United States Government Accountability Office

GAO Testimony Before the Subcommittee on 

Government Management, Finance and 

Accountability, Committee on Government 

Reform, House of Representatives 

CFO ACT OF 1990

Driving the 

Transformation of 

Federal Financial 

Management 

Statement of Jeffrey C. Steinhoff 

Managing Director, Financial Management and Assurance 

For Release on Delivery

Expected at 2:30 p.m. EST 

Thursday, November 17, 2005 

GAO-06-242T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

November 17, 2005

CFO ACT OF 1990

Driving the Transformation of Federal 

Highlights of GAO-06-242T, a testimony Financial Management 

before the Subcommittee on Government 

Management, Finance, and Accountability,

Committee on Government Reform, 

House of Representatives

In 1990, the Chief Financial 

Officers (CFO) Act, heralded as the 

most comprehensive financial 

management reform legislation in

40 years, was enacted. The Act’s 

goal is to improve management

through reliable, useful, and timely 

financial and performance 

information for day-to-day

decisionmaking and accountability.

This testimony outlines the 

legislative history of the CFO Act,

and its key elements, progress to 

date in implementing the Act, and 

the challenges for the future. 

Prior to passage of the CFO Act, 

the seemingly never ending

disclosures of fraud, waste, abuse,

and mismanagement in federal 

programs painted a picture of a 

government unable to manage its 

programs, protect its assets, or

provide taxpayers with the

effective and economical services

they expect. The enactment of the

CFO Act represented a broad-based 

recognition that federal financial 

management was in great need of

fundamental reform. 

The Act mandated a financial 

management leadership structure; 

required the preparation and audit

of annual financial statements;

called for modernized financial 

management systems and 

strengthened internal control; and 

required the systematic

measurement of performance, the 

development of cost information, 

and the integration of program, 

budget, and financial systems. 

In the 15 years since the enactment of the CFO Act, the federal government 

has made substantial progress in strengthening financial management. The 

past 3 administrations have all made financial management reform a priority. 

Improved financial management has been one of the cornerstones of the 

President’s Management Agenda from the outset of the current 

administration. There has been a clear cultural change in how financial 

management is viewed and carried out in the agencies and a recognition of 

the value and need for good financial management throughout government, 

which was not the case in 1990. There are now qualified CFOs across 

government, who bring to the job proven track records in financial 

management. Financial management systems and internal control have been

strengthened. Generally accepted government accounting standards have 

been developed. For fiscal year 2005, 18 of 24 CFO agencies received clean 

audit opinions on their financial statements, up from just 6 in fiscal year 

1996. This year’s audited financial statements were issued in just 11⁄2 months 

after the close of the fiscal year as opposed to 5 months, which is the 

deadline in the Act. Agencies are also now preparing performance and 

accountability reports that tie together financial and performance 

information. Though not yet auditable, primarily because of problems in the 

Department of Defense, comprehensive annual consolidated financial 

statements are being issued in 21⁄2 months as opposed to the 6-month 

timeframe allowed in the Act. 

While there has been marked progress in the past 15 years and the CFO Act 

has proven itself as the foundation for financial accountability, GAO has 

identified five principal challenges to fully realizing the world-class financial 

management anticipated by the CFO Act. The need to: 

1. modernize and integrate financial management systems to provide a 

complete range of financial and cost information needed for 

accountability, performance reporting, and decision making, with 

special emphasis on the Department of Defense, which has deeplyrooted systems problems, 

2. build a more analytic financial management workforce to support 

program managers and decisionmakers, 

3. solve long-standing internal control weaknesses, 

4. enhance financial reporting to provide a complete picture of the 

federal government’s overall performance, financial condition, and 

future fiscal outlook, and 

5. ensure that financial management reform is sustained given the 

leadership changes that occur at the end of any administration and the 

long-term nature of many of the ongoing reform initiatives. 

The continuing strong support of the Congress has been a catalyst to the 

important progress that has already taken place and will be essential going 

forward.

www.gao.gov/cgi-bin/getrpt?GAO-06-242T.

To view the full product, click on the link 

above. For more information, contact McCoy 

Williams at (202) 512-6906 or 

williamsm1@gao.gov. 
United States Government Accountability Office

Washington, DC 20548 

 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today on the 15th anniversary of the enactment of 

the Chief Financial Officers Act of 19901

 (CFO Act) to discuss the effect of 

this groundbreaking legislation as well as the challenges that still remain. 

Having worked closely with the members of Congress on passage of the 

CFO Act, I can attest first hand that while many challenges still exist, the 

state of federal financial management has come a long way since 1990.

Nearly all the CFO Act agencies2

 have made marked improvements in 

financial management and have shown that issuing timely audited 

financial statements can become a routine part of doing business at the 

federal level. At the same time, there are opportunities to take federal 

financial management to the next level, which will be important as the 

federal government faces difficult fiscal challenges that will require 

reliable financial and performance information to support timely decisions 

on spending, and pressures to address fraud, waste, abuse, and 

mismanagement will only intensify. Also, certain material weaknesses in 

internal control and in selected accounting and financial reporting 

practices have continued to prevent the GAO from being able to issue an 

opinion on the consolidated financial statements of the U.S. government. 

These weaknesses which hinder management’s ability to manage day-today operations, most notably at the Department of Defense, need to be

resolved. 

Today, I would like to 

• highlight the legislative history of the CFO Act; 

• summarize the key elements of the CFO Act; 

• outline progress made to date in implementing the CFO Act; and 

• provide our views on the challenges remaining. 

 1

Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990). 

2

The CFO Act agencies are the executive branch agencies listed at 31 U.S.C. §901(b). See

Appendix I.

Page 1 GAO-06-242T 
Prior to passage of the CFO Act in 1990, the seemingly never ending 

disclosures of fraud, waste, abuse, and mismanagement in federal 

programs painted a picture of a government unable to manage its 

programs, protect its assets, or provide taxpayers with the effective and 

economical services they expect. As the Comptroller General pointed out 

around the time the CFO Act was passed,3

 the problems that existed were 

not limited to a few agencies or a few programs; rather, all of the major 

agencies had serious problems. For years, GAO and the Inspectors General 

had reported a litany of problems that resulted in wasteful spending, poor 

management, and losses totaling billions of dollars. In some cases, the 

government’s ability to carry out crucial programs had been severely 

hampered. 

CFO Act Enacted to 

Address Longstanding 

Problems 

The financial management environment was in such disarray that not only 

were audited annual financial statements not required, most in the federal 

financial management community did not even see the value of annual 

financial reporting. The need for federal financial statements was an area 

of major disagreement. Budgeting was what financial management was all 

about, and accountability for how the money was being spent was not the 

priority. Federal managers in the government were more concerned with 

the budget and did not focus on improved financial management. 

Concerned about the ever-growing problems in federal financial 

management and the need for a more integrated, comprehensive, and 

systematic approach to reform, in 1985 the Comptroller General issued a 

two-volume report entitled, Managing the Cost of Government: Building

an Effective Financial Management Structure.

4

 This report laid out the 

nature and scope of the problem and provided the conceptual framework 

for the reforms needed to improve the federal financial management and 

therefore, manage the cost of government. Problems included the poor 

quality of financial management information and antiquated financial 

management systems, with recommended reforms such as strengthened 

accounting, auditing, and financial reporting and the systematic 

measurement of performance. In addition, GAO and the Office of 

Management and Budget (OMB) conducted separate studies of “high risk” 

programs that demonstrated breakdowns in internal control affecting 

 3

GAO, Financial Management Reform, GAO/T-AFMD-90-31 (Washington, D.C.: Sept.17,

1990). 

4

GAO, Managing the Cost of Government: Building an Effective Financial Management 

Structure, GAO/AFMD-85-35 (Washington, D.C.: February, 1985). 

Page 2 GAO-06-242T 
hundreds of billions of dollars. Since January 1990, GAO has designated 

certain federal programs and operations as high risk because of their 

greater vulnerabilities to fraud, waste, abuse, and mismanagement. The 

increased awareness of the nature and extent of high-risk programs 

further bolstered the need for broad-based congressional action. 

While the federal government had not made concerted progress in 

reforming financial management, state and local governments had moved

beyond the federal government in this area because of key factors 

including federal legislation such as the Single Audit Act of 1984.5

 The 

Single Audit Act of 1984 established financial audit requirements for state 

and local governments that receive federal financial assistance in excess 

of certain dollar thresholds in any fiscal year. The Single Audit Act also 

included a requirement for independent auditors to review whether state 

and local governments have adequate internal control over federal funds. 

The need to comply with this law prompted states and local governments 

to focus on improving financial management and accountability. In the 

1980s, many states began producing financial reports based on generally

accepted accounting principles to provide a more complete picture of 

their financial situation. Consequently, in 1990, many in the financial 

management community believed that state and local governments were 

ahead of the federal government.6

To address the underlying problems that plagued federal financial 

management in March 1986, Senator William Roth introduced S.2230, the 

Federal Management Reorganization and Cost Control Act of 1986. Over 

the ensuing 41⁄2 years, the concepts in S.2230 were refined and debated.

7

What resulted was the CFO Act of 1990. The CFO Act, with bipartisan and

bi-cameral support, had as its principle sponsors Senators John Glenn and 

William Roth and Representatives John Conyers and Frank Horton. Signed 

into law by President George H.W. Bush on November 15, 1990, the CFO 

Act was the most comprehensive and far-reaching financial management 

improvement legislation since the Budget and Accounting Procedures Act 

of 1950. The CFO Act established a leadership structure, provided for long-

 5

Pub. L. No. 98-502, Stat. 1510 (Oct. 19, 1984). 

6

The Single Audit Act was later amended by the Single Audit Act Amendments of 1996. Pub.

L. No.104-156. 110 Stat. 1396 (Jul. 5, 1996). 

7

See H.R. Rep. No. 101-818, Part 1 (1990). 

Page 3 GAO-06-242T 
range planning, required audited financial statements, and strengthened 

accountability reporting.

The CFO Act was the beginning of a series of management reform 

legislation to improve the general and financial management of the federal 

government, and laid the foundation for other key legislative reforms that 

followed a common thread of increased accountability and better 

management practices. The first legislation that followed the CFO Act was 

the Government Performance and Results Act of 19938

 (GPRA), which 

requires agencies to develop strategic plans, set performance goals, and 

report annually on actual performance compared to goals. GPRA was 

followed by the Government Management Reform Act of 19949 (GMRA), 

which made permanent the pilot program in the CFO Act for annual 

audited agency-level financial statements, expanded this requirement to all 

CFO Act agencies, and established a requirement for the preparation and 

audit of governmentwide consolidated financial statements. The Federal

Financial Management Improvement Act of 199610 (FFMIA) built on the 

foundation laid by the CFO Act by reflecting the need for CFO Act 

agencies to have systems that can generate reliable, useful, and timely 

information with which to make fully informed decisions and to ensure 

accountability on an ongoing basis. The Clinger-Cohen Act of 199611 (also 

known as the Information Technology Management Reform Act of 1996) 

sets forth a variety of initiatives to support better decision making for 

capital investments in information technology, which has led to the 

development of the Federal Enterprise Architecture and better-informed 

capital investment and control processes within agencies and across 

government. The Accountability of Tax Dollars Act of 200212 (ATDA) 

required most executive agencies that are not otherwise required, or 

exempted by OMB, to prepare annual audited financial statements and to 

submit such statements to Congress and the Director of OMB.13 Lastly, the 

Department of Homeland Security Financial Accountability Act of 200414

 8

Pub. L. No. 103-62, 107 Stat. 285 (Aug. 3, 1993). 

9

Pub. L. No. 103-356, 108 Stat. 3410 (Oct. 13, 1994). 

10Pub. L. No. 104-208, div. A., sec. 101(f), title VIII 110 Stat. 3009, 3009-389 (Sept. 30, 1996). 

11Pub. L. No. 104-106, div. E, 110 Stat. 186, 679 (Feb. 10, 1996). 

12Pub. L. No. 107-289, 116 Stat. 2049 (Nov. 7, 2002). 

13ATDA agencies are not required to comply with FFMIA. 

14Pub. L. No. 108-330, 118 Stat. 1275 (Oct. 16, 2004). 

Page 4 GAO-06-242T 
added the Department of Homeland Security (DHS) to the list of CFO Act 

agencies. 

As shown in figure 1, if successfully implemented, these reforms provide a 

solid basis for improving accountability of government programs and 

operations as well as routinely producing valuable cost and operating 

performance information. 

Figure 1: Federal Financial Management Reform Framework 

The enactment of the CFO Act represented a broad-based recognition that 

federal financial management was in great need of fundamental reform. 

Key elements of the CFO Act require centralized financial management 

leadership, both governmentwide and at the agency level, and as expanded 

by GMRA, agency-level and governmentwide annual audited financial

The CFO Act 

Mandated Numerous 

Changes 

Page 5 GAO-06-242T 
statements. To facilitate stewardship and accountability at executive 

branch agencies, the CFO Act designated CFOs with broad responsibility 

for modernizing financial management systems, financial reporting, asset 

management, and strengthened internal control practices. The systematic 

measurement of performance, the development of cost information, and 

the integration of financial management systems are some of the financial

management practices called for by the CFO Act that, if properly 

implemented, will significantly improve financial management throughout 

the federal government. Furthermore, the Act statutorily designates the 

2415 executive departments and agencies covered. These 24 departments 

and agencies represent 95 percent of net outlays in fiscal year 2004. 

Strong centralized leadership is essential to solving the government’s longstanding financial management problems. The CFO Act provided for such 

leadership by giving OMB broad new authority and responsibility for 

directing federal financial management, modernizing the government’s 

financial management systems, strengthening financial reporting, and 

internal control. The CFO Act also created a new position in OMB, the 

Deputy Director for Management, who serves as the government’s chief 

official responsible for financial management. In addition, the CFO Act 

established a new Office of Federal Financial Management (OFFM) in 

OMB to carry out the government-wide financial management initiatives 

and responsibilities. To head this office, the CFO Act established the 

position of Controller, an individual who must possess demonstrated 

ability and practical experience in accounting, financial management, and 

financial systems. This individual has responsibility for handling the dayto-day operations of OFFM to ensure that financial operations are being 

properly carried out government-wide. 

Executive-level leadership is a critical success factor for building a 

foundation of control and accountability that supports external reporting

and performance management, which is needed to achieve the goals of the 

CFO Act. For this reason, an agency CFO must be a key figure in an 

agency’s top management team. The CFO Act stipulates that the CFO is a 

 15As shown in appendix I, initially, 23 agencies were designated as subject to the CFO Act. 

Upon its establishment as an independent agency, the Social Security Administration was

added in 1994. The Federal Emergency Management Agency, one of the original CFO Act 

agencies, was transferred to the Department of Homeland Security in 2003. The 

Department of Homeland Security Financial Accountability Act of 2004 added DHS to the 

list of CFO Act agencies thus bringing the number of CFO Act agencies again to 24 for 

fiscal year 2005. 

Page 6 GAO-06-242T 
presidential appointee or appointed by the agency head and is assisted by 

a Deputy Chief Financial Officer. Both the CFO and the Deputy CFO 

generally must possess demonstrated ability in accounting, budget 

execution, financial and management analysis, systems development, and

practical experience in financial management practices in large 

governmental or business entities. Among the CFO’s responsibilities are 

developing and maintaining integrated accounting and financial 

management systems, directing, managing, and providing policy guidance

and oversight of all agency financial management personnel, activities, and 

operations, and overseeing the recruitment, selection, and training of 

personnel to carry out agency financial management functions. In 

addition, each CFO for the 24 agencies serves on the Chief Financial 

Officers Council, which regularly meets to advise and coordinate the 

activities of the agencies of its members on such matters as consolidation 

and modernization of financial systems. The CFO Act created the council 

and specified that the council will be chaired by OMB’s Deputy Director 

for Management. Other members will be OMB’s Controller and the 

Department of the Treasury’s Fiscal Assistant Secretary. 

The CFO Act, as expanded by GMRA, required that annual financial 

statements be prepared and audited for each CFO Act agency covering all 

accounts and associated activities of each office, bureau, and activity of 

the agency.16 The CFO Act also requires that the financial statements 

prepared pursuant to the act be audited in accordance with applicable 

generally accepted government auditing standards. These audits are the 

responsibility of the Inspectors General, but may be conducted by, and at 

the discretion of, the Comptroller General, in lieu of the Inspectors 

General. Inspectors General may contract with independent public 

accountants to conduct financial statement audits. 

The federal government has made substantial progress in financial 

management in the 15 years since the enactment of the CFO Act. If I were 

to summarize in just a few words the environment in 2005 as compared to 

1990, financial management has gone from the backroom to the 

boardroom. 

Important Progress 

Made to Achieving 

CFO Act Goals 

 16The CFO Act initially called for pilot financial statements from selected agencies that 

covered all of the offices, bureaus, and activities of that department or service. 

Page 7 GAO-06-242T 
Achieving Cultural Change—Perhaps most importantly, we have seen 

true cultural change in how financial management is viewed, this has been

accomplished through a lot of hard work by OMB and the agencies and 

continued strong support and oversight by Congress. As I previously 

discussed, federal financial management had suffered from decades of 

neglect and an organizational culture that for the most part, had not fully 

recognized the value of good financial management—as a means of 

ensuring accountability and sound management. 

Although the views about how an organization can change its culture vary 

considerably, the organizations we and others have studied17 identified 

leadership as the most important factor in successfully making cultural 

changes. Top management must be totally committed in both words and 

deeds to changing the culture and the fundamental way that business is 

conducted. At the top level, federal financial management reform has 

gained momentum through the committed support of top federal leaders. 

For example, improved financial performance is one of the six 

governmentwide initiatives in the President’s Management Agenda (PMA). 

Under this initiative, agency CFOs share responsibility—both individually 

and through the efforts of the CFO Council—for improving the financial 

performance of the government. To achieve the goals of the financial 

performance initiative, agencies must now have more timely and reliable 

financial information, improve the integrity of their financial activities, and 

have sound and dependable financial systems. In conjunction with the 

other governmentwide program initiatives of the PMA, the federal 

government is improving its financial reporting practices and overall 

accountability. 

Establishing a Governmentwide Leadership Structure—As established 

by the CFO Act, OFFM, the OMB organization with governmentwide 

responsibility for federal financial management, has undertaken a number 

of initiatives related to improving financial management capabilities 

ranging from requiring the use of commercial-off-the-shelf financial 

systems to the promotion of cost accounting. In addition to assessing 

agency financial performance for the PMA, OFFM has issued financial 

management guidance to agencies. Some of OFFM’s initiatives are in 

collaboration with the CFO Council and are broad-based attempts to 

 17Grant Thornton LLP and the Association of Government Accountants, CFO Survey: 

Preparing for Tomorrow’s Way of Doing Business, (Alexandria, Virginia: March 1998) and 

GAO, Executive Guide: Creating Value Through World-class Financial Management, 

GAO/AIMD-00-134 (Washington, D.C.: April 2000). 

Page 8 GAO-06-242T 
reform financial management operations across the federal government. 

While reforming federal financial management is an undertaking of 

tremendous complexity, it presents great opportunities for improvements 

in financial management and related business operations. In their efforts 

to continue financial management improvement, OFFM has recently 

collaborated with the CFO Council on initiatives in the following areas: 

• internal control, 

• full implementation of FFMIA, 

• asset management, 

• improper payments, and 

• control over federal charge cards 

Selecting Qualified CFOs—The CFO Act established CFOs at the major 

departments and agencies and established minimum qualifications for 

CFOs. Measured in terms of coming to the job with a proven track record 

in financial management, the background of individuals selected for these 

positions has improved tremendously over the past 15 years. For example, 

the CFO at the Department of Labor has held a range of CFO and CFOrelated positions in the private sector and government over a 30-year 

career that included serving as Treasury’s CFO in a previous

administration. Testifying with me today, Dr. Linda M. Combs, the 

Controller at OMB, brings impeccable credentials and extensive 

experience to the federal government’s financial management leadership 

and policy-setting organization and exemplifies today’s federal CFO. 

Improving Financial Management Systems and Operations—Since 1990, 

progress has been made towards improving financial management systems 

in the federal government. Improved agency financial management 

systems and operations are essential to support management decision 

making and results-oriented activities as addressed by the CFO Act. At a 

minimum, federal managers must have financial information that is 

reliable, useful, and timely to support this effort. Federal financial 

management systems requirements for the core financial system, 

managerial cost system, and 12 other administrative and programmatic 

systems, such as grants, property, revenue, travel, and loans, which are 

part of an overall financial management system, have been developed. 

Beginning in 1999, OMB required agencies to purchase commercial-off-theshelf (COTS) software that had been tested and certified through the Joint 

Page 9 GAO-06-242T 
Financial Management Improvement Program (JFMIP)18 Program 

Management Office19 against the systems requirements that I just 

mentioned as well as the standard general ledger issued by the 

Department of Treasury. With these requirements, the federal government 

has better defined the functionality needed in its financial management 

systems which has helped the vendor community understand federal 

agencies needs. Concurrently, there has been an evolving realization that 

agencies need to change their business processes to adapt to the practices 

embedded in commercially available software versus modifying the 

software to accommodate their existing practices. 

Looking at financial management systems from another perspective, the 

federal government has acted on opportunities to consolidate operations. 

For example, a number of agencies perform accounting or business 

operations on behalf of others, consequently, the number of agencies 

processing payroll has been dramatically reduced from 22 to 4. According 

to OMB, through these initiatives, millions of dollars will be saved through 

shared resources and processes and by modernizing on a cross-agency, 

governmentwide basis. Further, OMB had established agency task forces

that focused on developing Centers of Excellence to (1) reduce the 

number of systems that each individual agency must support, (2) promote 

standardization, and (3) reduce the duplication of efforts. If we were to 

compare the state of financial management systems today to where 

agencies were 15 years ago, the evolution has been dramatic. On the other 

hand, systems are at the top of our list in terms of remaining challenges for 

the future. As I will discuss later, agencies continue to struggle with 

developing and implementing integrated systems that achieve expected

functionality within cost and timeliness goals. 

Preparing Auditable Financial Statements—Most CFO Act agencies have 

obtained clean or unqualified audit opinions on their financial statements. 

 18 JFMIP was originally formed under the authority of the Budget and Accounting 

Procedures Act of 1950 and was a joint and cooperative undertaking of the Government 

Accountability Office, the Department of the Treasury, OMB, and the Office of Personnel 

Management (OPM), working in cooperation with each other to improve financial 

management practices in the federal government. In a December 2004 memorandum, OMB 

announced a realignment of JFMIP’s responsibilities for financial management policy and 

oversight in the federal government. 

19 Under the realignment of JFMIP’s responsibilities announced in December 2004, the

Program Management Office will continue its software certification process. Also, systems 

requirements will be issued by OFFM. Therefore, JFMIP ceased to exist as a separate 

organization, although the Principals will continue to meet at their discretion. 

Page 10 GAO-06-242T 
Unqualified audit opinion for CFO Act agencies financial statements have 

grown from 6 in fiscal year 1996 to 18 in fiscal year 2005. Improvements in 

timeliness have been even more dramatic this year. Agencies were able to

issue their audited financial statements within the accelerated reporting 

time frame—all of the 24 CFO Act agencies issued their audited financial 

statements by the November 15, 2005 deadline, set by OMB, just 45 days 

after the close of the fiscal year. The CFO Act calls for agency financial 

statements to be issued no later than March 31st, which is 6 months after 

the fiscal year end, and in the earlier years some agencies were unable to 

meet that timeframe. OMB has incrementally accelerated the financial 

statement issuance date to address the timeliness of the information 

provided by the financial statements. Just a few years ago, most 

considered this accelerated timeframe unachievable. While the increase in

unqualified and timely opinions is noteworthy, we are concerned about the 

number of CFO Act agencies that have had to restate certain of their 

financial statements to correct errors. I will discuss these issues in more 

detail later in this statement. 

Preparing Performance and Accountability Reports—Another clear 

indication of progress to date is the preparation of the annual Performance 

and Accountability Reports (PAR) by CFO Act agencies. The PARs provide 

financial and performance information that enables the President, the 

Congress, and the public to assess the performance of an agency relative 

to its mission and to demonstrate accountability. These reports summarize 

program, management, and financial performance data, including the 

Annual Performance Reports required by GPRA with annual financial 

statements and other reports, such as agencies’ assurances on internal 

control, accountability reports by agency heads and Inspectors’ General 

assessments of agencies’ most serious management and performance 

challenges. These reports serve as the federal government’s report to the 

American public and provide an accounting for the return on the 

taxpayers’ investment. This information is also provided to decision -

makers who are interested in CFO Act agencies’ performance, such as 

OMB and the Congress. Furthermore, the Association of Government 

Accountants recognizes federal agencies for their high-quality 

performance and accountability reports by its annual awarding of the 

Certificate of Excellence in Accountability Reporting (CEAR). For the 

most recent evaluation of 21 agencies performance and accountability 

reports, 10 agencies were recognized for achieving excellence in their 

reports. Of particular note, the Social Security Administration and 

Department of Labor have received the CEAR award for the past 7 and 

5 years, respectively. As part of our effort to be a model agency, GAO has 

been awarded the CEAR award since it first applied in 2001 and for the 

Page 11 GAO-06-242T 
19th consecutive year, independent auditors gave our financial statements 

an unqualified opinion with no material weaknesses and no major 

compliance problems. 

Strengthening Internal Control—Accountability is part of the 

organizational culture that goes well beyond receiving an unqualified audit 

opinion; the underlying premise is that agencies must become more 

results-oriented and focus on internal control. In December 2004, OMB 

revised its Circular No. A-123, Management’s Responsibility for Internal

Control, to provide guidance to federal managers on improving the 

accountability and effectiveness of federal programs and operations by 

establishing, assessing, correcting, and reporting on management controls. 

Requiring federal managers, at the executive level, to focus on internal 

control demonstrates a renewed emphasis on identifying and addressing 

internal control weaknesses. Based on our 2005 assessment of high-risk 

programs,20 three programs previously designated as high-risk, largely due 

to financial management weaknesses, were removed from the list. The 

Department of Education’s Student Financial Aid Programs, the Federal 

Aviation Administration’s Financial Management, and the Department of 

Agriculture’s Forest Service Financial Management all sustained 

improvements in financial management and internal control weaknesses 

and thus warranted removal. Further, as I testified21 before this

subcommittee earlier this year, thousands of internal control problems 

were identified and fixed over the past two decades, especially at the 

lower levels where internal control assessments were performed and 

managers could take focused actions to fix relatively simple problems. But 

again as I will discuss later, this type of work is far from complete. 

Developing New Accounting Standards—Another definitive example of 

progress made to date as well as a critical component of improved 

financial performance is the establishment of the Federal Accounting 

Standards Advisory Board (FASAB). In conjunction with the passage of 

the CFO Act, the OMB Director, Secretary of the Treasury, and the 

Comptroller General established FASAB to develop accounting standards 

and principles for the newly required financial statements and other 

federal entities. FASAB is comprised of a 10-member advisory board of 

4 knowledgeable individuals from government and 6 non-federal members 

 20GAO, High-Risk Series an Update, GAO-05-207 (Washington, D.C.: January 2005). 

21GAO, Financial Management: Effective Internal Control is Key to Accountability, GAO05-321T, (Washington, D.C.: Feb. 16, 2005). 

Page 12 GAO-06-242T 
selected from the general financial community, the accounting and 

auditing community, and academia to promulgate proposed accounting 

standards designed to meet the needs of federal agencies and other users 

of federal financial information. The mission of FASAB is to develop 

accounting standards after considering the financial and budgetary 

information needs of congressional oversight groups, executive agencies, 

and other users. These accounting and reporting standards are essential 

for public accountability and for an efficient and effective functioning of 

our democratic system of government. To date, FASAB has issued 

30 statements of federal financial accounting standards (SFFAS) and 

4 statements of federal financial accounting concepts (SFFAC).22 The 

concepts and standards are the basis for OMB’s guidance to agencies on

the form and content of their financial statements and for the 

government’s consolidated financial statements. The standards developed 

by FASAB have been recognized by the American Institute of Certified 

Public Accountants as generally accepted accounting standards for federal 

entities. 

While there has been marked progress in financial management, as I have

just highlighted, a number of challenges still remain. The principal 

challenges remaining are (1) modernizing financial management systems, 

(2) improving financial reporting, (3) building a financial management 

workforce for the future, (4) addressing long-standing internal control 

weaknesses, and (5) ensuring the continuity of financial management 

reform. Fully meeting these challenges will enable the federal government

to provide the world-class financial management anticipated by the CFO 

Act. While there continues to be much focus on the agency and 

governmentwide audit opinions, getting a clean audit opinion, though 

important in itself, is not the end goal. The end goal is the establishment of 

a fully functioning CFO operation that includes (1) modern financial 

management systems that provide, reliable, timely, and useful information 

to support day-to-day decision-making and oversight and for the 

systematic measurement of performance; (2) a cadre of highly qualified

CFOs and supporting staff; and (3) sound internal controls that safeguard 

assets and ensure proper accountability. 

Challenges Remain 

to Fulfilling the 

Objectives of the 

CFO Act 

 22Accounting standards are authoritative statements of how particular types of transactions 

and other events should be reflected in financial statements. SFFACs explain the objectives 

and ideas upon which FASAB develops the standards.

Page 13 GAO-06-242T 
First and foremost, agencies must take full advantage of modern 

technology and develop financial management systems that are integrated 

with the range of other business systems. The federal landscape is littered 

with far too many unsuccessful financial management system 

implementation efforts. Most notable has been the Department of Defense 

(DOD) where billions of dollars have been invested in financial 

management systems with little return on the investment. DOD has 

historically been unable to develop and implement business systems on 

time, within budget, and with the promised capability. For example, we 

recently reported23 that the Department of Navy spent approximately 

$1 billion for four largely failed pilot Enterprise Resource Planning (ERP) 

system24 efforts, without marked improvement in its day-to-day operations. 

The Navy now has underway a new ERP project, which early Navy 

estimates indicate will cost another $800 million. While the new project, as 

currently envisioned, has the potential to address some of the Navy’s 

financial management weaknesses, it will not provide an all-inclusive endto-end corporate solution for the Navy. Further, there are still significant 

challenges and risks ahead as the project moves forward, such as 

developing and implementing 44 system interfaces with other Navy and 

DOD systems and converting data from legacy systems into the ERP 

system. 

Financial Management 

Systems 

The results of the fiscal year 2005 assessments performed by agency 

inspectors general or their contract auditors under FFMIA show that these 

problems continue to affect financial management systems at most of the 

24 CFO Act agencies. While the problems are much more severe at some 

agencies than at others, the nature and severity of the problems indicate 

that overall, management at most CFO Act agencies do not yet receive the

complete range of information needed for accountability, performance 

management and reporting, and decision making. 

 23GAO, DOD Business Systems Modernization: Navy ERP Adherence to Best Business

Practices Critical to Avoid Past Failures, GAO-05-858 (Washington, D.C.: Sept. 29, 2005). 

24An ERP solution is an automated system using commercial off-the-shelf (COTS) software 

consisting of multiple, integrated functional modules that perform a variety of businessrelated tasks such as payroll, general ledger accounting, and supply chain management. 

Page 14 GAO-06-242T 
As we recently testified in September 200525, managerial cost accounting 

essentially entails answering very simple questions such as how much 

does it cost to do whatever is being measured, thus allowing assessments 

of whether those costs seem reasonable. In other cases, it could involve 

establishing a baseline for comparison with what it costs others to do 

similar work or achieve similar performance. To date, accumulating and

analyzing the relevant financial and nonfinancial data26 to determine the 

cost of achieving performance goals, delivering programs, and carrying out 

discrete activities has proven difficult to do. Among the barriers standing 

in the way of this enhanced data are nonintegrated financial systems, lack 

of accurate and timely recording of data, inadequate reconciliation 

procedures, noncompliance with accounting standards, including the cost 

management standard, and failure to adhere to the U.S. Government 

Standard General Ledger (SGL). 

What is most important is that the problem has been recognized. Across 

government, agencies have efforts underway to implement new financial 

management systems or to upgrade existing systems. Agencies expect that

the new systems will provide reliable, useful, and timely data to support 

day-to-day managerial decision making and assist taxpayer and 

congressional oversight. Whether in government or the private sector, 

implementing and upgrading information systems is a difficult job and 

brings a degree of new risk. Organizations that follow and effectively

implement accepted best practices in systems development and 

implementation (commonly referred to as disciplined processes) can 

manage and reduce these risks to acceptable levels, organizations that do

not typically suffer the consequences. For example, our work at DOD27 and 

the National Aeronautics and Space Administration28 this past year has 

shown that these agencies, which have experienced significant problems 

in the past in implementing new financial management systems, were not 

following the necessary disciplined processes for efficient and effective 

 25GAO, Managerial Cost Accounting Practices: Departments of Labor and Veterans 

Affairs, GAO-05-1031T (Washington, D.C.: Sept. 21, 2005) 

26Nonfinancial data measures the occurrences of activities and can include, for example, 

hours worked, units produced, grants managed, inspections conducted, or people trained.

27GAO, Army Depot Maintenance: Ineffective Oversight of Depot Maintenance Operations

and System Implementation Efforts, GAO-05-441 (Washington, D.C.: Jun. 30, 2005).

28GAO, Business Modernization: Some Progress Made toward Implementing GAO 

Recommendations Related to NASA’s Integrated Financial Management Program, GAO05-799R (Washington, D.C.: Sept. 9, 2005). 

Page 15 GAO-06-242T 
development and implementation of such systems. As I mentioned earlier, 

NASA is on its third attempt to implement a new financial management 

system. The first two attempts, which cost $180 million, failed and the 

current system initiative which is expected to cost close to $1 billion, has 

experienced problems. As we pointed out in recent testimony29 before this

subcommittee, many of the problems NASA has been experiencing with its 

financial management system stemmed from inadequate implementation 

of disciplined processes. As the federal government moves forward with 

ambitious financial management system modernization efforts to identify

opportunities to eliminate redundant systems and enhance information 

reliability and availability, adherence to disciplined processes is a crucial

element to reduce risks to acceptable levels. 

In the area of financial reporting, we see two challenges: (1) the 

elimination of restatements and (2) greater transparency in financial 

reporting. Many CFO Act agencies have obtained clean or unqualified 

audit opinions on their financial statements, but the underlying agency 

financial systems and controls still have some serious problems. This 

manifested itself last year when a number of CFO Act agencies had to 

restate their financial statements. As we have previously testified,30 at least 

1131 of the 2332 CFO Act agencies restated their fiscal year 2003 financial 

statements, and 533 CFO Act agencies restated their fiscal year 2002 

financial statements. The restatements to CFO Act agencies’ fiscal year 

2003 financial statements ranged from correcting 2 line items on an 

agency’s balance sheet to numerous line items on several of another 

Financial Reporting 

 29GAO, National Aeronautics and Space Administration: Long-standing Financial

Management Challenges Threaten the Agency’s Ability to Manage Its Programs, GAO-06-

216T (Washington, D.C.: Oct. 27, 2005). 

30GAO, Fiscal Year 2004 U.S. Government Financial Statements: Sustained Improvement 

in Federal Financial Management Is Crucial to Addressing Our Nation’s Future Fiscal 

Challenges, GAO-05-284T (Washington, D.C.: Feb. 9, 2005). 

31Departments of Agriculture, Defense, Health and Human Services, Justice, State, and 

Transportation, and the General Services Administration, National Science Foundation, 

Nuclear Regulatory Commission, the Office of Personnel Management, and the Small 

Business Administration. 

32At the time of our review there were only 23 CFO Act agencies because as we discussed 

earlier, FEMA was no longer required to prepare and have audited financial statements 

under the CFO Act, leaving 23 CFO Act agencies for fiscal years 2003 and 2004. 

33Departments of Agriculture, Health and Human Services, the Interior, Transportation, and

the Treasury. 

Page 16 GAO-06-242T 
agency’s financial statements. The amounts of the agencies’ restatements 

ranged from several million dollars to over $91 billion. Nine34 of those 

11 agencies received unqualified opinions on their financial statements 

originally issued in fiscal year 2003. Seven of the 9 auditors issued 

unqualified opinions on the restated financial statements, which in 

substance replace the auditors’ opinions on their respective agencies’

original fiscal year 2003 financial statements. For 235 of these 9 agencies, 

the auditors not only withdrew their unqualified opinions on the fiscal year 

2003 financial statements but also issued other than unqualified opinions 

on their respective agencies’ restated fiscal year 2003 financial statements 

because they could not determine whether there were any additional 

misstatements and the effect that these could have on the restated fiscal 

year 2003 financial statements. We have reported36 on some of these 

agency restatements and have work ongoing37 at a number of other 

agencies to more fully understand the issues surrounding these 

restatements. We have not yet had a chance to look in any depth at 

restatements for fiscal year 2005 because fiscal year 2005 financial 

statements, which would identify any such restatements, were just issued 

by the deadline of November 15. We did note though, that there were a 

number of restatements. 

The second challenge is that current financial reporting does not clearly 

and transparently show the wide range of responsibilities, programs, and 

activities that may either obligate the federal government to future 

spending or create an expectation for such spending. The current financial 

reporting model provides information on financial position and changes in

such position during the year, as well as budget results. However, more 

important than current and short-term deficits, we face large and growing

structural deficits in the future due primarily to known demographic 

 34General Services Administration, National Science Foundation, Nuclear Regulatory 

Commission, Office of Personnel Management , and the Departments of Agriculture, Health 

and Human Services, Justice, State, and Transportation. 

35Nuclear Regulatory Commission and the Department of Justice. 

36GAO, Financial Audit: Restatements to the Department of State’s Fiscal Year 2003 

Financial Statements, GAO-05-814R (Washington, D.C.: Sept. 20, 2005). Financial Audit: 

Restatements to the Nuclear Regulatory Commission’s Fiscal Year 2003 Financial 

Statements, GAO-06-30R (Washington, D.C.: Oct. 27, 2005). 

37Departments of Agriculture, Health and Human Services, Justice, and Transportation, the

General Services Administration, National Science Foundation, and Office of Personnel 

Management. 

Page 17 GAO-06-242T 
trends, rising health care costs and relatively low federal revenues as a 

percentage of the economy. Our nation’s current fiscal path is

unsustainable and failure to highlight, analyze and appropriately respond 

to the resulting long-term consequences could have significant adverse 

consequences on our future economy and standard of living. While the 

Statement of Social Insurance will provide long-term information for those 

specific programs, in our view, more comprehensive reporting is 

necessary to fully and fairly reflect the nation’s longer-term fiscal 

challenges. Consequently, a top priority should be communicating 

important information to users about the long-term financial condition of 

the U.S. government and annual changes therein. Furthermore, FASAB 

recognized that tax expenditures, which can be large in relation to 

spending programs that are measured under federal accounting standards, 

may not be fully considered in entity reporting. Reporting information on 

tax expenditures would ensure greater transparency of and accountability 

for such expenditures.38

Changing the way business is done in a large, diverse, and complex 

organization like the federal government is not an easy undertaking. 

According to a survey of federal CFOs,39 federal finance organizations of 

the future will have fewer people, with a greater percentage of analysts, as 

opposed to accounting technicians. However, today, most functions within 

federal finance organizations are focused primarily on (1) establishing and 

administering financial management policy; (2) tracking, monitoring, and

reconciling account balances; and (3) ensuring compliance with laws and 

regulations. While they recognize the need for change, according to the 

CFOs surveyed, many questions remain unanswered regarding how best to 

facilitate such changes. When it comes to world-class financial 

management, our study40 of nine leading private and public sector financial 

organizations found that leading financial organizations often had the 

same or similar core functions (i.e., budgeting, treasury management, 

Financial Workforce 

 38GAO, Government Performance and Accountability: Tax Expenditures Represent a

Substantial Federal Commitment and Need to be Reexamined, GAO-05-560 (Washington,

D.C.: Sept. 23, 2005). 

39Grant Thornton LLP and the Association of Government Accountants, CFO Survey: 

Preparing for Tomorrow’s Way of Doing Business, (Alexandria, Virginia: March 1998). 

40GAO, Executive Guide: Creating Value Through World-class Financial Management, 

GAO/AIMD-00-134 (Washington, D.C.: April 2000). Appendix II includes a synopsis of the 

key concepts discussed in the study. See Appendix II. 

Page 18 GAO-06-242T 
general accounting, and payroll), as the federal government. However, the 

way these functions were put into operation varied depending on 

individual entity needs. Leading organizations reduced the number of 

resources required to perform routine financial management activities by

(1) consolidating activities at a shared service center and (2) eliminating 

or streamlining duplicative or inefficient processes. Their goal was not 

only to reduce the cost of finance but also to organize finance to add value 

by reallocating finance resources to more productive and results-oriented 

activities like measuring financial performance, developing managerial 

cost information, and integrating financial systems. 

The federal financial workforce that supports the business needs for today 

is not well-positioned to support the needs of tomorrow. A JFMIP study41

indicated that a significant majority of the federal financial management 

workforce performs transaction support functions of a clerical and 

technical nature. These skills do not support the vision of tomorrow’s 

business that will depend on an analytic financial management workforce 

providing decision support. The financial management workforce plays a 

critical role in government because the scale and complexity of federal 

activities requiring financial management and control is monumental. 

Building a world-class financial workforce will require a workforce 

transformation strategy devised in partnership between CFOs and agency 

human resource departments, now established in law as Chief Human 

Capital Officers, working with OMB and the Office of Personnel 

Management. Agency financial management leadership must identify 

current and future required competencies and compare them to an 

inventory of skills, knowledge, and current abilities of current employees. 

Then, they must strategically manage to fill gaps and minimize overages 

through informed hiring, development, and separation strategies. This is 

similar to the approach that we identified when we designated strategic 

human capital management as a high-risk area in 2001 recognizing that 

agencies, working with Congress and OPM, must assess future workforce 

needs and determine strategies to meet those needs, especially in light of

long-term fiscal challenges.42 Achieving the financial management vision of

the future will be directly effected by the workforce who support it. 

 41JFMIP, Building a World Class Financial Workforce, The Federal Financial

Management Workforce of the Future, (Washington, D.C.: September 2003). 

42 GAO-05-207. 

Page 19 GAO-06-242T 
Earlier, I noted that while important progress in strengthening internal 

control has been made, the federal government faces numerous internal 

control problems, some of which are long-standing and are welldocumented at the agency level and governmentwide. As we have reported

for a number of years in our audit reports on the U.S. government’s 

consolidated financial statements, the federal government continues to 

have material weaknesses and reportable conditions in internal control 

related to property, plant, and equipment; inventories and real property; 

liabilities and commitments and contingencies; cost of government 

operations; and disbursement activities, just to mention a few of the 

problem areas. 

Internal Control

As an example, consider DOD which has many known material internal 

control weaknesses. Of the 25 areas on GAO’s high-risk list, 14 relate

wholly or partially to DOD, particularly its financial management 

problems. Overhauling DOD’s financial management controls and 

operations represents a challenge that goes far beyond financial 

accounting to the very fiber of DOD’s range of business operations, 

management information systems, and culture. Although the Secretary of 

Defense and several key agency officials have shown commitment to 

transformation, as evidenced by key initiatives such as the Business 

Management Modernization Program43 and the Financial Improvement and 

Audit Readiness Plan, little tangible evidence of significant broad-based 

and sustainable improvements has been seen in DOD’s business 

operations to date. For DOD to successfully transform its business 

operations, it will need a comprehensive and integrated business 

transformation plan; people with the skills, responsibility, and authority to

implement the plan; an effective process and related tools, such as a 

business enterprise architecture;44 and results-oriented performance 

measures that link institutional, unit, and individual personnel goals and 

expectations to promote accountability for results. 

 43GAO, DOD Business Systems Modernization: Long-standing Weaknesses in Enterprise

Architecture Development Need to Be Addressed, GAO-05-702 (Washington, D.C.: Jul. 22, 

2005) 

44A business enterprise architecture is a well-defined blueprint for operational and 

technological change. 

Page 20 GAO-06-242T 
As I testified before you in February 2005, we support OMB’s efforts to 

revitalize internal control assessments and reporting through the 

December 2004 revisions to Circular No. A-123. These revisions recognize 

that effective internal control is critical to improving federal agencies 

effectiveness and accountability and to achieving the goals established by 

Congress. They also considered the internal control standards issued by 

the Comptroller General,45 which provide an overall framework for 

establishing and maintaining internal control and for identifying and 

addressing major performance and management challenges and areas at

greatest risk of fraud, waste, abuse, and mismanagement. 

Effective internal control, as envisioned in the newly revised Circular No. 

A-123, inherently includes a successful strategy for addressing improper 

payments. Our prior work46 has demonstrated that attacking improper 

payment problems requires a strategy appropriate to the organization 

involved and its particular risks. We have found that entities using 

successful strategies to address their improper payment problems shared 

a common focus of improving the internal control system—the first line of

defense in safeguarding assets and preventing and detecting errors and 

fraud. Moreover, as we testified47 before this subcommittee in July of this 

year, even though progress has been made, certain agencies have not yet

performed risk assessments of all their programs and/or estimated 

improper payments for their respective programs. 

I pointed out in my February 2005 testimony, six issues critical to 

effectively implementing the changes to Circular No. A-123, specifically, 

the need for 

1. development of supplemental guidance and implementation tools to 

help ensure that agency efforts are properly focused and meaningful; 

2. vigilance over the broader range of controls covering program 

objectives; 

 45GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington D.C.: November 1999). 

46GAO, Financial Management: Effective Implementation of the Improper Payments 

Information Act of 2002 Is Key to Reducing the Government’s Improper Payments, GAO03-991T (Washington, D.C.: Jul. 14, 2003). 

47GAO, Financial Management: Challenges in Meeting Governmentwide Improper 

Payment Requirements, GAO-05-907T (Washington, D.C.: Jul. 20, 2005). 

Page 21 GAO-06-242T 
3. strong support from managers throughout the agency, and at all levels; 

4. risk-based assessments and an appropriate balance between the costs 

and benefits of controls; 

5. management testing of controls in operation to assess if they are 

designed adequately and operating effectively, and to assist in 

formulating corrective actions; 

6. management accountability for control breakdowns. 

Since that time, in July 2005, the CFO Council, in collaboration with the 

President’s Council on Integrity and Efficiency (PCIE)48 and OMB, issued 

an implementation guide to assist departments and agencies in addressing 

the Circular No. A-123 requirements related to internal control over 

financial reporting. As I mentioned earlier, this is a positive first step to 

helping the federal government clearly articulate its objectives and criteria 

for measuring whether the objectives of Circular No. A-123 have been 

successfully achieved. Equally important will be the rigor with which these 

criteria are applied. 

The federal government has always faced the challenge of sustaining the

momentum of transformation because of the limited tenure of key 

administration officials. The current administration’s PMA has served as a 

driver for governmentwide financial management improvements. It has 

been clear from the outset that the current administration is serious about 

improved financial management. We have been fortunate that, since the 

passage of the CFO Act, all three administrations have been supportive of 

financial management reform initiatives. And, as I discussed earlier, we’ve 

seen a positive cultural shift in the way the federal government conducts 

business. Given the long-term nature of the comprehensive changes 

needed and challenges still remaining to fully realize the goals of the CFO 

Act, it is unlikely they will all occur before the end of the current 

administration’s term. Therefore, sustaining a commitment to 

Continuity of 

Leadership 

 48 The PCIE is an interagency council comprised principally of the presidentially appointed

and Senate-confirmed IGs, which is governed by Executive Order No. 12805 (1992), to 

coordinate and enhance the work of the IGs. The Deputy Director for Management in OMB

serves as the chair. 

Page 22 GAO-06-242T 
transformation in future administrations will be critical to ensure that key 

management reforms such as the CFO Act are fully attained. 

In closing, over the past 15 years, we have seen continuous movement 

toward the ultimate goals of accountability laid out in the CFO Act. I 

applaud the CFO and audit communities for the tremendous progress that 

has been made. While early on some were skeptical, the CFO Act has 

dramatically changed how financial management is carried out and the 

value placed on good financial management across government. Sound 

decisions on the current results and future direction of vital federal 

programs and policies, while never easy, are made less difficult when 

decision makers have timely, reliable, and useful financial and 

performance information. Across government, financial management 

improvement initiatives are underway, and if effectively implemented, 

have the potential to greatly improve the quality of financial management 

information. Proper accounting and financial reporting practices are even 

more essential at the federal level than they were 15 years ago given the 

difficult spending challenges and the long-term fiscal condition of the 

federal government. 

Further, I want to reiterate the value of sustained congressional interest in

these issues, as demonstrated by this subcommittee’s leadership. It will be 

key that going forward, the appropriations, budget, authorizing, and 

oversight committees hold agency top leadership accountable for 

resolving remaining problems and that they support improvement efforts 

that address the challenges for the future I highlighted today. The federal 

government has made tremendous progress in the past 15 years, and 

sustained congressional attention has been and will continue to be a 

critical factor to ensuring achievement of the CFO Act’s goals and 

objectives. 

Mr. Chairman, this completes my prepared statement and I want to thank 

you for the opportunity to participate in this hearing and for the strong 

support of this Subcommittee in addressing the need for financial 

management reform and accountability. I would be happy to respond to 

any questions you or other members of the subcommittee may have at this

time. 

For information about this statement, please contact Jeffrey C. Steinhoff at 

(202) 512-2600 or McCoy Williams, Director, Financial Management and 

Assurance, at (202) 512-6906 or williamsm1@gao.gov. Individuals who 

made key contributions to this testimony include Felicia Brooks, Kay Daly, 

Contacts and 

Acknowledgments 

Page 23 GAO-06-242T 
and Chanetta Reed. Numerous other individuals made contributions to the 

GAO reports cited in this testimony. 

Page 24 GAO-06-242T 
Appendix I: Chief Financial 

Officers Act Agencies 

Page 25 GAO-06-242T 

Appendix I: Chief Financial Officers Act 

Agencies 

Agency 

The Department of Agriculture 

The Department of Commerce 

The Department of Defense 

The Department of Education 

The Department of Energy 

The Department of Health and Human Services 

The Department of Housing and Urban Development 

The Department of the Interior 

The Department of Justice 

The Department of Labor 

The Department of State 

The Department of Transportation 

The Department of the Treasury 

The Department of Veterans Affairs 

The Environmental Protection Agency 

The National Aeronautics and Space Administration 

The Agency for International Development 

The Federal Emergency Management Agency

1

 

The General Services Administration 

The National Science Foundation 

The Nuclear Regulatory Commission 

The Office of Personnel Management 

The Small Business Administration 

The Social Security Administration 

The Department of Homeland Security 

 1

The Federal Emergency Management Agency, one of the original CFO Act agencies, was 

transferred to the Department of Homeland Security in 2003 and thus removed from the

original list of CFO Act agencies. The Department of Homeland Security Financial 

Accountability Act of 2004 added DHS to the list of CFO Act agencies thus bringing the

total number of CFO Act agencies again to 24. 
Appendix II: Ke

Finan

y Concepts of World-class 

cial Management 

Page 26 GAO-06-242T 

Appendix II: Key Concepts of World-class 

Financial Management 
Appendix II: Key Concepts of World-class 

Financial Management 

(195075) Page 27 GAO-06-242T 
Appendix II: Key Concepts of World-class Financial Management

Page 28 GAO-06-242T 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To

have GAO e-mail you a list of newly posted products every afternoon, go 

to www.gao.gov and select “Subscribe to Updates.” 

The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to: 

U.S. Government Accountability Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

PRINTED ON RECYCLED PAPER