a lot of the information and the reason people are driven to those sites is because they want to see how much of their tax dollars are getting returned to their own congressional district the information in here is a little bit different so not everyone is going to have an interest in it but if you get it out there electronically usable findable if it pops up on google when you do a search for the federal financial report or u s government financial report folks are going to start to pay more attention offer two quick suggestions one is to use many more charts and graphs and colorful displays the document right now has many spreadsheets and tables as you might expect but usa today the newspapers you read the front page of the paper today bars and charts and graphs are often a more effective way of communicating particularly to citizens so more use of  devices like that would be helpful and again the web based tools would be helpful in that regard the second and also in the web based category is this idea of having it machine readable right now that is a hard as recovery gov had been in the past for the recovery act money you could search by a county or a title or a period of time and come up with the data that particularly corresponded to your particular interests and would make it a  much more user friendly and user customized tool for people to begin to dig in and i think that is indeed why recovery gov has been so popular it is getting millions hundreds of millions of hits because citizens are able to dig in where the who understand how to read financial statements when they look at the financial statements of the federal government it is confusing to them traditional financial statements have a very clear bottom line and they have a clear operating statement that shows how much that financial position changed in a period of time now because of the complexities and it starts with the way things are budgeted and when you look at the financial statements of the federal government you see i have information on social insurance it is in a separate financial statement i have information on long term projections that is in a separate financial statement i really dont have a bottom line if you were to ask me how did we do last year just like in my testimony my written comments if i ask you how did we do in two thousand and seven off the top of your head you would say great but in reality once you start looking at some of the information that i laid out how great was it and that is something that you would start asking yourself in your mind it was great but we were increasing our debt how do those two things reconcile together so that is the challenge that we have with the complexity of the federal government and that probably would require more than just standards that we would set that would require the concerted effort of congress and the way they approach things and the way they budget things and the way it is reported to citizens that would be a very comprehensive challenge but would be a challenge worthy to at least look a thank you very much gentlemen for being here today it is a two way street i think it is also from the legislators to having quick synopses of what we are actually seeing and being able to convey that to people as well the non profits do this very very well in some cases where you see for every dollar we put in how many cents are actually derived to the source that we are trying to adjudicate for so with that in mind i think we have to look introspectively and from your perspective what is the best way from an accounting perspective to determine if a government program is using its dollars efficiently mister allen do you want to talk about the recommendations on uniting the performance information with the financial do you want to go ahead and address that initially or was that directed to me mister gosar all of you mister breul i will just start it off then the second of the recommendations was to include performance information that cost alone was not a sufficient perspective you really need to know what you got for that money and again that is why i mentioned the recent enactment of the gpra modernization act which is a renewed attention by the administration and congress that you need a complete picture of not only what we spend but what we are getting for that spending understanding the performance and results that are being paid for with this money during that particular period of time to me that is the essential pairing of information that is needed to really make an informed judgment of whether we are getting the value that we are expecting effective what you then have to do as jonathan talked about is to tie that program performance information back to budget and that is really the key in assessing the performance but then demonstrating some budgetary changes as a result of a programs performance easier said than done in a lot of ways i think but that is how i would approach it that is how i think it has been approached and there have been many as you know many efforts by congress and others over the years to try to understand exactly how effective these programs are being i would add i guess you talked about not for profit organizations and even there the standard setter identified what it is you need to report cost of raising money versus program services you are delivering but there is no requirement from an accounting standpoint of tell us how effective you are so it is a challenge in fact that probably is an area that is best addressed by those who are managing those programs the agencies themselves and i think from a standard setter standpoint we can say you should include program information but how to effectively present it is probably going to reside with those agencies with models that may be presented by the task force or others up question because i want to make sure that we are getting the right information in regards to the proper accounting so in your opinion as accountants and following through and financial statements in last years health care bill did congress follow its due process in properly accounting for funds and cost analysis in a transparent and accurate accounting method i dont see the ten foot pole but my understanding is that there will be a presentation of those people who prepared the financial statements for two thousand and ten and who audited those financial model it doesnt lend itself very well especially the lack of performance and easy access to performance information is that a fair statement mister breul i think that is true and i would simply point out that with the new g modernization act at least for the high level high priority goals the congress asked for quarterly reporting so in fact you could begin to build up a more periodic reporting and have information not only at the end of the year but during the year when there is some opportunity to make some course corrections or changes if you want to accelerate or decline the trend that you are currently on so i think that is exactly right  chairman lets be honest this is one of the most important and most boring hearings in congressional history we are lucky if this is even on c span three there are about maybe twenty live people in this room and half of them are asleep because we are not speaking a language the average american voter understands so let me put the cookies on a low shelf and especially i would like to get doctor gosars attention on this because as a new member perhaps he can re us we are now sitting in a room of the only large enterprise left in america that is exempt from using real accrual accounting this violates the first plank of the contract with america back in in which congress was supposed to live by the laws it passes for the rest of the people it is my understanding that every enterprise in this country with revenues of about five  million has to use in addition to cash accounting also real accrual accounting but somehow the federal government is exempt we are hypocritical now why is that well first of all i still cant find one lobbying enterprise in this town and lord knows there are thousands of them there are between thirty and sixty lobbyists for every one of us not one of those folks to my knowledge is for real accrual accounting for the federal government isnt that interesting when the average civic club member back home has to use real accrual accounting for their business whether they are for profit or non profit state and local governments have to use real accrual accounting it prevents them from hiding their unfunded pension liabilities and things like that so why isnt the federal government using it this is a mystery that you gentlemen can help us solve because while we are talking here about electronic display of information or fine tuning these facts there is not a lack of information there is a willful blindness to that information the rating agencies moodys and standard and poors have already said maybe we have one or two years left before we face a possible downgrade of the treasury bond because we are so mismanaging our nations finances now how are we mismanaging it according to cash accounting our debt is on the order of fourteen dollars trillion but if you look at our unfunded obligations programs like medicare social security things like that is more like unfunded obligations of fifty sixty who knows how many trillion dollars many times larger our debt this year isnt a one point five trillion or so it is more like two trillion so when are we going to get real on these numbers and that is why i think it is important to be somewhat blunt be simple without being simplistic to help the average american understand the situation we are in because it is very convenient here today for federal officials to hide the real numbers are talking about electronic displays for the average citizen the treasury department has never held a press conference about the release of the financial report of the united states government our own treasury officials in both parties whether it was the bush administration or the obama administration they deliberately hide the release of this document the only one compiled according to law passed by senator john glenn that uses the real numbers so forgive me for being frustrated but the business mantra is if you cant measure it you cant manage it we are refusing to measure the dimensions of our problem a historian will look back years hence and say they had the tools to do a good job but they refused to use the tools the tool is real accrual accounting because that enables us to see what is not only in the national checkbook but what is on the national credit card so i know mister allen knows these issues cold i appreciate his great service on fasab i appreciate the other pioneers who have worked on it but somehow we have to break the gridlock on this issue lets find one business lobby in america that is willing to support real accounting for the federal government where is the chamber of commerce where is the business roundtable where is the nfib for that matter where is the wall street journal i have a chart in my office i have had it for years what is the debt what is your share of the debt we are using cash numbers we need the real numbers and you gentlemen while you are doing all the fancy fine tuning stuff you can help us understand the pla blunt truth we are not using honest accounting standards not using real accounting standards not using accrual accounting standards for the federal government so this is more of a statement than a question i appreciate your efforts mister chairman to highlight these issues cooper your statement is one of the reasons i am delighted to be back on the committee with you and as i said your efforts over many years to raise this very very important issues as you say maybe boring but is do you all ever look though at the costs of your decisions mister allen for example i cant remember the exact number i used to know it by heart but i was in local government for fourteen years and  new gasb standard added gazillions of dollars to the cost of local government or eliminated even the option of expanding benefits because of the actuarial implications that gasb required us all in the name of a new and more transparent accounting standard and i think it depends on where you sit how helpful that is and my question is does fasb and do others and the other panelists could certainly feel free to com ever take into account the cost implications of your decisions both on the federal and state and local government levels or for that matter on the private sector mister allen can i go ahead and start  well thank you it is nice to see a welcoming face here understanding the challenges of standard setting i suspect i know what standard you are talking about that was passed that was probably the last standard that i k however when one thinks about that what has resulted from that decision in other words as accountants we try to be non political we provide you information that you make decisions in that particular case we received letters back that were disconcerting if you make us report this in our financial statements they wont continue that benefit and in fact in the state of utah where i am now a visiting professor at a university i dont earn any benefit for health care because the state of utah legislators when faced with the decision of do i put that on the face of my financial statements and recognize that decided that that cost was too great for them to assume so when you look at the role of accounting it isnt to make decisions about what one should do but it is to provide you clearly the information that you have to make a decision understanding the full cost of that and i think that is what mister cooper was also really true when gasb came out with that standard we didnt have a choice the bond rating houses werent going to accept our financial statements if we didnt do what you in fact set out for us as a result it wasnt just a matter of make sure the public knows the transparency  transaction that meant that when i wanted to give on an annual basis because everything is appropriated on an annual basis that is not an applied commitment for tomorrow maybe i wanted to increase retirees health care offsets because of the rise in health care costs i couldnt just do that on an annual basis as we always had done before that new gasb standard i now had to account for the actuarial life of each recipient forever and that cost suddenly went from whatever it was may think that is a good thing but i can tell you as someone who spent fourteen years managing a county government that was selected as the best managed in the united states we didnt think it was such a good thing and it hurt our firefighters and our retirees because we could no longer provide that extra benefit that they deserved and that they had earned so my point is that this is a two sided coin that when you make certain standards it has implications individuals or to organizations nevertheless the issue becomes not that gasb has any ability to make a government do anything like fasab doesnt have any ability the only question was and many governments still provide that benefit and still dont fund health care most fund pensions many still dont fund that health care but they do have on the financial statements the recognition of the obligation that is there under a concept called intergenerational equity in state and local governments that became the driving force that the cost of someone providing services ought to be recognized in the period that that service is provided not recognized years later when somebody else paid the cost of those services so that is the sometimes disconnect  a very serious underlying mission but immediately became interested in the inefficiency of the  more important today because when we hear some of what masquerades in what i can only call propaganda for what is what is right or wrong with the government you can understand that it must be that there is no objective understandable information out there i mean some things are a little bit easier to understand than others for example social security where people still have to be told that the trust fund will last x number of years and that does give them some sense a little bit of an understanding of social security although it is kind of lumped together with everything else that needs cutting it does need cutting but the distinction is an important one but if you take another program that i have always found very very difficult to understand which is even more seriously running out of money medicare i dont think the average person for whom that means everything has any way to fasten on whether or not it will you know if you are young whether or not social security will be available if it is not there you know four mentions a citizens guide to the financial report that began in two thousand and seven and then at the bottom of the page is the task force necessary still to make recommendations on how to caused the formation of the task force would you reconcile the notion that there was a citizens guide and what it did right or wrong so that we understand why a task force of experts to increase user understanding access etcetera was later formed mister allen the citizens guide was an excellent effort not by a standards setter it was by treasury omb and gao getting together as mike indicated and coming up with what they thought would be a better way to communicate it has the same limitations these two gentlemen have talked about which is i can look at a summary total of something but if i want to know any detail  isnt what i want i want to know some detail about that and that is why this electronic delivery of information and how to organize the information again back to mister coopers comment if you look at some of the illustrations the two thousand and four illustration for example that came from the treasury department it actually side by side and then combined the social security and these reports that help you understand better the financial statements all the citizens guide comes from the financial statements what they are talking about is giving additional information even beyond the summary information you see in the financial statements documents on a website it is a static document they essentially copy it put a pdf up there and you can read it but you may as well be reading the hard copy and what we are talking about is trying get a document on there that you can go in and work with and drill down and look at this information the information that you find important to you and really understand that information the citizens guide is a ten twelve fifteen page summary of a three hundred and fifty four hundred page consolidated financial report it is very helpful and i was part of the effort when i worked on the subcommittee working with the folks at treasury that came up with the citizens guide model  i thought that was a great first step i think what we are suggesting here and as tom points out from a standards setting standpoint is that we take it beyond that to something that gets you better access to more information in a more understandable usable fashion and as i mentioned in my statement some of the recommendations really allow you to understand the true cost of government by function not just necessarily by agency and i think that is particularly gasb and setting those accounting standards for state and local governments in addition to i think as you referenced intergenerational equity are there lessons learned from your work at gasb with state and local government reporting that you think we can well apply to the federal government in what we are doing mister allen i guess the first two that come to mind are probably some that i have already mentioned the challenge as you know state and local governments focus very much on short term financial resources and even the thought of adding these obligations to their financial statement was very disconcerting and we sought feedback from the bond rating agency that basically said what is important isnt what you report we already know you have those things and we already add those up what is important is that you clearly communicate where you are at and then present information that shows where you are going from there and i actually think that is applicable to the federal government i think people who have concerns about reporting stuff the point isnt that we dont know there are obligations are not obligations out there the point is what are you doing about it as you go forward i think that is a very important focus to look at the other was very consistent with the report we found that state and local governments report as mister connolly would tell fund basis people didnt want to know what was in a particular fund they wanted to know what the cost of those services were and who paid that cost so we had to change the whole operating statement to do that and that be one of the challenges of meeting the cost based information that they are talking about so yes i think we learned the information that people want about the federal government is very similar to what they wanted about state and local governments mister platts thank you  the two thousand and twelve budget mister breul mister chairman i am not but i would doubt very much that there is a cost in fact we were hopeful some of these recommendations would in fact save cost by moving away from paper based printing and distribution and i dont think any of them really are costers i think they are pretty much cost neutral and our recommendations were so recent i would doubt very much that the omb has had an opportunity to incorporate them in any of their thinking quite yet talk about how strong the governments financial statements are for a minute i guess i will start with you mister allen your organization sets accounting standards for the federal government that is accurate right year but there is normally maybe three or four that dont but most of the major agencies do meet those standards mister towns isnt it basically the same ones each time mister allen that is my understanding yes information that is asked for these recommendations will help discuss how it ought to be more effectively communicated how it can be more effectively accessed i can tell you for dont have the information make estimations then do something to try and move forward so we recognize that there is value in information we dont want people to spend tons of time researching all costs so we are trying to be cost effective but that agency still has to arrive at some point in time of having the information and then you can talk about how better to communicate it  audit standards but i think it is just as important to have that disclosure what we do know about that situation it might add a little shame and humiliation to the situation so that that might get peoples attention to insist that they do adhere to the standards so again i think the idea of a little disclosure is helpful by making it known that that is the condition and it is a condition that doesnt satisfy the auditors yet and that ought to b there is absolutely no reason that as you look at legislation as you conduct your oversight that you i mean you should look at these recommendations and some of them may be things that you all could  what more transparent and accurate accounting could do for the federal government i wonder what your thoughts are about the critique that is sometimes raised but what we dont do very well and you alluded to it some other kinds of spending one of the concerns i have and we have the continuing resolution on the floor of the house right now is almost a mindless approach to spending it is all bad and it is all the same well it isnt the spending on the interstate highway system which was initiated by a republican president had a return on it that is impossible to calculate it was so great and arent we glad we made that spending decision yes it cost money but it is different purchasing a bottle of water and consuming it i wonder what your thoughts are on those two issues and how we can better account for them and how they would perhaps perfect that picture  exactly the one that is addressed by this new gpra modernization act which is recognizing the need to marry the information about cost with information about what the results or performance is that you are buying them for is it just water you are consuming or is it a long term investment that is going to accrue benefits over time and having that kind of performance information visible alongside the cost so you can make a judgment as to whether that dollar is more or better spent here rather than there  that is why one of the recommendations of this task force to inform those kind of decisions was to have performance information highlighted in the consolidated report as well so that citizens would have some more information about what they are getting for those dollars a recurring theme and part of that recurring theme is going to be it is very difficult as part of the financial statement process to properly account for assets and in particular you are going to see that problem i think as it relates to  places where they have huge assets like the department of defense where you have aircraft carriers and ships or nasa where you have satellites and things like that those are assets from my experience and i am not an auditor but i  did work on the committee for four years those are the things that as we looked at financial statements when i was on the committee repeatedly we heard concerns about so to back to mister towns question as you are looking at these  things and looking at agency financial statements one of the things you probably ought to take a look at is is there a way to better account for assets for property plant and equipment in a way that it is not property plant and equipment that is drawing down  opinion the most important thing is to decide what are you going to do should we expense all of these things when we buy them should we capitalize and it almost doesnt matter what matters is that you apply something you make a decision you apply it consistently going forward from that point then you can measure its impact on the rest of the operations of the federal government is this truly something that has long term benefits that we want to capitalize and use up over the long term if it isnt really significant because the federal government is sure significant maybe we would be better off just expensing it in the year that we make that expenditure  chairman i know my time is up but i do think this is a very important aspect of what we are talking about and i hope some day we can expand on it i can just tell you my own local government when i first got elected there was no roi analysis on certain investments so it was the clipboard method someone went around and said okay jonathan what do you think you need this year for technology well i think i need six computers and maybe i should have eight just because government being government who knows when i will get replacements and there was no question of well but wait a minute lets match your request against mikes because he actually can show roi and we know he is productive and you need to compete with him for us to make that investment you are going to have to justify  it at the time a completely alien concept today i am proud to say we do it very rigorously and everybody understands they are going to have to justify that and other kinds of investments and that they are in competition with other agencies and i am just thank our witnesses again both for your expertise that you shared and your knowledge but also your patience here with hearing because the floor votes didnt start for about almost an hour and a half late and we look forward to continuing as a committee working with each of you individually and collectively as we go forward and helping to set the stage today for our march th hearing when we do shed some light on the consolidated financial report and as mister cooper said there may not have been a press conference held when it was release but we are going to do our best to make sure the american people know what it says and how important it is for them to know what it says because it is about their money with that we are going to keep the record open for two weeks if there is any additional information to be shared along with written