November 20, 2000

I am pleased and proud to commend the members of the Chief Financial Officers Council

as you celebrate the Council's tenth anniversary. 

In the decade since passage of the Chief Financial Officers Act, you have been the

catalyst for extraordinary progress in improving federal financial management. Because of your

efforts, executive agencies now routinely produce financial statements that contain the

information we need to manage programs effectively and to fulfill our responsibility to be

accountable to the American public.

Your accomplishments have provided a strong framework for the next Administration to

achieve even more progress in improving federal financial management in this new century, and I

am deeply grateful for your leadership and dedication.

Congratulations on marking this milestone, and best wishes for continued success in the

years to come.
1

19

15

5

15

12

8

13

11

8

6 6

13

Timely Clean Disclaimers

0

5

10

15

20

Out of 24 CFO Act Agencies

Note: Disclaimer category also includes agencies that did not prepare agency-wide financial statements 

required by the Government Management Reform Act of 1994.

1996 1999 1997 1998 1996 1999 1997 1998 1996 1999 1997 1998

Federal Financial Statements:

Improving in Timeliness and Quality
i

2000 FEDERAL FINANCIAL MANAGEMENT REPORT

TABLE OF CONTENTS

Page

FOREWORD: FEDERAL FINANCIAL MANAGEMENT TODAY ...................................... 1

SUMMARY .................................................................................................................................... 3

I. IMPROVE FINANCIAL ACCOUNTABILITY ............................................................... 9

II. IMPROVE FINANCIAL PERFORMANCE .................................................................... 19

III. INVEST IN HUMAN CAPITAL ....................................................................................... 31

IV. MANAGE OBLIGATIONS TO THE FEDERAL GOVERNMENT ............................. 37

V. IMPROVE ADMINISTRATION OF FEDERAL GRANT PROGRAMS .................... 49

APPENDICES

I. Agency Performance on Financial Statements ..................................................... 59

II. Financial Statement Preparation by Components of Executive Departments

and Agencies ...................................................................................................... 63

III. Federal Managers’ Financial Integrity Act (FMFIA) Tables .............................. 65

IV. Federal Accounting Standards Advisory Board (FASAB) Documents ............... 67

LIST OF CHARTS AND TABLES ............................................................................................... 71

ABBREVIATIONS ......................................................................................................................... 73

GENERAL NOTE

All years referred to are fiscal years, unless otherwise noted.

This report is also available at: http://www.whitehouse.gov/OMB/financial
1

FOREWORD: FEDERAL FINANCIAL

MANAGEMENT TODAY

Each year, we report on the progress

being made in the financial management

of the Federal Government. In the past

year, much has been accomplished. Nonetheless, much more remains.

A decade ago, the Chief Financial Officers

(CFO) Act first demanded modern financial

management by the Federal Government. At

the time there was much to be improved:

Federal agencies could not answer the most

basic questions about the state of their finances. The only annual financial reports

were limited to guesses about how much

an agency had spent in the previous year.

Financial information wasn’t gathered automatically or consistently, and financial systems were primitive. Even if Federal agencies

had wanted to report their finances in accordance with professional standards, there were

no such standards for the Federal Government.

The CFO Act sparked many changes. We

have made dramatic progress in financial

reporting. A decade ago, only a few agencies

routinely prepared and issued audited financial statements. Currently—in only the fourth

year of reporting—all 24 agencies subject

to the CFO Act issue annual audited financial

statements. More than 60 percent received

clean audits on them. This performance is

even more impressive when you compare

it to that of state governments, which took

a decade even to reach the 50 percent

mark. A decade ago, there was no Government-wide financial statement; this year

marks the third production of an annual

Government-wide financial statement. In 1990,

the Federal financial community did not

have a set of Government-wide accounting

standards. The creation of the Federal Accounting Standards Advisory Board (FASAB)

in 1990 led to the development and issuance

of a complete set of basic accounting standards

and concepts by 1996. In October 1999,

as validation of these efforts, the American

Institute of Certified Public Accountants

(AICPA) recognized FASAB standards as ‘‘generally accepted accounting principles’’ (GAAP).

Recognition of FASAB standards by an independent, internationally-recognized audit

standard-setting authority marks a significant

milestone.

We have also begun to install and use

modern financial systems. A decade ago,

agency financial management systems, such

as they were, were unable to keep standard

accounts. They had been developed in an

era in which there was no call for common

financial information and no common standards. Agencies had dozens, sometimes hundreds of separate systems. Even within an

agency, financial systems could not communicate with each other and provide accurate,

timely, and meaningful information. Many

of these challenges remain. Nonetheless, today

we have developed standards for these systems

and established a program of comprehensive

testing of commercial systems to ensure that

they meet them. Only off-the-shelf systems

certified as compliant may be purchased by

Government agencies. The vast majority of

Federal agencies are hard at work, either

modernizing their systems or replacing them

entirely. OMB helps by making sure that

these critical projects are carefully planned

and adequately funded.

These are not the only examples of the

progress we are making. Throughout the

Federal Government, agencies are taking advantage of new technologies to streamline

grantmaking, debt management and other

financial activities. In 1999, total delinquent

debt dropped from $60 billion to $53.3 billion.

Also, delinquent debt as a percentage of

total non-tax receivables decreased from 22.5

percent to 19.7 percent. The Department

of Justice used its authorities as the government’s collector of last resort to collect $1.3

billion in delinquent debt, a 23 percent

increase over the previous year.

Working together in interagency councils

and individually, agencies are also taking
2 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

advantage of the promise of electronic government to reduce waste and improve service.

In 1999, the US Government made almost

one trillion payments electronically, some 80

percent of all non-tax payments. In addition,

transactions using small purchase bank cards

instead of purchase orders increased fourfold since 1995 to over 18 million last year,

saving an estimated $450 million in administrative costs.

All this is an extraordinary transformation.

It requires serious and sustained commitments, both of Federal dollars and trained

personnel. We have made that commitment.

Throughout the Federal financial community—

at OMB, the CFO’s, and the inspectors general

who are our auditors—thousands of people

are working hard. They are developing better,

more accurate financial and program information, and installing the systems and training

the people to implement them.

Nonetheless, we all recognize there remains

much yet to accomplish. In the years to

come, agencies will need to complete modernization of their systems and combine financial reporting with information about an

agency’s performance and results. They will

need to review and reinvent their most

basic operations, to improve efficiency and

service.

This report is a joint project of OMB

and the CFO Council. It is organized in

accordance with our Government-wide goals

for financial management: (1) improve financial accountability; (2) improve financial programs and the performance of financial systems; (3) invest in human capital; (4) better

manage obligations of the Federal Government; and (5) improve the administration

of Federal grants.

Although much remains to be done, we

are proud of what we have accomplished.

We remain fully committed to achieving the

vision for the Federal financial community

established a decade ago: To provide reliable

information, used by Federal agencies to

manage and improve their programs; to be

accountable for their efforts with Congress

and the public; and to provide the better,

more reliable service that the American people

can and should expect from their Government.

JOSHUA GOTBAUM JOHN J. CALLAHAN

EXECUTIVE ASSOCIATE DIRECTOR AND CONTROLLER EXECUTIVE VICE CHAIR,

OFFICE OF MANAGEMENT AND BUDGET CFO COUNCIL
3

SUMMARY

When the CFO Act was passed 10 years

ago, its objective was to require the U.S.

Government to adopt modern financial management practices. In crafting the legislation,

Congress recognized the Federal Government

lagged far behind private businesses as well

as state and local governments in the creation

and use of financial information. The Act

created the CFO position in major Federal

agencies, established the Deputy Director for

Management and Controller positions at OMB,

and created the CFO Council. Four years

later, the Government Management Reform

Act (GMRA) took the additional step of

requiring annual audited agency financial

statements beginning in 1997.

This report highlights how far Federal

financial management has come in the past

decade and describes additional improvements

needed in the future. It is the joint project

of OMB and the CFO Council. The Council,

chaired by the Deputy Director for Management of OMB, includes OMB’s Controller,

the Fiscal Assistant Secretary of the Department of the Treasury (Treasury), and the

24 CFO Act agency CFOs and Deputy CFOs.

Greater Accountability to the Public

Financial reporting by the Federal Government provides information for formulating

policy, planning actions, evaluating performance, and other purposes. The processes of

preparing and auditing financial reports can

enhance the Government’s overall accountability structure by providing greater assurance that transactions are recorded and reported accurately and consistent definitions

are used to describe transactions. Federal

financial reporting helps to fulfill the Government’s duty to manage programs economically,

efficiently, and effectively and to be publicly

accountable.

In the past decade, the issuance of independently audited annual financial statements

by agencies has been an important step

in improving accountability to the public.

These agency financial statements have been

prepared in accordance with a comprehensive

set of accounting principles recognized in

1999 by the public accounting profession

as GAAP. The GAAP designation indicates

the Federal Government’s finances are reported using standards with the same degree

of acceptance as those used to prepare annual

stockholder reports in the private sector and

in turn, also receive the same degree of

audit scrutiny. Some of the key accomplishments in Federal financial management over

the past decade are outlined below:

Creation of Federal Accounting Standards:

Before 1990, the Federal financial community

did not have Government-wide accounting

standards. That year, the Secretary of the

Treasury, the Director of OMB, and the

Comptroller General of the United States

created the FASAB to develop and recommend

accounting standards for the Federal Government. By 1996, FASAB had produced a

set of basic accounting standards and concepts.

FASAB continues to develop specialized standards and address additional accounting and

financial management issues.

Recognition of FASAB Standards as Generally Accepted Accounting Principles: In October 1999, as validation of the Federal Government’s efforts, the AICPA recognized FASAB

standards as GAAP. Recognition of FASAB

standards by an independent, internationallyrecognized audit standard-setting authority

marks a significant milestone in improving

public confidence in Federal financial management.

Preparation of Agency and Governmentwide Audited Financial Statements: A decade

ago, only a few agencies prepared and issued

financial statements. Currently, the 24 largest

departments and agencies issue annual financial statements, and the Federal Government

has produced its third Government-wide financial statement.

Improved Timeliness and Quality of Agency

Financial Statements: The timeliness of financial reports continues to improve. This year,

19 CFO Act agencies met the statutory

March 1 deadline for producing financial
4 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

statements, an increase of four agencies from

1998. The quality of the financial statements

also has improved. In 1996, only six agencies

received clean opinions on their financial

statements. For 1999, 15 agencies received

clean opinions. The number of agencies with

disclaimers (i.e., whose accounts were in

such shape that no opinion could be expressed)

dropped from 13 in 1996 to five in 1999.

What has been accomplished by the Federal

Government in the past four years compares

quite favorably with the experience of state

governments. With few exceptions, individual

states began issuing GAAP-based financial

statements in the 1970s. In 1980, Standard

and Poors, a rating agency, issued a policy

statement directing all state bond issuers’

financial reports be prepared in conformity

with GAAP and audited by independent auditors or else their bond ratings would be

affected. Within 10 years, only half of all

state governments received clean opinions.

By comparison, more than 60 percent of

the CFO Act agencies were able to achieve

clean opinions in only four years.

Creation of Reliable Financial Systems

Although important, an accurate annual

financial statement is only one of our goals.

Ultimately, financial systems should provide

financial reports automatically, in a reliable

and timely way, so financial information

can be used to improve Government decisionmaking. Congress recognized this need by

enacting the Federal Financial Management

Improvement Act (FFMIA) in 1996. With

the push to achieve clean audit opinions

of agency financial statements well underway,

the financial management community intends

to shift its attention to meeting the additional

challenge of improving financial management

systems.

FFMIA requires that agencies’ financial

management systems comply with: (1) Federal

financial management systems requirements;

(2) applicable Federal accounting standards;

and (3) the U.S. Government Standard General Ledger (SGL) at the transaction level.

For 1999, six of the 24 CFO Act agencies

complied with all three of the requirements.

OMB and the CFO Council are placing greater

emphasis on FFMIA compliance through monitoring and education activities. OMB is implementing a comprehensive strategy for improving Federal financial management systems

and a methodology for reviewing agency remediation plans. Improving financial systems

is a major challenge in an environment

dominated by legacy systems that were not

designed to support current requirements or

technology. These systems improvements are

difficult and progress is a long-term process.

We have already taken important steps

in this area. During the past year, we

established an effort through the Joint Financial Management Improvement Program

(JFMIP) to codify our financial systems requirements and test commercial systems for

compliance with those standards. OMB has

directed agencies only purchase systems that

have been tested and meet JFMIP requirements. Key accomplishments include:

Development of Functional Requirements for

Federal Financial Systems: JFMIP functional

requirement documents define how information is processed and shared with other

systems. Increasing compliance with requirement documents will lead to additional Federal

financial systems consistently and accurately

capturing transactions. JFMIP has developed

system requirement documents for core accounting, managerial cost accounting, and

six of 13 subsidiary systems, including inventory, travel, human resource and payroll,

seized property and forfeited asset, direct

loan, and guaranteed loan. Plans are in

place to eventually issue requirements for

the remaining seven subsidiary systems, including benefit payments, insurance claims,

grants, property management, acquisition, revenue, and budget formulation.

Testing and Certifying Compliance of Commercial Systems: In November 1998, JFMIP

established an office to develop functional

requirements for Federal financial management systems; reengineer and maintain the

core financial systems software test and certification process; work with the General Services

Administration (GSA) to maintain streamlined

procurement processes; and share, via the

Internet, information on financial commercial

systems capabilities and services.
SUMMARY 5

Better Financial Management

CFOs have made significant progress, including efforts in the areas of:

Electronic Commerce: The emergence of new

technologies and tools for doing business

has dramatically increased the Government’s

potential to provide timely and effective services. By taking advantage of the efficiencies

offered by electronic commerce, CFOs are

making sure Government business is conducted faster and with increased accuracy

in a customer-driven environment. Working

together in interagency councils and individually, agencies are taking advantage of the

promise of electronic government to reduce

waste and improve service. In 1999, the

US Government made almost one trillion

payments electronically, some 80 percent of

all non-tax payments, and we are steadily

approaching the Congressionally mandated

target of 100 percent. States have implemented electronic benefit transfer (EBT) programs to provide food stamps and other

benefits electronically. By March 2000, 38

States, the District of Columbia, and Puerto

Rico have operational online food stamp EBT

systems. Transactions using small purchase

bank cards instead of purchase orders increased four-fold since 1995 to over 18 million

last year, saving an estimated $450 million

in administrative costs. The CFO Council

is now urging agencies to take the next

step towards electronic Government by using

the Internet for timely implementation of

the Government Paperwork Elimination Act

(GPEA). GPEA requires Federal agencies by

October 21, 2003 to allow individuals or

entities the option of submitting information

to agencies electronically when practicable.

The goal is to conduct secure, private, and

authenticated Internet transactions within

three years. Two key initiatives discussed

in this report include using electronic processing to maximize the use of the Internet

for credit and debt management programs

and the administration of grant programs.

Improving Management of Debts Owed to

the Government: Federal agencies improved

credit management and collection of obligations by streamlining portfolio management

and using various collection tools. In 1999,

total delinquent debt dropped from $60 billion

to $53.3 billion. Also, delinquent debt as

a percentage of total non-tax receivables

decreased from 22.5 percent to 19.7 prcent.

The Department of Justice used its authorities

as the government’s collector of last resort

to collect $1.3 billion in delinquent debt,

a 23 percent increase over the previous

year. SBA’s loan asset sale held in August

2000 included approximately 26,000 loans

with an unpaid principal balance of $1.2

billion, and returned $530 million to the

Treasury, a $225 million premium above

the $305 million value of holding the loans

to maturity. Similarly, FHA auctioned 8,053

single-family loans in September 2000, with

an unpaid principal balance totaling $480

million. The sale generated proceeds in excess

of $467 million, or 97 percent of the unpaid

principal balance of the mortgage loans, the

highest return to date. The CFO Council

is now urging agencies to conduct secure,

private, and authenticated Internet transactions for debt management programs within

three years. The Federal Credit Policy Working Group (FCPWG), working closely with

the CFO and Chief Information Officers (CIO)

Councils, will establish a subcommittee to

identify credit industry standards and Internet

best practices related to credit and debt

management. The goal is to use the Internet

for secure transactions between agencies and

their private sector partners by using electronic signature technology, including digital

signatures or Personal Identification Numbers

(PINs) where appropriate. To assist in this

process, GSA has made available to all agencies a schedule of approved contractors for

providing validated digital signature certificates known as Access Certificates for Electronic Services (ACES). ACES use the highest

level Public Key Infrastructure (PKI) technology. ACES provide identification, authentication, and non-repudiation as a means

for individuals and businesses to be authenticated when accessing, retrieving, and submitting information in communications with the

Federal Government. To promote acceptance

of ACES, the first 500,000 certificates are

being offered to Federal agencies for a nominal

user fee.

Streamlining Federal Grants: OMB and

the agencies are working to make it easier

for state, local, and tribal governments and
6 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

non-profit organizations to apply for Federal

grants and, as recipients, report their progress.

The Inter-agency Electronic Grants Committee

(IAEGC) and its ‘‘Federal Commons’’ initiative—a project to establish a single point

of entry for Federal grant programs—are

central to this Government-wide effort to

use electronic processing in the administration

of agencies’ grant programs. Participating

Federal agencies have developed the Federal

Commons project in an effort to provide

a common face of the Government for the

purposes of grants administration.

Building Professionalism

The CFO Council recognizes the challenges

of ensuring a quality financial management

workforce are great. The past decade has

seen the downsizing of administrative and

financial management functions in Government along with a marked increase in the

number of employees eligible to retire. Recruiting new employees with pertinent competencies is highly competitive in the current

tight labor market. The CFO Council’s accomplishments in this area over the past decade

include:

• Defined Core Competencies: The Federal financial management community defined

core competencies that were published by

JFMIP during the period of 1995–1998.

These core competency documents articulate the appropriate knowledge, skills, and

abilities necessary for financial personnel

to succeed in their respective careers.

These documents have guided the Council’s human capital strategies and efforts

relating to professional development, recruitment, and qualification standards.

• Established a CFO Council Fellows Program: The CFO Fellows Program is in its

third year. It is designed to provide career

development opportunities for promising

financial managers within the CFO community with the intent of achieving a

cadre of experienced and diverse leaders

prepared to assume financial executive positions in the future.

New strategies are needed to recruit, develop, and sustain a workforce prepared to

meet the needs of the new decade. Examples

of strategies adopted by the CFO Council

include: (1) a CFO Careers Program, aimed

at attracting a well-qualified, diverse pool

of candidates in all financial management

disciplines; (2) a CFO Internship Program,

which will provide structured on-the-job experiences to undergraduate and graduate students that may lead to permanent job opportunities in the future; and (3) a CFO Scholars

Program, in partnership with the Association

of Government Accountants (AGA), to provide

competitive scholarship opportunities for outstanding Federal financial managers to pursue

degree programs and professional certifications.

Much Accomplished, Much Still to be

Done

Better financial management will help agencies run better programs. It will also provide

accountability to the President, the Congress,

and the American people, so they have confidence in the performance of their Government. Much remains to be done, but the

Federal financial community has made great

strides in the 10 years since the enactment

of the CFO Act. This progress is due to

the hard work of thousands of people throughout the Government.

This report presents both accomplishments

and future initiatives of the CFO Council

and central agencies to strengthen Federal

financial management. CFOs are working

within their agencies and through the CFO

Council to achieve the critical objectives described in this report. CFOs will continue

to pursue high standards of fiscal discipline

for making significant contributions to the

improved management of their agencies and

the Federal Government.
7

2000 FEDERAL FINANCIAL

MANAGEMENT REPORT
9

1An unqualified opinion indicates the auditor believes the financial statements present fairly the financial position and results of

operations in accordance with GAAP. It is commonly referred to as

a ‘‘clean opinion,’’ a phrase that will be used throughout this report.

CHAPTER I. IMPROVE FINANCIAL

ACCOUNTABILITY

Goal:

Develop useful, reliable, and timely financial and performance information by:

• Ensuring sound accounting standards that provide the basis for Federal financial

statements and consistent, reliable financial information;

• Preparing annual financial statements and obtaining ‘‘clean,’’ unqualified 1 opinions

for CFO Act agencies; and

• Issuing timely, useful, and reliable financial management reports.

A Decade of Progress

In 1990, Congress recognized the Federal

Government lagged far behind private businesses and state and local governments in

financial management. Congress mandated

the gap be closed by enacting the CFO

Act. Later, GMRA extended this mandate

by requiring the preparation of the first

annual audited agency-wide financial statements beginning in 1997. Some of the key

accomplishments over the past decade include:

• Developed Government-wide Accounting

Standards: In 1990, the Federal financial

community did not have prescribed Government-wide accounting standards. The

Director of OMB, the Secretary of the

Treasury, and the Comptroller General of

the United States, who serve as its principals, established FASAB to develop and

recommend accounting standards for the

Federal Government. By 1996, FASAB

produced a set of basic accounting standards and concepts. See Appendix IV for

a complete listing of FASAB standards

and concepts and instructions on how to

obtain copies.

• Federal Government Accounting Standards

Recognized by the AICPA: In October 1999,

the AICPA recognized FASAB standards

as GAAP, validating our progress. Acknowledgment by an independent, internationally-recognized audit standard-setting authority that FASAB standards are

GAAP marks a significant milestone for

improving public confidence in Federal financial management.

• Produced Agency and Government-wide

Audited Financial Statements: In the last

decade, only a few agencies prepared and

issued audited financial statements. The

Federal Government as a whole produced

only ‘‘prototype’’ financial statements

which were not auditable. Currently, the

24 CFO Act agencies engage independent

accountants and issue financial statements

annually, and the Federal Government

has produced its third annual Government-wide financial statements.

• Improved Timeliness and Quality of Agency Financial Statements: Clean and timely

financial statements are evidence of financial discipline and data integrity. In 1996,

only six agencies produced clean financial

statements. Four years later, the quality

of agency financial statements increased

over 100 percent when 15 agencies obtained clean opinions. Similarly, only six

agencies were able to produce timely financial statements in 1996. This year, 19

agencies complied with the March 1 statutory due date, an increase of more than
10 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

19

15

5

15

12

8

13

11

8

6 6

13

Timely Clean Disclaimers

0

5

10

15

20

Out of 24 CFO Act Agencies

Note: Disclaimer category also includes agencies that did not prepare agency-wide financial statements 

required by the Government Management Reform Act of 1994.

1996 1999 1997 1998 1996 1999 1997 1998 1996 1999 1997 1998

Chart 1. Federal Financial Statements:

Improving in Timeliness and Quality

200 percent. See Chart 1 for improvements

in agencies’ financial statements.

• Financial and Performance Reports Integrated into Accountability Reports: Prior to

GMRA, agencies produced stand-alone or

‘‘stovepipe’’ financial and performance

management reports that presented information in a fragmented format. As a result of the GMRA’s Accountability Report

pilot project, begun in 1995, Congress and

the American taxpayer can now turn to

agency Accountability Reports to obtain

integrated and comprehensive financial

and performance information. In November, the President signed the Reports Consolidation Act of 2000, which provided permanent authority for agencies to produce

Accountability Reports.

Agency financial accountability remains our

priority goal. Some of the most recent achievements in this area are outlined below:

Achievements in the Past Year

Accounting Standards

In 1998, when the basic set of accounting

standards for the Federal Government took

effect, the Administration sought recognition

of FASAB standards by the AICPA. AICPA

recognition was necessary to allow Federal

entities to state that financial reports were

prepared in accordance with GAAP. Some

achievements in the past year include:

Recognized by the AICPA: In October 1999

the AICPA recognized FASAB as the source

of GAAP for the Federal Government. It

found FASAB met the criteria established

by the AICPA for GAAP standard-setting

bodies, i.e., it makes independent determinations, observes due process, has clear authority

to issue standards, has adequate human

and financial resources, and develops comprehensive and consistent standards. The significance of meeting these criteria and attaining recognition is twofold:

• The Federal Government has created a

sound structure for meeting the account-
CHAPTER I. IMPROVE FINANCIAL ACCOUNTABILITY 11

ing information needs of the public, the

Congress, and the Executive Branch; and

• Federal agency reports are based on

standards that have the highest level of

acceptance and the same stature as the

standards applicable to private sector entities and state and local governments.

Auditors can now express an opinion on

whether the Federal financial statements

present fairly the financial position and

results of operations in accordance with

GAAP.

Issued New Standards: Over the past year,

the FASAB principals adopted standards recommended by the Board. OMB issued one

standard on accounting for social insurance

and FASAB issued two standards amending

accounting for: (1) direct loans and loan

guarantees, and (2) property, plant, and equipment.

Provided Guidance on Accounting Standards

and Financial Statement Preparation: The

Accounting and Auditing Policy Committee

(AAPC), a standing committee of FASAB,

works to clarify and resolve implementation

issues concerning the preparation and audit

of financial statements. The AAPC consists

of 11 members—three each from the CFO

and Inspector General (IG) communities, one

each from the FASAB principals (OMB, Treasury, and the General Accounting Office

(GAO)), one at-large member, and a nonvoting staff member. The AAPC approved

a technical release on non-valued seized and

forfeited property and developed guidance

on allocation of legal costs. In addition,

work continued on stewardship reporting, liabilities, and inter-entity costs. The AAPC

also sponsored a series of accounting and

auditing forums and provided informal guidance on the preparation and audit of financial

statements.

Audited Financial Statements

Achieving a clean opinion on the financial

statements of individual Federal agencies,

and ultimately on the consolidated Government-wide financial statements, is a vital

step toward putting the Federal Government’s

financial house in order. Striving to receive

clean opinions leads to the development of

better financial information. When clean financial statements are provided to management

on a timely basis, decision-making is improved.

For the 1999 statements, the CFO Act agencies made noteworthy progress toward clean

opinions on financial statements and Treasury

continued to produce consolidated Government-wide financial statements. Accomplishments in the past year include:

• Improved Timeliness of Agency Financial

Statements: The timeliness of financial reports improved. Last year, 15 of the 24

CFO Act agencies met the statutory March

1 deadline for producing financial statements. This year four additional agencies

met the deadline, for a total of 19. Twentytwo agencies submitted their financial

statements by March 31. Two agencies

submitted later in May and June. Submissions of preliminary data permitted the

two agencies’ financial results to be included in the Government-wide consolidated financial statements.

• Improved Quality of Agency Financial

Statements: The quality of these financial

statements also improved. By March 1,

1999, only seven of the 24 CFO Act agencies received clean opinions on their financial statements; ultimately 12 did so. This

year, 15 agencies received clean opinions.

Seven agencies improved measurably over

last year, upgrading from a disclaimer or

a qualified opinion to a qualified or a clean

opinion.

—The Departments of Commerce (DOC)

and Transportation (DOT) improved from

disclaimers to clean opinions—significant

accomplishments for these departments

considering agency financial records were

in such poor shape the year before that

auditors could not provide an opinion.

—The Departments of Health and Human

Services (HHS), Energy (DOE), and Veterans Affairs (VA) advanced from qualified

to clean opinions.

—The Departments of Education (Education) and Justice (DOJ) moved from disclaimers to qualified opinions.

• Issued Government-wide Consolidated Financial Statements: After agencies submitted their 1999 adjusted trial balances

on February 1, 2000, Treasury issued
12 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

timely Government-wide consolidated financial statements for the third year in

a row on March 31, 2000. These statements were issued as part of the 1999 Financial Report of the United States Government at www.fms.treas.gov/cfs.

Streamlined Financial Management

Reports

Section 404 of GMRA provided the Director

of OMB with the authority to streamline

and consolidate financial management reporting. OMB and the CFO Council have used

this authority to work with congressional

and agency staffs to devise an integrated,

comprehensive, user-friendly annual accountability reporting model. In November, the

President signed the Reports Consolidation

Act of 2000, which provided permanent authority for agencies to produce Accountability

Reports.

The goal for the Accountability Report

project is to provide, in a single document,

a comprehensive view of agency financial

and management performance. The CFO Act

agencies have made great strides in their

efforts to implement Accountability Reports.

Increased Participation in the Accountability

Report Pilot: Nineteen agencies produced Accountability Reports for 1999, compared to

18 in 1998. DOC and the Small Business

Administration (SBA) issued their first Accountability Reports in 1999. The Office of

Personnel Management (OPM) withdrew from

the 1999 pilot to focus on the development

of its agency consolidated financial statements.

See the inside back cover of this report

for the Internet sites of agency Accountability

Reports.

Integrated Additional Reports in Accountability Reports: In their efforts to provide

a more comprehensive picture of agency financial and program management, agencies continue to discover additional ways for integrating and improving their financial and

management performance reporting. Six agencies, DOE, DOJ, Department of Labor (DOL),

VA, Nuclear Regulatory Commission (NRC),

and the Social Security Administration (SSA),

integrated their Government Performance and

Results Act (GPRA) performance reports with

their 1999 Accountability Reports. DOJ and

VA integrated agency-specific annual reports

with their 1999 Accountability Reports. SSA’s

IG included the semiannual reports to Congress in SSA’s 1999 Accountability Report.

Agencies Participated in the AGA Certificate

of Excellence Program: For 1998, 10 Federal

agencies and bureaus submitted their Accountability Reports for review to the AGA’s Certificate of Excellence Program. Each agency’s

Accountability Report received an in-depth

review by five knowledgeable persons in Federal management.

For 1998, the National Aeronautics and

Space Administration (NASA) and SSA were

awarded the Certificate of Excellence in Accountability Reporting, representing a significant accomplishment for these agencies and

their management. A number of other agencies

were close to earning a certificate. Comprehensive letters sent to participants noted both

commendable practices and recommendations

for improvement.

For 1999, nine Federal agencies—HHS, Department of the Interior (DOI), DOL, Agency

for International Development (AID), NASA,

NRC, National Science Foundation (NSF),

SBA, and SSA—participated in the 1999

Accountability Report review. The NSF and

SSA were honored with Certificates of Excellence in Accountability Reporting from the

AGA on October 17, 2000.

Initiatives

Despite noteworthy progress, there is still

much to accomplish. Ultimately, we want

financial systems that provide reliable and

timely financial information for improving

Government decision-making and providing

accountability. An agency’s ability to produce

timely, reliable financial information is demonstrated not only by a clean audit opinion,

but by compliance with FFMIA. For 1999,

six agencies complied with the requirements

of FFMIA. Chapter 2 of this report discusses

the results and goals for improving financial

management systems.

Efforts continue to focus on: (1) ensuring

sound accounting standards; (2) preparing

annual financial statements and obtaining

clean audit opinions; and (3) issuing streamlined financial management reports. Together
CHAPTER I. IMPROVE FINANCIAL ACCOUNTABILITY 13

these comprehensive efforts are providing the

type of consistent and reliable information

needed to better manage the Government

and gauge its performance.

Accounting Standards

Initiatives to ensure sound Federal accounting standards include:

• FASAB Projects: FASAB continues to address issues associated with implementation of the core body of standards. In addition, FASAB is reviewing the reporting

model implemented in 1998 and expects

to clarify the new model during 2000 and

2001. FASAB has initiated a comprehensive research project intended to develop

relevant accounting guidance for national

defense property, plant, and equipment

(PP&E). Topics identified as potential

FASAB projects for future years include:

(1) performance measures; (2) accounting

for grants, joint ventures, or cooperative

agreements; (3) accounting and reporting

issues associated with Federally-controlled

natural resources; (4) definitions of assets;

(5) reporting on internal controls; and (6)

reporting on custodial activities and balances, trust funds, and fiduciary funds.

• Accounting and Auditing Policy Committee

Projects: AAPC will continue projects addressing stewardship reporting and auditing, inter-entity costs, and imputed liabilities. The AAPC plans to conduct a survey

on inter-entity costing options. Inter-entity

costs are costs incurred by one Federal

agency but directly attributable to the operations of another agency.

Building upon AICPA recognition, outreach

efforts are underway to increase the public’s

awareness of the value and purpose of Federal

accounting standards. FASAB initiatives include participating widely in educational

events, scheduling board meetings outside

of the Washington, D.C. area, and increasing

the availability of information on the FASAB

projects.

Audited Financial Statements

Reliable financial information is needed

to enable Congress and the Executive Branch

to effectively evaluate the cost and performance of Federal programs and activities.

Clean Opinions on Agencies’ Financial Statements: All of the CFO Act agencies have

efforts underway to obtain clean opinions

on their financial statements. Appendix I

presents agency financial statement audit

results from 1996 through 1999. Several

key Federal agencies are still unable to

obtain a clean opinion on their financial

statements due to significant and long-standing deficiencies. These challenges are summarized in Table 1. Despite progress over the

past year, we still have a number of challenges

remaining before the U.S. Government obtains

a clean opinion on the Government-wide

consolidated financial statements.

Pursuant to a May 26, 1998, memorandum

from the President to agency heads, efforts

are underway within agencies to correct these

reported deficiencies. Endeavors require significant resources and some efforts will extend

beyond the end of the fiscal year. Certain

efforts are described below:

• Property, Plant and Equipment, and Inventories: DOD has engaged significant

contractor support to help value real and

personal property, improve PP&E internal

controls, and develop training for non-financial management personnel so they

may better understand the implications

their efforts have on financial statements.

In addition, DOD is in the process of implementing new, or modifying existing,

property systems.

• Direct Loan and Loan Guarantees: The

Department of Agriculture (USDA) established an executive steering and advisory

committee to improve the estimation and

re-estimation of direct loans and loan

guarantees. In addition, USDA established

an interagency working group to improve

USDA’s loan budgeting and accounting

processes.

• Environmental and Disposal Liabilities:

DOD made significant strides in identifying and recording environmental and

disposal liabilities and is working to improve documentation quality. Additional

time, however, is needed to conduct inventories, surveys, and site assessments, and

to prepare cost estimates.
14 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

Table 1. Challenges to Improving Federal Financial Reporting

Area Affected Description of Challenges

Property, Plant and Equipment,

and Inventories

Does not have adequate systems and controls to ensure the

accuracy of information about the assets it holds; does not

have adequate supporting financial logistical documentation; and cannot ensure all assets are reported.

Agency Affected: DOD

Loans Receivable and Loan Guarantee LiabilitiesUnable to properly estimate the cost of certain Federal

lending programs.

Agency Affected: USDA

Environmental and Disposal LiabilitiesEnvironmental and disposal liabilities lack adequate support and may not be complete.

Agency Affected: DOD

Military Post-Retirement Health

Benefits, and Other Liabilities

Adequate systems and cost data are not available to accurately estimate military post-retirement health benefits liability. Also, some agencies do not maintain adequate

records or have systems to ensure accurate and complete

data were used to estimate accounts payable and other liabilities.

Agencies Affected: DOD for health benefits and various

agencies for other liabilities

Cash Disbursement Activity Agencies are not effectively reconciling cash disbursements.

Agencies Affected: Several major agencies

Cost of Government Operations The Government could not support significant portions of

the total net cost of operations due to deficiencies in reporting assets and liabilities and ineffective cash disbursement

reconciliations. Also, it could not determine whether the

amounts reported in the individual net cost categories on

the statement of net cost were properly categorized.

Agencies Affected: Treasury and other agencies

Preparation of U.S. Government Financial StatementsThe Government does not have sufficient systems, controls,

or procedures to properly prepare consolidated financial

statements for the U.S. Government. The Government: (1)

cannot reconcile certain intra-governmental activity; (2)

cannot ensure information in the financial statements is

properly and consistently compiled; and (3) does not yet

have a process to obtain information to effectively reconcile

operation results with budget results.

Agencies Affected: Most agencies for intra-governmental

transactions; Treasury for compiling the financial statements and for reconciling operation results with budget results.

• Military Post-Retirement Health Benefits:

In partnership with its Office of Inspector

General and GAO, DOD formed a working

group to evaluate the use of cost data in

one of its reporting systems as a means

to better support and measure the full cost

of accrued benefits. DOD also established

a project team for improving data quality.
CHAPTER I. IMPROVE FINANCIAL ACCOUNTABILITY 15

• Clean Opinion on the Government-wide Financial Statements: We are still years

from being able to achieve a clean opinion

on the Government-wide financial statements in the 1999 Consolidated Financial

Report of the United States Government.

In addition to the agencies’ challenges discussed above, two other Government-wide

challenges exist that prevent the Federal

Government from obtaining a clean opinion on its consolidated financial statements. These challenges are summarized

in Table 1.

There is a need to improve the classification

of information collected to manage and properly report on the financial results of Government-wide operations. The following are initiatives underway to consistently capture information Government-wide and properly prepare

the Government-wide financial statements:

• Reconcile Intra-Governmental Transactions: Interagency task forces with representatives from OMB, Treasury, and

GAO work with the CFO Council to develop short- and long-term solutions to the

complex challenge of identifying and reporting transactions between Federal

agencies. The Financial Statements and

Standards Committee of the CFO Council

is designing a standard, technology-based

solution that will enable effective elimination of intra-governmental transactions

on the Government-wide consolidated financial statements. The project will attempt to create a technical means of recording classification data at the transaction level for addressing accounting and

reconciliation issues. The project will

evaluate alternative ways to record and

transmit classification and remittance information.

• Expand the Government-wide Proprietary

Data Model to Improve Compilation of Financial Information: Efforts will begin in

late 2000 to review and expand the Federal Agencies’ Centralized Trial-Balance

System (FACTS) I data model that Treasury uses to collect the financial information it uses in preparing the Governmentwide consolidated financial statements.

The FACTS I data model will fit within

a Government-wide proprietary data

model. It will be a companion model to

the budgetary data model published in

1998 by Treasury. Expanding the data

model to cover other aspects of financial

reporting will reduce form-based reporting

to OMB and Treasury. Collection of data

by elements rather than standard forms

eliminates reporting inconsistencies and

improves data reliability. This effort complements the FACTS II data collection effort designed to collect budget execution

data. See Chapter 2 for information pertaining to the FACTS II implementation.

• Evaluate the U.S. Government SGL: During 2000, Treasury, OMB, and the CFO

Council will evaluate the structure of the

SGL. As part of this Treasury-led effort,

the criteria for adding or changing definitions and data elements will be evaluated.

This analysis also will address ways to improve the current process for maintaining

the SGL.

Clean Opinions on Agency Components’ Financial Statements: OMB requires 20 agency

components to prepare audited financial statements separate from their department’s consolidated financial statements. Appendix II

displays the 1996–1999 audit results for each

agency component. In 1999, half of the 20

agency components received clean opinions.

Components that were unable to obtain a

clean opinion on their financial statements

are experiencing problems in the functional

issue areas presented in Table 1.

Clean Opinions on Government Corporations’

Financial Statements: In addition to the foregoing results for Federal agencies, OMB received 1999 audited financial statements from

all 18 Government corporations covered under

the Government Corporation and Control Act.

(See Appendix I for a listing of the Government corporations.) All but one of the corporations have received clean opinions on their

financial statements. A new accounting system

that will be operational for 2000 is expected

to improve financial reporting for the remaining corporation.
16 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

Cost of Improving Financial

Management

The CFO Act requires that this report

include an estimate of the cost of implementing the Government-wide plan. For 2000,

the 24 agencies covered by the CFO Act

estimate that the total cost of financial

management activities was approximately $7.6

billion.

MILESTONES TO ACHIEVE GOALS

Ensure sound accounting standards to provide the basis for Federal financial statements and

consistent, reliable financial information

Tasks: Milestones:

Promulgate accounting standards for reconciliation of individual direct loan and

loan guarantee programs (FASAB)

Issue exposure draft ............................................................................................... May 2000

Complete standards ................................................................................................ December 2000

Promulgate accounting standards for national defense PP&E (FASAB)

Deliberate ............................................................................................................... 2000

Complete standards ............................................................................................... 2001

Address priority issues selected from the FASAB Technical Agenda (FASAB) .... Ongoing

Assist in the implementation of accounting standards through the AAPC

(FASAB) ................................................................................................................... Ongoing

Provide training support (FASAB) ............................................................................ Ongoing

Speak at conferences

Review textbook and other instructional material

Reach out to the academic community

Prepare annual financial statements and obtain clean opinions for all CFO Act agencies

Tasks: Milestones:

Identify issues and solutions with intra-governmental transactions (CFO Council and agencies) ...................................................................................................... October 2000

Update audit requirements for Federal agency 2000 financial statements

(OMB) ....................................................................................................................... October 2000

Update form and content requirements for Federal agency 2000 financial statements (OMB) ........................................................................................................... October 2000

Begin evaluation of the SGL to determine the best structure to meet Government-wide and agency financial information needs (Treasury, OMB, and

agencies) .................................................................................................................. November 2000

Resolve obstacles for a clean opinion on the Government-wide financial statements (CFO Council, OMB, and Treasury) .......................................................... Ongoing

Remove impediments for obtaining clean audit opinions of agencies and components’ financial statements (CFO Act agencies) ................................................... Ongoing
CHAPTER I. IMPROVE FINANCIAL ACCOUNTABILITY 17

MILESTONES TO ACHIEVE GOALS—Continued

Provide quarterly reports on the status of agency plans for resolving financial

reporting deficiencies (CFO Act agencies) ............................................................ Ongoing

Provide training and education on preparing and auditing financial statements

(CFO Council, President’s Council on Integrity and Efficiency (PCIE), Executive Council on Integrity and Efficiency (ECIE), Treasury, and OMB) ............. Ongoing

Issue agency 2000 financial statements (CFO Act Agencies) ................................. March 1, 2001

Issue the 2000 Financial Report of the United States Government (Treasury and

OMB) ........................................................................................................................ March 31, 2001

Expand the Government-wide proprietary data model: (Treasury, OMB, and

agencies).

—Begin Analysis ..................................................................................................... Spring 2001

—Release Model ...................................................................................................... TBD

Issue timely and reliable financial management reports

Tasks: Milestones:

Receive results of the 1999 AGA Accountability Report review (Participating

agencies) .................................................................................................................. September 2000

Obtain congressional approval for permanent report streamlining authority

(OMB and CFO Council) ........................................................................................ November 2000

See Appendix I of this report for the Internet sites of agency 1999 pilot Accountability Reports.

Related Internet sites for Chapter 1 topics:

http://www.financenet.gov
19

CHAPTER II. IMPROVE FINANCIAL

PERFORMANCE

Goal:

Improve the financial performance of the Federal Government by:

• Developing financial management systems that provide timely, usable, and reliable

financial information to increase accountability and improve program management;

• Streamlining financial transactions using best business practices;

• Offering common administrative services to achieve efficiencies and reduce cost; and

• Maintaining a secure systems environment.

Congress acknowledged in the CFO Act

that the Federal Government ‘‘is in great

need of fundamental reform in financial management requirements and practices.’’ To succeed, Federal program managers must have

ready access to complete and accurate information about the costs of their programs. From

the Act’s inception, we recognized that if

we were to achieve their missions, Federal

financial management performance must be

vastly improved. To obtain this magnitude

of improvement, we selected three main

themes: (1) Federal financial management

systems must be modernized to support fiscal

and programmatic accountability and conform

to uniform accounting concepts and standards;

(2) financial operations must be less cumbersome, more responsive, and less costly;

and (3) agencies with strong financial management capabilities should be able to assist

other agencies by providing consolidated financial services on a competitive basis.

A Decade of Progress

Over the past 10 years, the Federal financial

community embarked on ambitious projects

to: (1) improve standards for financial management systems; (2) identify and test financial

software to see if it meets the core financial

system requirements for Federal financial

systems; (3) use modern business practices

to streamline financial transaction processing;

and (4) formalize and strengthen arrangements whereby Federal agencies provide financial and administrative services to other agencies (‘‘cross-servicing’’ arrangements). Some

of the key achievements over the past decade

in these areas are discussed below.

Developed Requirements for Federal Financial Systems: We have developed requirement

documents for Federal financial systems that

describe the functional standards for Government-wide and individual agency financial

systems. These documents also explain how

these systems should be integrated. Documents have been developed for core accounting

systems, managerial cost accounting systems,

and six of 13 subsidiary systems. Plans

are in place to issue requirements for the

remaining seven subsidiary systems. This

will ensure greater consistency in financial

management and increase compliance with

professional standards.

Established a Core Financial System Software Testing and Qualification Process: We

established a new process for testing and

certifying core financial management system

software packages to: (1) improve quality

assurance; (2) provide more comprehensive

information on software packages to Federal

agencies; and (3) improve communication of

Government requirements to vendors. JFMIP

completes a comprehensive test of each software package based on its published system

requirements. The new testing process collects

information about desirable features or characteristics over and above the mandatory re-
20 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

quirements. Requirements, test information,

and pertinent information about each software

package are available on the Internet at

www.financenet.gov/financenet/fed/jfmip.

Increased Use of Electronic Business Practices: The emergence of new technologies

and tools for doing business has dramatically

increased the Government’s potential to provide timely and effective services. The Administration’s focus on using electronic business

methods was highlighted in Electronic Commerce for Buyers and Sellers; Electronic Purchasing and Paying in the Federal Government, a report by the Electronic Processes

Initiatives Committee (EPIC) of the President’s

Management Council. This report envisions

extensive use of electronic commerce to make

Federal purchases and payments. The CFO

Council actively supports electronic commerce

initiatives through its Financial Implementation Team for Electronic Commerce (FITEC).

By taking advantage of the efficiencies offered

by electronic commerce, CFOs ensure that

Government business is more timely, accurate,

and responsive to customers. Some examples

of the many Federal initiatives include:

• Government-wide Small Purchase Bankcard: Small purchasing has been greatly

simplified by expanding the use of the

Government-wide small purchase bankcard. For purchases under $2,500, the

number of transactions using Governmentwide small purchase bankcards has increased from under four million in 1995

to over 18 million last year. The use of

bankcards has also reduced Federal administrative expenses through consolidated invoicing, increased early payment

rebates, and reduced prompt payment penalties. Using a conservative cost avoidance

estimate of $25 per transaction, the Federal Government is now saving at least

$457 million annually as a result of the

Government-wide small purchase bankcard program.

• Federal Government Use of EFT: The Federal Government continues to expand its

use of electronic funds transfers (EFT). In

April 1996, the Congress enacted legislation, mandating that 100 percent of payments, except tax refunds, be made via

EFT by 1999. This is the first year information is available on the Governmentwide rate for electronic transactions. In

1999, 78 percent of the 959 million payments made by the Federal Government

were electronic. This percentage includes

Government purchase and fleet card transactions and electronic payments by DOD,

non-Treasury agencies, and Treasury (excluding tax payments). Salary payments

were 96 percent electronic, vendor payments were 81 percent electronic, and benefit payments were 73 percent electronic.

Improved Financial Management by Offering

Administrative Services to Other Agencies:

Over the past decade, through cross-servicing

arrangements and ‘‘franchise fund’’ pilots,

Federal agencies increasingly have provided

financial management functions to other agencies or consolidated financial management

functions within their agencies, thereby improving efficiency and reducing costs throughout the Federal Government. For example,

the Defense Finance and Accounting Service

(DFAS) has consolidated over 300 finance

and accounting field sites scattered throughout

the world into 26 locations, saving $120

million annually.

In response to a National Performance

Review (NPR) recommendation, Congress authorized the establishment of franchise fund

pilots through GMRA to provide common

administrative services on a competitive basis.

Franchises strive to enhance efficiency by

providing best-value administrative services

to Federal customers. Since implementation

of the program, OMB and the Entrepreneurial

Government Committee of the CFO Council

have been monitoring performance of the

six designated franchise pilots, which collectively have generated more than $1 billion

in gross revenue in three years of operation.

With the pilot program scheduled to sunset

on October 1, 2001, OMB and the CFO

Council are pursuing permanent authority

for the program.

Achievements in the Past Year

Financial Management Systems

Improving financial systems so that they

produce accurate, reliable, consistent, and

timely information for program and financial
CHAPTER II. IMPROVE FINANCIAL PERFORMANCE 21

1 By law, this is an agency-head determination; in some cases

their auditors did not agree.

managers is a major challenge in an environment dominated by legacy systems that were

not designed to support current requirements

or technology. These system improvements

are difficult and progress requires great effort.

We are making that effort, recognizing that

it is a long-term process. In the past year,

the CFO Council, OMB, Treasury, JFMIP,

and the Federal agencies made key improvements that are discussed below.

Improved Compliance with FFMIA: The

FFMIA requires agency heads to implement

and maintain financial management systems

that comply substantially with: (1) Federal

financial management systems functional requirements; (2) applicable Federal accounting

standards; and (3) the U.S. Government’s

SGL at the transaction level. OMB reviewed

1999 financial statement audits for compliance

with FFMIA. Six agencies—DOE, NASA, NSF,

SSA, OPM, and the Federal Emergency Management Agency (FEMA)—reported they are

in substantial compliance.1 Many previouslyidentified problem areas have been corrected

by the 18 CFO agencies that have not

yet achieved substantial compliance.

Upgraded Financial Management Systems

for Year 2000 (Y2K): Upgrading financial

systems to bring them into compliance for

Y2K has resulted in improvements in many

other financial management areas, such as

improved security and internal controls.

Improved Budget Data Collection: Treasury

began implementing FACTS II to collect information by data elements rather than standard

forms. This has eliminated reporting inconsistencies and improved data reliability. This

data was used for the President’s 2000 Budget

and the Treasury’s Annual Report, delivered

to Congress in February and January, respectively.

Developed System Requirements: JFMIP continues to develop system requirements to

ensure Government-wide standards are met.

JFMIP:

• Reissued financial system requirements

for Direct Loan Systems (June 1999), Travel Systems (July 1999), and Seized Property and Forfeited Asset Systems (January

2000).

• Issued system requirements exposure

drafts for Grants Systems (October 1999)

and Guaranteed Loan Systems (October

1999).

• Developed system requirements for Property Systems and Benefit Payments Systems that will be issued in December 2000.

Electronic Transactions

Electronic commerce can be a valuable

tool for streamlining Government financial

operations and improving the overall integrity

of financial information. Federal agencies continued their efforts to improve and expand

electronic payment programs during the past

year. They expanded Federal credit card

programs and launched innovative payroll

distribution tests using smart cards, electronic

payment and collection systems, and DOT’s

electronic travel booking pilot test.

Implemented Credit Card Programs: Federal

Government credit card programs have substantially reduced paperwork, facilitated payments to vendors, improved employee support,

and increased rebates. The use of commercial

credit cards is central to the Government’s

strategy for implementing electronic commerce. They are easy to use and make

possible a full, electronic business cycle. Some

key programs are described below.

• Government-wide Small Purchase Bankcard: The CFO Council’s goal for small

purchase card use is more than 90 percent

of purchases under $2,500. In 1999, 11 of

the 24 CFO agencies exceeded this goal,

17 agencies exceeded 80 percent, and 20

agencies exceeded 70 percent. (See Table

2.) Total purchase card transactions for

1999 increased by two million.

• SmartPay Program: The SmartPay program is a Government-wide contract providing purchase, travel, and fleet cards to

the Federal Government. Through the program, agencies are able to select one of

five banks offering credit card services. In

1999, over two million cards were issued,

customer training was completed, electronic invoicing and disbursing between

contract banks and Government offices
22 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

Table 2. CFO Agency Use of Government-wide Small Purchase Bankcard

Small Purchase Card Use

Rates Agencies

Over 90 Percent ........... DOC, DOD, DOE, HHS, DOI, DOT, Treasury, VA, FEMA, NSF, SBA

Over 80 Percent ........... USDA, Department of Housing and Urban Development (HUD), DOL,

Environmental Protection Agency (EPA), NASA, NRC

Over 70 Percent ........... Education, DOJ, OPM

were established, and travel agency interfaces for transmission of reconciliation

files were completed. Total sales under the

SmartPay program exceeded $14.8 billion

in 1999. The Government received over

$55 million in rebate payments from the

SmartPay program in 1999. An illustration of the benefits of the SmartPay program is DOI’s development of a single, integrated credit card program using the

GSA’s SmartPay contract. DOI successfully combined the purchasing, travel, and

fleet functions into one card. The DOI

manages over 60,000 cards under the program, which has an automated interface

with DOI’s accounting system.

Reduced Support Costs with Stored Value

Cards: Treasury and DOD continue to expand

the use of stored value cards to replace

cash and paper voucher payroll systems for

basic trainees. These stored value card programs are the largest in the United States

with over $80 million in transactions to

date, representing three million transactions

and 375,000 cards. The program is still

expanding in the U.S. and also was expanded

to Camp McGovern, a peacekeeping base

in Bosnia, in December 1999. All soldiers,

civilians, and contractors stationed at the

camp use stored value cards to receive salary

payments from the Army finance office and

to make payments to merchants operating

on the base. Use of the card in Bosnia

has significantly reduced cash requirements

and the support costs related to holding

and securing cash.

Increased Electronic Payments and Collections: Payments and collections are particularly targeted for improvement by the CFO

Council because they are areas in which

the Government interacts with individuals,

vendors, and grant recipients. Some key

achievements in payment activities and Internal Revenue Service (IRS) collection activities

are discussed below.

• VA Goes Paperless: VA’s totally electronic

and paperless payment system, the Prime

Vendor Payment Program, automates

pharmaceutical company payments. It

places orders electronically, processes

them against a credit card-like account established at VA’s bank, and electronically

posts them to VA’s accounting system.

During 1999, VA successfully processed

315,960 transactions, worth more than

$1.2 billion, under this program.

• Electronic Benefits Transfer (EBT): State

implementation of the EBT program to

provide food stamps and other benefits

electronically continues to expand. As of

March 2000, 38 states, the District of Columbia, and Puerto Rico have operational

online food stamp EBT systems.

• Student Aid Delivery System Modernization: The modernization of student financial aid is one of Education’s highest priorities. Students can now apply for student

financial aid electronically and access

their direct student loan information over

the Internet. Education pilot tested a new

‘‘just-in-time’’ or demand payment system

for student financial aid, which will disburse funds to students as their tuition

bills are due rather than in one lump sum.

When fully implemented, this program

will improve cash management and daily

reconciliation of the cash position at more

than 6,000 post-secondary schools nationwide.

Electronic Federal Tax Payment System

(EFTPS): EFTPS processes electronic pay-
CHAPTER II. IMPROVE FINANCIAL PERFORMANCE 23

ments from taxpayers to the IRS. In 1999,

EFTPS processed 55 million transactions for

over 2.3 million taxpayers with an error

rate of only .08 percent, a 19 percent improvement in accuracy from the paper-based system

it is replacing. In addition, the EFTPS program, which accepts credit cards for IRS

Form 1040 tax payments, was expanded to

include credit card payments for extension

filings and estimated tax payments. The

vendors collect funds from taxpayers by credit

card and send them to Treasury by EFT

through EFTPS. EFTPS is the world’s largest

collection mechanism, which in 1999 accelerated Treasury’s collection of over $1.3 trillion

by more than one day.

Pilot Tested Electronic Booking of Federal

Travel: In March 2000, DOT began a pilot

test of an operation whereby Federal agencies

will be able to make their travel arrangements

directly with the provider. It is expected

to reduce transaction fees by $10.92 per

booking and cut other costs of making travel

arrangements. DOT plans to establish direct

connections with airlines and car rental companies to bring economies to those Federal

agencies channeling their bookings through

the booking engine to their designated travel

agents. Savings are anticipated from elimination of credit charges, fees to computer

reservation systems, and accounting for commissions and rebates.

Common Administrative Services

As part of the GMRA in 1994, Congress

authorized the establishment of franchise fund

pilot programs to provide common administrative services on a competitive basis. Examples

of these common administrative services include financial and administrative systems

operations, payroll processing, records management, and financial and management training.

In 1997 six franchise fund pilots were established at DOC, HHS, DOI, Treasury, VA,

and EPA.

Increased Use of Franchise Funds: From

1997–1999 franchise funds generated $1.2

billion in gross revenues. (See Chart 2.)

Monitored Franchise Fund Performance:

Over the past three years, OMB and the

CFO Council, through the Council’s Entrepreneurial Government Committee, have monitored performance of the franchise fund

pilot. A legislatively-mandated report was

submitted to Congress in April 1998 on

the interim performance of the pilot. Over

the past year, OMB and the CFO Council’s

Electronic Government Committee have been

conducting a follow-up assessment of the

pilot program, focusing on three key elements:

(1) value to Government; (2) financial responsibility and integrity; and (3) competition.

Security of Financial Management

Systems

Virtually every agency conducts business

using various aspects of the electronic environment, such as the Internet, intranets, and

local and wide-area networks. The electronic

environment is greatly changing the way

the public, industry, and state and local

governments interact with the Federal Government. To meet public and private demand,

agencies are offering more online services

as well as electronic form and transaction

capabilities. Today’s financial management environment depends on this technology, presenting it with a new security challenge.

Through the Computer Security Act of 1987,

the Paperwork Reduction Act of 1995, the

Clinger-Cohen Act of 1996, and the Government Paperwork Elimination Act of 1998,

Congress has provided a sound statutory

framework to provide that security. Within

that framework, OMB and the National Institute for Standards and Technology (NIST),

respectively have the responsibility for setting

security policy and developing guidance for

the agencies. Departments and agencies must

implement the policy and guidance in a

risk-based and cost-effective way that enables

their business operations.

To assist agencies in their security responsibilities for all systems, including financial

systems, OMB issued two memoranda. OMB

Memorandum No. 00–07, Incorporating and

Funding Security in Information Systems Investments, provides specific security criteria

that must be met to obtain new or continued

funding for information systems and includes

guidance on accounting for security costs

over the life of the system. OMB Memorandum

No. 00–10, OMB Procedures and Guidance

on Implementing the Government Paperwork

Elimination Act, outlines how agencies are
24 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

FY 1997 FY 1998 FY 1999*

$0

$100

$200

$300

$400

$500

Chart 2. Increased Use of Common Administrative Services 

Through Franchise Fund Pilots 

Gross Revenues: FY 1997-FY 1999

Dollars in millions

$298

$397

$500

*FY 1999 Unaudited

to ensure security while moving towards

an even greater electronic environment.

OMB is working with the CFO and CIO

Councils, the PCIE, and NIST to develop

additional strategies to ensure the continued

confidentiality, availability, integrity, and authenticity of Government financial information

and systems. In addition, agencies must ensure basic security management requirements

such as password management, audit management and logs, integration of application

and database security, and role-based access

control are included with the overall management of agency systems.

Initiatives

The Federal Government must continue

to improve its financial performance. Now,

more than ever, effective management and

accountability require ready access to timely

and accurate financial data. Individuals and

organizations with which the Government

does business, as well as Federal program

managers, justifiably expect programs to be

more responsive, to cost less, and to be

secure. To meet these expectations, financial

management systems must be improved and

made secure. The use of electronic transactions

must be expanded and entrepreneurial techniques must be used to provide common

administrative services wherever it is appropriate.

Financial Management Systems

Improved financial performance requires

quality financial management systems. These

systems must be capable of supporting effective decision-making and ensuring accountability. Systems enhancements must be timely,

within budget, and provide quality support

to system users. Future financial management

system initiatives of OMB and the CFO

Council fall into three general categories:

(1) assisting agencies in making financial

management system improvements; (2) improving the data and functional requirements

for Federal financial management systems;

and (3) improving central agency (Treasury

and OMB) systems.

Improve Agency Financial Management Systems: Over the course of the next five years,

it is anticipated that the vast majority of

agency financial system applications will be

upgraded or replaced. The CFO Council, OMB,

and JFMIP are assisting agencies in making

improvements to financial management systems through the following initiatives:
CHAPTER II. IMPROVE FINANCIAL PERFORMANCE 25

• Update Policy: OMB Circular A–127, Financial Management Systems, prescribes

the policies and standards that executive

departments and agencies must follow in

developing, operating, evaluating, and reporting on financial management systems.

It will be revised during 2001 to provide:

(1) a process for reviewing the FFMIA remediation plans, tracking performance,

and performing compliance reviews; (2)

guidance on procurement of financial management systems and services; and (3)

clarification of financial management system requirements.

• Emphasize FFMIA Compliance: OMB and

the CFO Council will emphasize FFMIA

compliance through more vigorous monitoring and outreach to the agencies. At

the same time, OMB is revising the standards for compliance with FFMIA, to focus

agencies on the financial standards and

systems requirements that are at the

heart of the Act. A collaborative group

that includes the agencies, multiple offices

within OMB, the CFO Council’s Systems

and Electronic Commerce Committees, the

CIO Council, and the Procurement Executives Council will help agencies develop

plans to modernize financial management

systems and track implementation. Group

monitoring will ensure that agencies are

complying with FFMIA and taking action

to correct other system problems. It will

also ensure that resource needs are appropriately defined; actions are integrated

with financial management, information

technology, and business planning processes; capital asset plans are being developed where needed and supported by

agency management; and implementation

is on schedule. The CFO Council’s Systems

Committee, along with input from the

PCIE, expects to issue an exposure draft

later this year presenting guidance to assist agency management in reviewing and

monitoring financial systems for compliance with applicable policies and regulations, including FFMIA.

• Improve Capital Asset Planning: Improving the planning, budgeting, and acquisition of capital assets, including financial

management systems, has been a widespread concern. During the 2001 budget

process, OMB provided agencies with assessments of agency capital asset plans,

information technology investment summaries, and overall capital planning and

investment control (CPIC) processes. OMB

recommended funding commensurate with

the quality of agencies’ CPIC processes.

Agencies are continuing to improve their

processes based upon these recommendations. In addition, a new automated database linking information technology spending summaries with capital asset plans

and justifications is planned to allow

tracking of costs, schedules, and performance for key systems across the Government, beginning with the 2002 budget. Future plans are to link this information

with initiatives included in agency financial management system plans.

• Use Information Technology Resource

Board (ITRB): The CFO Council and OMB

will encourage agencies to use the ITRB,

a legislatively-established group charged

with helping agencies assess information

technology systems, in reviewing agency

project plans and risk assessments, and

in analyzing specific financial management system problems that could prevent

an agency from achieving FFMIA compliance.

• Ensure Quality Core Financial System

Software Packages: The JFMIP will test

system requirements issued since the last

test of software packages. Commercial financial software for the Federal Government must pass the test to retain a certificate of compliance. JFMIP, together with

the CFO Council’s Systems Committee

and OMB, will assess whether the core

systems test should be expanded to cover

application service providers and customdeveloped software. In 2000, JFMIP will

test and qualify software for compliance

with Treasury FACTS II reporting requirements. In the future, JFMIP also

plans to test non-core financial systems

based on functional requirements.

• Identify Best Practices to Support Successful System Implementation: JFMIP will

compile financial system implementation

resources and post them on its Internet

site. Also, the CFO Council’s Systems and
26 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

the Human Resources Committees will collaborate to identify recruitment, retention,

and training strategies necessary to successfully implement and manage Federal

financial systems.

Improve Classification of Data: There is

a need to improve the classification of information collected to manage and report on the

financial results of Government operations.

Collection of data by elements rather than

standard forms eliminates reporting inconsistencies and improves data reliability. For

example, the FACTS II system collects data

by elements rather than standard forms.

Treasury and OMB are urging agencies to

increase their participation in FACTS II reporting to the 90 percent level by November

2000. By the end of 2001, all agencies

must submit budget execution reports through

FACTS II. Other initiatives to improve classification of data such as FACTS I and the

SGL are discussed in Chapter 1.

Continue Updating and Developing System

Functional Requirement Documents: During

2000, JFMIP will issue requirement documents for grants, guaranteed loans, and property systems, and continue work on benefit

systems. The goal is to issue financial system

requirements for the balance of subsidiary

systems in 2001. JFMIP and the CFO Council’s Financial Systems Committee will define

appropriate data exchange and processing

connections between critical financial management systems in the Federal Government.

Efforts to develop and implement standardized

interfaces will also be reviewed and evaluated.

Improve Central Agency Systems: Improvements to central agency systems are necessary

to ensure adequate, consistent, and timely

financial information for Government-wide reporting. Several new central systems, critical

to Government-wide financial reporting, are

described below.

• Improve Central Accounting Processes:

Treasury Financial Management Service

(FMS), OMB, and the CFO Council are

developing a strategy for improving central accounting and reporting functions,

and central processes associated with

budget execution. The vision is to provide

Government-wide accounting information

almost in real time. It is anticipated that

agency systems will need to be modified

as central processes change. As an interim

improvement, a web-enabled application is

being developed to provide agencies with

more current information from the FMS

legacy systems.

• Replace GOALS: Treasury FMS is making

the Government On-Line Accounting Link

System (GOALS) more user-friendly, in

part, by migrating its applications to a

new Government platform. FMS expects

to begin implementing the GOALS application in the fourth quarter of 2000. Movement to a new platform will make it easier

for agencies to enter their financial data

into the GOALS system. The objective is

to allow agencies and FMS to exchange

accounting, budget, and financial information through data file transfers.

Electronic Transactions

Streamlined processing will make financial

management more effective. Federal agencies

are beginning to re-engineer business practices

to provide better service at reduced cost.

Agencies are adopting electronic commerce

and developing innovative relationships with

the private sector, like the SmartPay program.

Electronic business techniques available today

and those that will be available in the

future will fundamentally change the way

the Government does business. Investments

today in electronic business techniques will

improve future delivery of services both within

the Government and to the public.

• Improve Payment Performance under the

SmartPay Program: At this time, delinquency rates for individually billed accounts for travel are at 12 percent of

amounts due. Delinquency rates for centrally billed travel and purchase accounts

are 11 percent, and 2 percent, respectively.

Delinquency rates are having an adverse

impact on the benefits from the program.

OMB will negotiate delinquency rate reduction goals with each agency. Quarterly

reports will be published to track agency

performance to their established goals.

• Improve Access America for Students

(AAFS): Through the collaborative efforts

of agencies and private-sector companies,

AAFS has developed pilot projects to ex-
CHAPTER II. IMPROVE FINANCIAL PERFORMANCE 27

pand and improve secure electronic access

to educational services and information for

students. In 2000, AAFS expanded its

award-winning web portal ‘‘students.gov’’

linking to commercial sites offering student services and information. The site includes searchable categories such as plan

your education, pay for your education,

taxes, community service, and career development. Four AAFS agencies, Education, VA, DOL and the U.S. Postal Service, implemented a pilot test this summer

of digital signature use using GSA’s Access

Certificates for Electronic Services (ACES)

contract to acquire digital signature services. The ACES contract is being used to

test multi-agency use of a common electronic identification. The expansion of

AAFS allows students searching for information on education and careers to come

to one location to start their research.

• Encourage Businesses to Pay Taxes Electronically: An IRS and FMS Internet pilot

program will begin in mid-2000 encouraging businesses to pay taxes electronically through EFTPS. The web application

is being developed to allow businesses and

other taxpayers to enroll, pay taxes, view

their account details, and obtain customer

service over the Internet.

• Implement Point-of-Sale Check Conversion

System: Treasury’s point-of-sale check conversion pilot is designed to change paper

checks into EFT transactions. This process

of ‘‘check conversion’’ from paper to an

electronic transaction results in more reliable and efficient payments. A consumer

leaves each transaction with a canceled

check and a transaction receipt. As of December 1998, there are four agency sites

that convert consumer checks to EFT

transactions.

• Develop Intra-governmental Payment and

Collection (IPAC) System: Treasury FMS

and the Federal Reserve Bank are developing IPAC to replace the current on-line

payment and collection applications for all

type of non-retail intra-governmental

transfers. The new IPAC system is expected to give agencies improved transaction processing. Development of the system is underway and user testing will

begin in 2000. Implementation and integration of IPAC with GOALS II is expected in spring 2001.

• Implement Central Contractor Registration

(CCR): DOD implemented a central contractor repository for vendor information

that permits vendors to register just once,

yet offer services to many agencies. The

CCR is a web-enabled, self-service database accessible to vendors and Government officials. The CCR allows all registered vendors to be paid via EFT. Agencies use the CCR as a vendor database

for procurement and EFT information.

Agencies provide contract and EFT data

to Treasury FMS for payments. Several

agencies are using the CCR and further

expansion to other agencies is anticipated

over the next year.

Common Administrative Services

Applying entrepreneurial techniques is

changing the way the Government provides

services. This approach is improving the

Government’s financial performance. Franchise

operations are based on a set of fundamental

‘‘Business Operating Principles’’ that encourage full cost recovery, performance measurement, and benchmarking. The goal is to

put public and private sector providers on

a level playing field. The playing field is

leveled primarily by the ability and requirement of franchises to account for and recover

the full cost of providing their services.

Since the inception of the pilot, franchises

have made full cost accounting a priority

and continue to address this issue both

individually, through systems development

and the use of financial statement audits,

and collectively, by comparing best practices.

The CFO Council’s Entrepreneurial Government Committee has been instrumental in

providing a forum in which to identify issues

and develop solutions for franchises and other

reimbursable organizations. To provide for

continued innovation, the Administration proposed legislation to make the franchise fund

concept permanent.
28 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

Security of Financial Management

Systems

Virtually every agency conducts some part

of its business electronically via the Internet.

This is greatly changing the way citizens

and industry interact with the Federal Government. To meet public and industry demand,

agencies are offering more online services

through Access America-type initiatives as

well as electronic form and transaction capabilities. To further promote electronic interaction, the Government Paperwork Elimination Act of 1998 requires that by October

21, 2003, Federal agencies provide an electronic option to those persons who are required

to interact with the Federal Government

to maintain, submit, or receive information.

While Internet access can provide great

efficiency benefits, it also introduces significant risks and challenges for security and

privacy in agency systems. This is especially

true for Federal financial and administrative

systems that are Internet accessible. For

example, to ensure that these systems are

available only to authorized users, each user’s

identity must be authenticated before they

are granted electronic access. The Federal

Government is implementing PKI technology

and other technologies such as smart identification cards to provide this authentication.

Similarly, assurance is necessary to preserve

the appropriate levels of information confidentiality, availability, and integrity, in financial

and administrative systems.

To ensure that security is an integral

element of all Government systems, especially

those providing online access, OMB issued

Memorandum No. 00–007, Incorporating and

Funding Security in Information Systems Investments, which sets forth specific security

criteria that agencies must meet to obtain

new or continued funding for those systems.

Additionally, the CFO Council is working

with OMB, the CIO Council, the PCIE,

NIST, and others to assist agencies in identifying and employing the controls necessary

to provide and maintain the appropriate level

of security for all Federal information systems,

including financial and administrative systems, web-based information services, procurement systems, financial transactions with

the public, etc.

Conduct ‘‘Best Practices’’ Workshops: The

CFO Council in partnership with the CIO

Council and the Information Technology Association of America is sponsoring ‘‘best practices’’ workshops to examine security and

privacy initiatives that could assist Federal

agencies.

Develop Benchmarks: The CFO Council’s

Systems Committee and CIO Council are

working collaboratively to develop and distribute fact-finding surveys to gather information on ‘‘best practices.’’ These surveys will

be used in developing future guidance on

security for both electronic Government initiatives and financial systems.

Identify and Promote a Minimum Set of

Security Controls Necessary to Secure Federal

Financial and Administrative Systems: Government-wide financial performance can be

greatly improved by direct user access to

financial and administrative systems via the

Internet. However, access must be secure.

In 2000, OMB, the CFO and CIO Councils,

the PCIE, NIST, and others will develop

an agreed upon set of minimum security

controls for agency financial and administrative systems and information. These controls

will address all elements of security, i.e.,

confidentiality, availability, integrity and authenticity. The challenge will be to provide

some level of uniformity while maintaining

sufficient flexibility for unique agency needs

and circumstances. The effort will explore

uniform security methods through PKI, digital

certificates, and smart identification cards.
CHAPTER II. IMPROVE FINANCIAL PERFORMANCE 29

MILESTONES TO ACHIEVE GOALS

Improve development of financial management systems that provide timely, usable, and reliable

financial information to increase accountability and improve program management

Tasks: Milestones:

Support Agency Financial Management System Improvements

Establish core accounting systems test and qualification process for compliance with new FACTS II requirements (JFMIP) ............................................. August 2000

Compile system implementation resources for agencies and develop a human

resources strategy (CFO Council and JFMIP) .................................................. September 2000

Establish a process to improve financial systems using agency FFMIA remediation plans (OMB) ............................................................................................ October 2000

Revise FFMIA implementation guidance to focus agencies on the core financial systems and standards requirements ......................................................... January 2001

Revise OMB Circular A–127 to include: (1) FFMIA review and reporting requirements; (2) guidance on procuring financial management systems and

services; and (3) clarification of current financial management systems requirements (OMB) ............................................................................................... September 2001

Provide agencies with assessments of capital asset plans, information technology investment summaries, and overall capital planning (OMB) .............. Ongoing

Issue Functional Requirements

Issue system requirements documents: (JFMIP)

—Issue requirements for grants, guaranteed loans systems, and property

systems ............................................................................................................. 2000

—Issue an exposure draft for benefit payment system requirements ............ 2000

—Issue exposure drafts for the balance of subsidiary system requirements ................................................................................................................ 2001

Streamline financial transactions using good business practices

Tasks: Milestones:

Develop IPAC System: (Treasury)

—Test IPAC ............................................................................................................. November 2000

—Implement IPAC with GOALS II ....................................................................... June 2001

Establish agency SmartPay program payments goals and monitor quarterly delinquency reports (OMB, CFO Council, and GSA) ............................................... Quarterly

Continue Access America for Students: (Education and agencies)

—Improve functionality and design of ‘‘students.gov’’ portal site ....................... Ongoing

—Build authentication strategies to be used throughout the Government ....... Ongoing

—Test digital certificates ....................................................................................... Ongoing
30 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

MILESTONES TO ACHIEVE GOALS—Continued

Provide common administrative services to achieve efficiencies and reduce cost

Tasks: Milestones:

Propose legislation to make the franchise fund authority permanent (OMB) ...... September 2000

Update operating guidance to include full cost accounting (OMB) ........................ March 2001

Establish and maintain a secure systems environment that ensures appropriate information access

and exchange

Tasks: Milestones:

Conduct ‘‘best practices’’ workshops to examine security and privacy (CFO and

CIO Councils) .......................................................................................................... Ongoing

Develop benchmarks (CFO Council Systems Committee) ....................................... TBD

—Develop survey questions

—Mail surveys

—Analyze surveys

Develop secure Internet access minimum requirements for financial and administrative systems ..................................................................................................... October 2000

—Design a plan which establishes a framework for minimum security controls

Related Internet sites for Chapter 2 topics:

http://www.fms.treas.gov

http://www.financenet.gov/jfmip
31

CHAPTER III. INVEST IN HUMAN CAPITAL

Goal:

Develop and maintain a high quality Federal financial management workforce by:

• Assisting agencies in recruiting and retaining qualified financial management personnel; and

• Promoting effective financial management education and training within the Federal

Government.

The CFO Act defined the need for a

new class of financial managers within the

Federal Government. Agency CFOs recognize

their organizational success depends upon

a highly talented and multi-disciplinary workforce. Indeed, our ability to deliver on any

of our goals depends on the qualifications,

productivity, and motivation of our workforce.

The CFO Council continues to lead efforts

to develop such a diversified corps of financial

management professionals for the Federal

Government.

A Decade of Progress:

Some of the Council’s key accomplishments

over the past decade include:

• Defined Necessary Knowledge, Skills, and

Abilities (KSAs): The Federal financial

management community defined and published KSAs, also known as core competencies, during 1995–1998. These core

competency documents articulate the appropriate knowledge, skills, and abilities

necessary for financial personnel to succeed in their respective careers. These documents have guided the Council’s human

capital strategies and efforts relating to

professional development, recruitment,

and qualification standards.

• Established a CFO Council Fellows Program: The CFO Council continues to sponsor a CFO Fellows Program, currently in

its third year. The program is designed

to provide career development opportunities for promising financial managers

within the CFO community with the intent of developing a cadre of experienced

and diverse leaders prepared to assume

financial executive positions in the future.

• Compiled Personnel Management Tools:

The CFO Council compiled and posted on

the Internet An Executive Tool Kit—Building a Financial Management Development

Plan. It can be found at www.financenet.

gov/financenet/fed/cfo/hrc. The kit assembles, at one site, useful personnel management tools for financial managers. The

information guides managers in assessing

their workforce needs and developing

workforce skills for the future. The tool

kit brings together in one place KSAs,

model individual development plans, promotional materials, and best practices.

• Improved Recruitment Strategies: The CFO

Council and OPM issued Recruiting and

Retaining Financial Management Employees—Useful Tools. This publication is organized around common problems in recruitment and retention reported by financial

managers and provides solutions to these

problems. This publication has been very

popular and has been used as a model

by other groups. It is posted at

www.opm.gov/iag/public/recruiti.htm.

• Established Training Guidelines for Federal Financial Management Personnel: The

CFO Council issued a Statement of Principles for Federal Financial Education and

Training providing guidelines for planning

and evaluating education and training programs. It has been widely distributed to

the financial and human resources com-
32 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

munities, training and education providers, and is posted on financenet.

Achievements in the Past Year

Financial Management Personnel

• Established a Core Competencies Review

Board: A Core Competencies Review

Board was established to ensure KSAs do

not become outdated as financial management requirements continue to evolve. In

1999, revised core competencies’ documents were issued for budget analysts, financial managers, and accountants.

• Established CFO Council Impact Awards:

Personal recognition is a key element to

any successful retention strategy. The

Council has initiated the CFO Council

Committee Impact Awards to publicly recognize individuals who, working within

the Council’s committee structure, are advancing the goals of the Council. Seventeen outstanding financial employees were

recognized at the annual JFMIP Conference in March 2000.

• Established the CFO Council Recruitment

Consortium: The CFO Council Human Resources Committee completed a survey of

CFO Council members to gauge their interest in pooling resources for consolidating the recruitment of financial personnel. The effort led to the establishment

of the CFO Council Recruitment Consortium. The Consortium consists of six CFO

Act agencies committed to working together to gain leverage in the hiring market at selected colleges and universities.

Recruitment trips have been completed to

three universities and two more are scheduled in late October. The current common

vacancy announcements have attracted 35

applicants for the accountant position, 73

applicants for the budget analyst position,

and 74 applicants for the financial specialist position, as of October 16, 2000.

OPM is ready to begin issuing certificates

of eligible candidates immediately upon request. Requests may come from either the

financial office or the human resources office of participating agencies.

• Revised Qualification and Classification

Standards: OPM issued a draft revision

of its qualification and classification standards for GS-510 accountants. The Human

Resources Committee worked closely with

OPM in developing these revised standards, focusing on qualitative measures

based on demonstrated competencies rather than quantitative measures, such as the

number of accounting credit hours or years

of experience. Seven agencies volunteered

to pilot the new standards beginning in

April 1999.

Education and Training

Improved Professional Education Opportunities: Recognizing the opportunities presented

by rapidly evolving electronic learning technologies, the CFO Council took an active role

in the Federal Training Technology Initiative,

which led to issuance of the President’s Executive Order 13111, Using Technology To Improve Training Opportunities for Federal Government Employees. The CFO Council contributed to the work of the Presidential Task

Force on Federal Training Technology, established by the Executive Order. The final report

to the President was issued in July 2000 and

is posted at OPM’s Internet site. It recommends use of the Federal Learning eXchange (FLX) as a virtual yellow pages of education and training opportunities for Federal

workers. FLX will also offer other learning

tools such as the ‘‘Marketplace,’’ a site for

agencies to collaborate in the development of

training and sharing resources.

Initiatives:

In today’s dynamic environment, new strategies are needed to recruit, develop, and

sustain a workforce prepared to meet the

needs of the next decade. Financial management legislation subsequent to the CFO Act,

an increasing rate of new and revised professional standards, and new opportunities presented by rapidly evolving technologies mean

significant changes to the practice of Federal

financial management. The past decade has

seen the downsizing of administrative and

financial management functions in Government along with a marked increase in the

number of employees eligible to retire. CFOs

are reassessing the appropriate level, skills

mix, and location of staff while taking into

account their overall resources.
CHAPTER III. INVEST IN HUMAN CAPITAL 33

The themes of this year’s human resources

plan are to: (1) continue progress in developing

new recruitment strategies; (2) promote real

improvements in professional development;

and (3) reach out to the academic community.

Taken together, these initiatives offer a framework for a comprehensive investment in

human capital.

Financial Management Personnel

Recruitment Consortium: In 1999, the Council established a recruitment consortium consisting of six CFO Act agencies who committed

to work together in order to gain leverage in

the hiring market at selected colleges and universities. The desired outcome of this project

is faster, more cost-effective placement of wellqualified individuals into Federal financial

management positions. The consortium has

outlined a framework for this effort and will

take action in 2000/2001 to build a sustainable

pipeline of talented people to fill positions.

The consortium will also produce a program

for use by other agencies to make their

recruiting efforts more effective. This effort,

the CFO Careers program, will include targeted recruitment aimed at attracting a wellqualified, diverse pool of candidates who

will be offered unprecedented opportunities

for early career development through structured training and rotational assignments

leading to the full performance level within

their field. This program will target positions

in all financial management disciplines, including budget analysts, financial systems

specialists, accountants, and financial management specialists.

Presidential Management Intern (PMI) Program: One of the most successful hiring programs in Government is the PMI program. The

PMI program consistently delivers high quality

candidates to Federal agencies for public policy

positions. These candidates often rise to leadership positions within Government.

However, the PMI program has not worked

well for financial management positions. The

historical focus of the program on public

policy positions overlooks comparably skilled

financial management candidates. To address

this problem, the CFO Council will work

with OPM to strengthen the program’s emphasis on Federal finance.

Internship Opportunities: One of the most

pointed lessons we have learned is recruitment

for top candidates begins well before the end

of an academic program. In fact, many of our

competitors for talent use summer jobs and

internships to attract students in undergraduate and graduate programs, providing

practical exposure to the career options available, and promoting a good fit between employer and employee well before a permanent

job offer is made.

Federal financial management organizations

are ideally suited for providing challenging

internship opportunities to talented students.

To maximize our competitive position for

these talented candidates and to promote

a broader understanding of Federal financial

management, the CFO Council will initiate

a CFO Internship program, providing structured on-the-job experiences to undergraduate

and graduate students that may lead to

permanent job opportunities in the future.

Partnership with Colleges and Universities:

The CFO Council has a great opportunity for

a natural alliance with colleges and universities that will enable the Federal financial

management community to strengthen its

human capital. This alliance spans the recruitment and professional development goals of

the Council. The CFO Council will reach out

to the academic community in the following

ways:

• Partnerships in support of the recruitment

consortium, including support for the CFO

Careers program;

• Establishment of the CFO Internship program, which will host undergraduate and

graduate-level interns at CFO agencies;

• Encouraging the development of course

content focusing on Federal financial management issues; and

• Partnerships in innovative delivery of

structured professional development

courses to the financial management community.

Education and Training

Scholarship Program: The CFO Council will

partner with the AGA to provide competitive

scholarship opportunities to outstanding Fed-
34 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

eral financial managers to pursue degree programs and professional certifications through

the CFO Scholars program. AGA’s administration of a scholarship fund and a competitive

program for placement will provide unprecedented opportunities for our most valued employees to obtain the skills needed to enable

us to meet our performance goals in the coming years. This program will also complement

our recruitment efforts, as it provides further

evidence of our long-term commitment to excellence in the workforce.

Development of the Federal Financial Workforce: The past decade has produced the infrastructure for individual agencies to establish

performance goals for investing in human capital in the following areas:

• Needs Assessments: The CFO Council will

promote periodic assessments of applicable

financial organizations and respective employees to identify current and emerging

skill requirements for organizations, employees, and prospective employees. Responses to a recent informal survey of

CFO Council members indicated 14 CFO

Act agencies conducted at least a partial

organizational needs assessment within

the last two years.

• Professional Education: Continuing professional education is one of the key factors

for improving and maintaining performance and is a sound retention strategy.

The CFO Council will foster and support

investments in continuing professional

education for financial management workers, and will promote the use of structured

planning techniques, such as assessments,

for targeting these investments. A March

2000 survey of financial management employees indicated over 50 percent of respondents had attended 20 hours or more

of education and training in calendar year

1999. About 20 percent of respondents reported they had no education and training

in the same period.

• Professional Certification: Earning and

maintaining a professional certification is

a strong indicator of proficiency and a

commitment to keep up with advances in

the financial management professions.

Employees will be encouraged to pursue

and maintain certifications appropriate to

their career goals. About 20 percent of financial employees responding to a survey

in March 2000 reported they hold one or

more professional certifications pertinent

to their professions.

MILESTONES TO ACHIEVE GOALS

Assist agencies in recruiting and retaining qualified financial management personnel

Tasks: Milestones:

Develop materials to help agencies recruit financial personnel (CFO Council) .... June 2000

Issue a report on the pilot implementation of qualification and classification

standards for the GS–510 accountant series (OPM and CFO Council) .............. January 2001

Establish the CFO Careers program to enhance early career development and

to attract entry-level recruits (CFO Council) ....................................................... February 2001

Work with OPM to strengthen the PMI Program’s emphasis on Federal finance

(CFO Council) .......................................................................................................... Ongoing
CHAPTER III. INVEST IN HUMAN CAPITAL 35

MILESTONES TO ACHIEVE GOALS—Continued

Promote effective financial management education and training within the Federal Government

Tasks: Milestones:

Represent the CFO Council on the Presidential Task Force on Federal Training

Technology (OPM, DOL, and CFO Council) ......................................................... through September 2000

Establish an ‘‘electronic marketplace’’ for education providers and the financial

community to meet and exchange information (OPM, DOL, and CFO Council) June 2000

Establish a CFO Scholars program with AGA (CFO Council and AGA) ............... January 2001

Launch a CFO Council Internship program (CFO Council) ................................... January 2001

Related Internet sites for Chapter 3 topics:

http://www.opm.gov/UsingIT/index.htm

http://www.financenet.gov/financenet/fed/cfo/hrc

http://www.financenet.gov/financenet/fed/cfo/fellows/fellows.htm

http://www.financenet.gov/financenet/fed/jfmip/jfmip.htm
37

1The cost of the loan or loan guarantee is the present value of

estimated cash overflows less the present value of estimated cash

inflows to the Government.

2Total non-tax receivables reported on the Treasury Report on

Receivables (TROR) reflect unaudited outstanding balances owed

to Federal agencies. The amount listed in the balance sheet in the

Government-wide financial statement reflects the net current value

of these receivables as recorded for credit reform budgeting. Historically, the Internal Revenue Service has been the only agency

with jurisdiction over tax receivables.

CHAPTER IV. MANAGE OBLIGATIONS TO

THE FEDERAL GOVERNMENT

Goal:

Improve credit management and collection of obligations to the Federal Government by:

• Continuing to improve debt collection practices;

• Streamlining portfolio management through asset sales; and

• Maximizing the use of the Internet for credit and debt management programs.

A Decade of Progress

The 1990s saw major legislative initiatives

that changed the way Federal agencies manage credit and debt. Along with the CFO

Act, the Federal Credit Reform Act (FCRA)

of 1990 and the Debt Collection Improvement

Act (DCIA) of 1996 changed the way Federal

credit agencies do business.

The FCRA revolutionized the budgeting

and financial management of Federal credit

by requiring the cost 1 of the direct loans

or loan guarantees to be recorded in the

budget when the loan is disbursed, bringing

the Government closer to private sector practice. Formerly, the budget recorded the cash

flows in the year they occurred. In 1993,

FASAB issued an accounting standard for

direct loans and loan guarantees for Federal

accounting to support the budget treatment

of credit programs. Several changes occurred

in order to support the revised standard,

including: FMS developed detailed case studies

to explain the credit accounting; several interagency groups improved and simplified the

procedures; OMB refined and simplified its

initial budget instructions; and the FCRA

was amended in 1997 to make changes

reflecting the initial experience in implementation. With the above changes, agencies are

encouraged to reduce the cost of extending

new loans or guarantees and to manage

their portfolios in ways to reduce defaults.

The improved accounting information and

budget incentives under credit reform have

enhanced the Government’s control over the

risk incurred from its credit programs.

The DCIA has revolutionized debt management just as FCRA has revolutionized credit

reform. As a result of the enactment of

the DCIA, many of the improved management

practices envisioned by Congress when it

passed the CFO Act of 1990 have been

implemented. DCIA was drafted and implemented through the cooperative efforts of

the Federal Credit Policy Working Group

(FCPWG). The DCIA significantly enhanced

the Federal Government’s ability to service

and collect its obligations by creating and

enhancing tools for agencies to reduce losses

and increase collections. The key debt collection tools include use of private collection

agencies, administrative offset, litigation, tax

refund offset, and referral of debts to Treasury

for collection (cross-servicing). The passage

of the DCIA has resulted in increased collections of delinquent non-tax debt and improved

management of the Federal Government’s

portfolio of non-tax delinquent debt.2 In 1999

the Federal Government reported $271 billion

in non-tax receivables. See Table 3 for a

detailed listing of agency delinquent debt.

Delinquent non-tax debt receivables include:
38 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

Table 3. Accounts Receivable and Delinquent Debt

(As of September 30, 1999)

(Dollars in millions)

Agencies with Large Receivable

Balances

Ending

Balance

Collections Write-offs Delinquencies

Delinquencies

>180

Days 1

USDA ...................................... 103,384 18,971 486 6,415 5,876

Education ............................... 57,258 7,045 696 15,317 5,389

HUD ....................................... 13,818 5,193 170 2,364 2,121

EX/IM ..................................... 12,183 1,507 16 2,757 2,652

AID ......................................... 11,303 1,079 1 744 687

HHS ........................................ 9,769 14,270 2,995 4,763 3,193

SBA ......................................... 8,675 2,023 646 1,748 1,347

FCC 2 ...................................... 9,072 412 28 8,273 8,031

DOE ........................................ 6,756 4,144 106 2,363 2,315

SSA ......................................... 6,500 2,246 808 880 400

DOI ......................................... 4,779 1,096 12 524 468

VA ........................................... 3,297 2,180 618 1,116 958

All Other 3 .............................. 23,756 34,083 468 6,044 5,078

Gov’t Total ........................ 270,550 94,249 7,050 53,308 38,515

1Delinquencies greater than 180 days are reported in Part I, Section B of the TROR.

2Federal Communications Commission

3 Includes the remaining CFO Act agencies and non-CFO Act agencies.

3 $11.5 billion of the $94.2 billion was delinquent debt, compared

with collection of all non-tax debt in 1998 of $87.6 billion.

(1) direct loans; (2) loans acquired as a

result of claims paid on defaulted guaranteed

loans; and (3) non-credit receivables. These

debts arise under a myriad of Federal programs authorizing Federal agencies to loan

money directly to citizens; to guarantee loans

citizens obtain from private financial institutions; or to collect amounts due the United

States from fees, leases, services, overpayments, civil penalties, and other similar

sources. The non-tax delinquent debt portfolio

includes unpaid and overdue balances on

Federal housing, small business, agricultural,

and student loans as well as other Government

receivables such as civil fines and judgments.

Achievements in the Past Year

Increased Collections

Increased Government-wide Collection of

Non-tax Receivables: In 1999, Governmentwide collections of non-tax receivables increased by $6.6 billion (see Table 4). Total nontax debt owed to the Federal Government was

$271 billion in 1999 compared to $267 billion

in 1998. Government-wide collection of all nontax debt was $94.2 billion in 1999.3 See Table

3 for a detailed listing of agency non-tax receivables and collections.

Table 3 presents the ending balance, collections, write-offs, delinquencies, and delinquencies greater than 180 days for the credit

agencies with the highest ending balances.

It groups all other agencies into a single

category. Total receivables owed to the Federal

Government is $271 billion. Of this amount,

91 percent belongs to the 12 agencies listed

below. The remaining nine percent is owed

to the remaining 52 agencies (grouped into

the ‘‘all other’’ category). Total collections

in 1999 were $94.2 billion, an increase of

$6.6 billion over 1998.

Increased Tax Refund Offsets: Tax refund

offset collections increased $574 million over

calendar year 1998. Of the $2.6 billion col-
CHAPTER IV. MANAGE OBLIGATIONS TO THE FEDERAL GOVERNMENT 39

Table 4. Government-wide Collection of Non-tax Receivables

(Dollars in billions)

Year

Total Nontax

Receivables

Outstanding

Delinquent

Non-Tax

Receivables

Percent

Delinquent

Total

Government

Collections

Percent

Collected

1998 .................... $267 $60.0 22.5% $87.6 33%

1999 .................... $271 $53.3 19.7% $94.2 35%

Table 5. Civil Cash Collections On Litigated Debt

(In thousands)

1994 1995 1996 1997 1998 1999

1,774,029 1,175,294 1,229,809 1,829,968 1,123,017 1,376,652

4 Child support obligations are not reported as receivables of the

Federal Government.

lected in calendar year 1999, half was collected

for delinquent child support obligations 4 and

the remaining $1.3 billion was for delinquent

Federal non-tax debt such as direct loans,

loans acquired as a result of claims paid on

defaulted guaranteed loans, and non-credit receivables. The dramatic increase in tax refund

offset collections can be attributed to a number

of factors:

• System enhancements allowing offset

matching on both social security numbers

on joint tax returns;

• An increase in debt referrals of $11.7 billion for child support and Federal non-tax

debt;

• System flexibility that allows creditor

agencies to add and update debt records

on a continuous basis; and

• An increase in the average amount and

number of tax refund payments due in

part to new tax credits.

Increased Child Support Collections: HHS’

Office of Child Support Enforcement program

supports children by assisting states in locating parents, establishing paternity, and enforcing child support orders. Total child support

collections in 1999 were $15.8 billion, an increase of more than eight percent over total

collections in 1998. FMS collected $1.3 billion

of the total $15.8 billion.

Increased Recovery of Civil Debts: DOJ

serves as the Federal Government’s collector

of last resort. It pursues civil debtors, using

litigation and enforced collection remedies

upon referral from agencies or the Treasury

after debt collection procedures provided for

under DCIA have been unsuccessful. At the

end of 1999, DOJ collected over $1.3 billion

in civil cash collections, a 23 percent increase

over 1998. As reported in Table 5, in 1999

over $1 billion was collected in civil cash collections for the sixth consecutive year. DOJ

cash collections vary from year to year, depending in part on the volume of agency referrals as indicated in Table 6. Further, because

legally complex referrals may be litigated over

a period of years, large collections generated

from the litigation in any single year may not

be directly related to efforts expended in the

same year.
40 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

Table 6. Number of Civil Debts

Referred to DOJ

1996 ................................. 24,290

1997 ................................. 45,585

1998 ................................. 44,876

1999 ................................. 88,228

In 1999, DOJ received a total of 88,228

new civil debts, a 97 percent increase over

1998. Education referred the largest number

of debts to DOJ for collection, and USDA

referred debts with the largest outstanding

balances.

Improved Debt Collection Practices

Developed System for State Tax Collection:

Under provisions of the Internal Revenue

Service Restructuring and Reform Act of 1998,

the Federal tax refund of a taxpayer who owes

a past-due, legally enforceable state income tax

obligation may be reduced, or offset, by the

amount owed to the state. As required by law,

FMS modified its Treasury Offset Program

(TOP) on January 1, 2000 to accept delinquent

state income tax debts. Even though the program is voluntary for the states, as of June

2000, seven states have submitted debts and

over $21 million has been collected. FMS will

continue its partnership with the Federation

of Tax Administrators (FTA), which includes

the principal tax collection agencies of the 50

states, to actively pursue state participation

in the tax collection program. FMS’ goal is

to have all 42 states that collect income taxes

participating in the program.

Merged the Tax Refund Offset and Treasury

Offset Programs: This past year, FMS successfully merged the Tax Refund Offset and the

Treasury Offset programs. Under this merged

program, a payee’s name and taxpayer identification number are matched against a Treasury database of delinquent debtors for an automatic reduction or ‘‘offset’’ of funds to satisfy

a person’s overdue Federal debt or child support obligations. As of September 30, 1999, the

value of debts in the delinquent debtor database was $70.5 billion ($23.3 billion in nontax debt and $47.2 billion in child support obligations). The current payment types subject

to offset include: OPM retirement annuity payments, IRS tax refunds, vendor payments, and

some Federal salary payments.

Referred Debt to Private Collection Agencies

(PCAs): Education and HHS were officially

designated by Treasury as debt collection centers during 1999. In addition to Treasury, the

Education and HHS debt collection centers

refer debts to PCAs for collection. Total collections reported for 9 months in 1999 by PCAs

exceeded $213 million. (See Chart 3.) Over

$11.8 billion in debt was referred to PCAs by

Education, Treasury, and HHS in 1999.

Referred More Agency Debt to Treasury: Cumulative referrals to Treasury for cross-servicing through September 1999 totaled $2.9 billion, an increase of $1 billion over the previous

year. Since enactment of the DCIA, through

May 2000, Treasury collected $63.4 million, of

which $23.5 million was collected in 1999. In

addition, repayment agreements totaling

$160.4 million have been established through

Treasury’s collection efforts.

The seven major credit agencies continue

to make significant progress in identifying

debt for referral to Treasury for offset. Table 7

summarizes debt at the major credit agencies

referred to Treasury for offset as of December

31, 1999.

Agencies are beginning to make significant

progress in referring debt to Treasury for

cross-servicing. Table 8 shows the level of

referral by the major credit agencies.

Developed Policy to Write-off Debt: Under the

sponsorship of the FCPWG, OMB Circular

A–129, Federal Credit Programs and Non-Tax

Receivables, was revised to include a debt

write-off policy that seeks to accurately portray

the true economic value of receivables on the

balance sheet, while preserving management

options that will maximize collection of delinquent debt. Generally, debt write-off is mandatory for delinquent debt older than two years,

unless a waiver is documented and justified

to OMB in consultation with Treasury. Once

the debt is written-off, the agency must either

classify the debt in a new reporting category

entitled currently not collectible (CNC) or close

out the debt. Debts in CNC status are reported

in the TROR and cost-effective collection ef-
CHAPTER IV. MANAGE OBLIGATIONS TO THE FEDERAL GOVERNMENT 41

Education PCAs Treasury PCAs HHS PCAs

$0

$50

$100

$150

$200

Chart 3. Collections by PCAs

(Jan. - Sept. 30, 1999)

Dollars in millions

$193

$15 $5

Table 7. Debt Referral to Treasury for Offset

(Dollars in millions)

Agency Eligible Debt

(As of 9/30/99)

Referral

Goal

Percent

Referred (As

of 12/31/99)

USDA ........................................................ $825 90% 100%

ED 1 ................................................................ $22,270 100% 73%

HUD ............................................................... $274 90% 100%

SBA ................................................................ $1,148 100% 90%

VA ................................................................... $327 90% 78%

HHS 2 ............................................................. $3,899 50% 18%

SSA ................................................................. $390 100% 100%

Source: Treasury

1 Education’s eligible debt includes $17.2 billion of ‘‘currently not collectible’’ (CNC) debt not

reported on the TROR. 2 HHS eligible debt includes $2.7 billion of CNC debt not reported on the TROR.

forts continue on CNC debt. The write-off policy requires agencies to continuously review

CNC debt and annually reclassify CNC debt

that should be closed out or included in asset

sales.

The new write-off policy has resulted in

a decrease of delinquent non-tax receivables

from $60 billion in 1998 to $53 billion

in 1999, primarily from a reclassification

of $17 billion in Education’s debt portfolio

to CNC (see Chart 4). The rationale for

status reclassification of the $17 billion as

CNC is that delinquent student loans, which

have no statute of limitations, have a high

probability of repayment because former student debtors generally need to establish good

credit over the long run. Education’s decrease

in total delinquencies was partially offset

by a $6 billion increase in the Federal

Communication Commission’s total delinquencies, due to the reinstatement of defaulted

loans for block sales of airwave licenses.
42 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

1995 1996 1997 1998 1999

$0

$50

$100

$150

$200

$250

$300

Non-Delinquent Delinquent

Chart 4. Non-Tax Receivables

Dollars in billions

$192 $195 $201 $207 $218

$50 $51 $52 $60 $53

Table 8. Debt Referral to Treasury for Cross-Servicing

(Dollars in millions)

Agency Eligible Debt

(As of 9/30/99)

Referral

Goal

Percent

Referred 1

(As of

12/31/99)

USDA ............................................................. $461 80% 23%

ED 2 ................................................................ $790 100% 100%

HUD ............................................................... $194 85% 100%

SBA ................................................................ $903 100% 100%

VA ................................................................... $464 90% 1%

HHS ............................................................... $1,122 57% 23%

SSA ................................................................. $390 0% 0%

Source: Eligible debt was reported by agencies on the quarterly TROR. Referral goals are

taken from the 1999 Federal Financial Management Status Report and Five Year Plan. 1Percentages referred are based on cumulative referrals since the program inception in September 1996. 2This amount is non-student loan debt. Because Education operates an efficient debt collection

center for delinquent student loans, these loans are not referred to Treasury.

Issued Credit Reform ‘‘Best Practices’’

Report

To address resource and workload issues

associated with credit and subsidy analyses

that support the preparation of budget estimates for credit programs, the Credit Reform

Best Practices Committee of the FCPWG

convened a ‘‘best practices’’ seminar in April

and conducted a preliminary survey of the

major credit agencies to identify the issues

and obstacles they face in this area. A

summary report of committee recommendations was presented to the FCPWG and

referred to OMB for further consideration.
CHAPTER IV. MANAGE OBLIGATIONS TO THE FEDERAL GOVERNMENT 43

Streamlined Portfolio Management

Through Asset Sales

Agencies are streamlining their portfolio

management by transitioning to lender oversight in their guaranteed/insured loan programs and by utilizing loan asset sales for

their receivables. For example, over the past

several years SBA has significantly increased

loan portfolios, increased collections, reduced

staff, and delegated loan-servicing authority

to its private sector partners as a result

of its asset sales initiative.

SBA Sold Loans for $725 Million: In August

1999, SBA collected $195 million from the sale

of a portfolio of just over 4,000 direct loans

and defaulted guaranteed loans with an unpaid principal balance of $332 million. Approximately half the loans sold were classified

as nonperforming or under-performing. Over

20 percent of delinquent borrowers paid off

their loans when notified their loan would be

sold. SBA’s second loan asset sale was held

in August 2000 and included approximately

26,000 loans with an unpaid principal balance

of $1.2 billion. The second sale included business and disaster loans which returned $530

million to the Treasury, a $225 million premium above the $305 million value of holding

the loans to maturity. The total from the two

SBA loan sales was $725 million.

HUD Sold Loans for $467 Million: The Federal Housing Administration (FHA) Asset

Sales program is taking action to sell HUD’s

entire inventory of Secretary-held single family

and multifamily mortgage notes in a series of

sale initiatives. On September 22, 2000, the

FHA auctioned 8,053 single family loans, with

an unpaid principal balance totaling $480 million. The sale generated gross proceeds in excess of $467 million, or 97 percent of the unpaid principal balance of the mortgage loans,

the highest return to date.

Established GSA Schedule for Financial

Asset Services: A recent achievement by the

FCPWG is the General Procurement Schedule

for Financial Asset Services administered by

GSA. This initiative was started by the

FCPWG in 1998 in an effort to make asset

sales of delinquent loans a standard operating

procedure as required by DCIA. Using HUD

and Resolution Trust Corporation (RTC) asset

sales procurement documents as baseline models, an interagency team of experts drafted

statements of work for six categories of financial and legal advisors. As of October 2000,

the GSA Schedule listed 97 approved contractors. The GSA Schedule has been used by

HUD, Federal Deposit Insurance Corporation

(FDIC), SBA, USDA, Education, Navy, Air

Force, Treasury, Overseas Private Investment

Corporation, and the District of Columbia Government for consultation on and/or execution

of asset sales.

Initiatives

Future initiatives to improve the management of obligations of the Federal Government

are outlined below:

Improve Debt Collection

• Increase Agency Debt Referral to Treasury:

Agencies are establishing target dates for

referral to Treasury of debts over 180 days

delinquent as required by DCIA. Treasury

is tracking the debt referral performance

of the 24 CFO Act agencies for both Treasury offset and cross-servicing. Each quarter, FMS reports to the FCPWG and OMB

the performance data for USDA, Education, HUD, SBA, VA, HHS, and SSA.

Eventually, FMS will expand reporting to

all 24 CFO Act agencies.

• Expand the TOP Program: FMS has

partnered with several creditor and payment agencies as well as FTA and the

states to enhance the TOP. Tax levies are

scheduled for July 2000. The Taxpayer Relief Act of 1997 permitted the IRS to direct

Treasury FMS to collect tax debts from

Government payments to a taxpayer. Tax

levies are established after all taxpayer

rights and remedies have been observed.

Also, SSA benefit payments offsets are

scheduled for implementation in February

2001, and expanded Federal salary payment offsets are scheduled to be implemented in the third quarter of 2001.

Improve Lender Monitoring and Credit

Underwriting

• Improve Lender Monitoring: In July 2000,

housing agencies began accessing lender

performance information via the Internet.

The Housing Consortium members (OMB,
44 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

Table 9. Use of CAIVRS for Loan Inquiries

Year

Loan

Default

Records

Number of

Lenders

and Agency

Users

Lender

Inquiries

on Loan

Applicants

Default

Matches

Percent in

Default

1995 .............................. 1,838,637 105,713 2,453,747 31,916 1.29

1996 .............................. 2,084,589 114,290 4,828,781 57,176 1.19

1997 .............................. 2,505,620 127,471 4,952,324 61,625 1.24

1998 .............................. 2,595,427 131,282 5,049,201 86,501 1.71

1999 .............................. 2,680,576 146,975 5,272,105 92,276 1.52

Ginnie Mae, FHA, VA, and USDA Rural

Housing Service (RHS)) are building on

the use of the Government Portfolio Analysis Database System (GPADS), which facilitates and improves lender performance

management Government-wide, (e.g., monitoring lender default and delinquency

rates). GPADS, operated by GinnieMae,

now permits housing agencies to access

the ‘‘Lender Data Warehouse’’ through

Ginnie Mae’s website. GPADs is a valuable tool for targeting high-risk lenders for

field audits.

• Increase Use of Credit Bureaus: DCIA requires Federal agencies to report all eligible delinquent debt to consumer credit bureaus. FMS is currently working with Federal agencies and the credit reporting industry to assist compliance with DCIA.

Treasury FMS will work with OMB to determine if there is a need to publish an

OMB Bulletin directing agencies to fully

utilize credit bureaus in all phases of credit and debt management reporting. The

credit bureau is an inexpensive tool to assist Federal agencies with improving the

Government’s credit management and

debt collection programs. Agencies can access accurate data from credit bureaus for

credit screening, debarment lists, and the

collection and verification of tax identification numbers. Further, the credit report

can be used to conduct credit scoring, skip

tracing, and asset determination.

• Expand Database and Improve Access to

Data for Credit Screening: The Credit

Alert Interactive Voice Response System

(CAIVRS), operated by HUD, is the Government’s only borrower credit screening

database. Agencies report borrowers in default to CAIVRS and screen new borrower

applicants against CAIVRS files. With

some exceptions, borrowers found to be in

default in one Federal program may be

denied credit in all Federal programs.

CAIVRS, with a budget of $830,000, produces immediate payoffs on delinquent

loans averaging $6 million a year and is

estimated to save billions in loan losses

on bad loans avoided.

The use of CAIVRS to screen borrowers

has grown steadily (see Table 9). Over the

past five years, the number of prospective

borrowers which CAIVRS found in default

on Government loans tripled from 31,916

in 1995 to 92,276 in 1999. Inquiries from

direct and guaranteed lenders averaged

five million per year from 1996 through

1999. However, not all agencies are reporting defaults in a timely manner or using

this credit screening tool. Agencies are

being encouraged to become compliant

with OMB Circular A–129 in this regard.

To this end, the FCPWG formed a subcommittee in September 2000 to evaluate

credit reporting and screening compliance

and effectiveness. To improve access for

agency direct and guaranteed lenders,

HUD is planning aggressive system upgrades to expand Internet access. Currently, Internet inquiries account for half

of total inquiries. The remaining inquiries

are made using telephone touchtone, Electronic Data Interchange (EDI), and computer to computer batch transmissions.
CHAPTER IV. MANAGE OBLIGATIONS TO THE FEDERAL GOVERNMENT 45

• Access National Directory of New Hires:

An effort is underway to implement a

match of delinquent student loan debtor

information with the National Directory of

New Hires maintained by HHS. In 1999,

authority to access the national employment database of new hires was expanded

from delinquent child support to delinquent student loans. Education can now

pursue debtors who have moved without

leaving forwarding addresses (i.e., through

skip tracing or contacting their employers). Education estimates that with the

new hire database they will collect an additional $1 billion from borrowers with defaulted loans.

• Improve Credit Reform Compliance: The

complexity of credit reform accounting and

the growing number of cohorts (loans of

a given program in a given year) being

tracked have resulted in material weaknesses at several agencies. USDA, which

presently reports on over 300 cohorts, has

embarked on a corrective action plan to

overcome non-compliance with credit reform requirements. USDA has established

an executive steering and advisory committee to improve estimation, re-estimation, and cost reporting. USDA established a credit reform working group comprised of personnel from OMB, USDA

agencies and the IG, with GAO acting as

an advisor to the group. The group developed a consolidated plan for improving

USDA’s loan budgeting and accounting

processes.

Increase Loan Asset Sales

In the coming year, agencies will be reviewing their debt portfolios and analyzing the

feasibility of debt sales. Several agencies

have also taken advantage of the GSA’s

new Multiple Award Schedule for Financial

Asset Services and have hired program financial advisors (PFA) to analyze existing asset

portfolios for determining the feasibility of

loan sales. Education, HUD, and SBA took

early action for hiring PFAs to analyze disposition alternatives for loan portfolios.

Section 601 of the Department of Veterans

Affairs and Housing and Urban Development,

and Independent Agencies Act of 1999, passed

in October 1998, provided FHA with additional

flexibility to choose the most cost-effective

methods of paying insurance claims and disposing of acquired notes or properties under

the FHA single family programs. It authorizes

FHA to take assignment of notes and transfer

them to private parties for servicing, foreclosure avoidance, property management, and

asset disposition. Section 601 (d) amends

Section 204 (g) of the National Housing

Act to allow a structured financing for asset

disposition in which FHA retains an equity

interest. FHA hired a PFA from the GSA

schedule to develop the program and draft

regulations for taking advantage of the new

authority granted in this legislation. FHA

also announced the sale of its $800 million

multifamily and healthcare loan portfolio,

which is projected to take place in December,

2000.

Maximize Use of the Internet for Credit

and Debt Management Programs

All Federal agencies have access to the

Internet to publicize or reference credit and

debt management programs and regulations

through financenet. Financenet is also the

home of the ‘‘govsales’’ site, the clearing

site for information on the public sale and

auction of surplus U.S. Government property.

The ‘‘govsales’’ site is receiving 30 million

hits per year.

The CFO Council is now urging agencies

to take the next step in electronic government

by using the Internet for timely implementation of Government Paperwork Elimination

Act (GPEA). GPEA requires Federal agencies

by October 21, 2003 to allow individuals

or entities the option to submit information

or transact with agencies electronically when

practicable. The goal is to conduct secure,

private, and authenticated Internet transactions within three years. The FCPWG,

working closely with the CFO and CIO Councils, plans to establish a subcommittee in

2001 to identify credit industry standards

and Internet best practices related to credit

and debt management. A major threshold

to reach in using the Internet is the execution

of secure transactions between agencies and

their private sector partners using electronic

signature technology, including digital signatures or PINs where appropriate.
46 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

To assist in this process, GSA has established a procurement schedule, available to

all agencies, of approved contractors to provide

validated digital signature certificates known

as ACES. ACES use the highest level PKI

technology. ACES provide identification, authentication, and non-repudiation as a means

for individuals and businesses to be authenticated when accessing, retrieving, and submitting information in communications with the

Federal Government. To promote acceptance

of ACES, the first 500,000 certificates are

being offered to Federal agencies for a nominal

user fee.

MILESTONES TO ACHIEVE GOALS

Continue to improve debt collection practices

Tasks: Milestones:

Ensure that debts 180 days delinquent are referred to Treasury for collection

action as required by DCIA unless the debts are in an exempt status (Treasury, OMB, and agencies) ........................................................................................ Review Quarterly

• Evaluate agency loan portfolios for potential debt referrals and collections

(Treasury, OMB, and agencies) ......................................................................... Ongoing

• Analyze delinquent receivables included on the ‘‘Report on Receivables Due

From the Public’’ (Treasury) .............................................................................. Ongoing

• Monitor agency debt referral schedules to ensure compliance (Treasury,

OMB, and agencies) ............................................................................................ Review Quarterly

• Implement administrative wage garnishment (Treasury and agencies) ....... December 2000

• Begin Federal salary offset (Treasury) ............................................................. September 2001

• Promote Federal agency use of the credit bureaus (Treasury, OMB, and

agencies) .............................................................................................................. Ongoing

• Provide guidance to Federal agencies on the use of credit bureaus and

credit reports (Treasury) .................................................................................... Ongoing

Review agency applications for designation as debt collection centers and make

determinations in accordance with standards published in October 1999

(Treasury) ................................................................................................................ Ongoing

Streamline portfolio management through asset sales

Tasks: Milestones:

Hire PFA to coordinate and oversee the sales initiatives and hire transaction

specialists to design and implement single family and multifamily mortgage sales (HUD) ................................................................................................. February 2000

Complete second loan asset sale (SBA) ................................................................. August 2000

Conduct a sale of 8,000 FHA single family loans with an unpaid principal

balance of $480 million (HUD) ........................................................................... September 2000
CHAPTER IV. MANAGE OBLIGATIONS TO THE FEDERAL GOVERNMENT 47

MILESTONES TO ACHIEVE GOALS—Continued

Participate in Intergovernmental Asset Sales Team feasibility study and

business plan for Internet auction of physical assets, real property, and financial assets (Credit agencies) ......................................................................... October 2000

Conduct sales of HUD held mortgage notes—$800 million multifamily and

nursing home notes (HUD) ................................................................................. December 2000

Conduct third loan asset sale (SBA) ..................................................................... December 2000

Maximize use of the Internet for credit and debt management programs

Tasks: Milestones:

Establish a subcommittee under the FCPWG and liaison with CFO and CIO

Councils (CFO agencies and Treasury) ............................................................. February 2001

Create Internet modernization plans and pilot project proposals consistent

with Internet development plans required by GPEA (Credit agencies) ......... June 2001

Conduct secure Internet monetary or confidential transactions using ACES

(Credit agencies for loan origination, loan repayment, or asset sales) ........... TBD

Related Internet sites for Chapter 4 topics:

http://www.fms.treas.gov/debt

http://www.financenet.gov

http://www.govsales@financenet.gov

www.whitehouse.gov/OMB/financialINDEX.html

www.fms.treas.gov/ussg/creditrefrom/index.html
49

CHAPTER V. IMPROVE ADMINISTRATION

OF FEDERAL GRANT PROGRAMS

Goal:

Provide better management of the over $300 billion in grants awarded annually to our

inter-governmental and non-profit partners by:

• Improving the framework of grant policy;

• Simplifying Federal programs’ administrative requirements;

• Exploring electronic processing options;

• Streamlining the delivery of payments; and

• Furthering audit and oversight policy.

A Decade of Progress

The Federal Government annually awards

over $300 billion in grants to non-Federal

entities (States, local governments, and nonprofit organizations). OMB establishes Government-wide policies to assure these dollars

are managed properly and spent in accordance

with laws and regulations. However, it is

the Federal agencies that implement these

policies and work with our non-Federal partners to administer grant programs.

The main goal of grants management is

to ensure Federal dollars are spent in accordance with their intended purpose. To achieve

this there must be accountability at the

Federal level, the grantee level, and even

at the level of sub-grantees where applicable.

A second and sometimes conflicting goal is

to minimize administrative burden throughout

the process. In the spirit of the CFO Act,

OMB and the CFO Council recognize the

need to improve grants management procedures and policies. Some key accomplishments

of the Federal grant community over the

past decade include:

• Simplified Grants Management Procedures: Throughout the 1990s, OMB and

the agencies, in consultation with Congress and the grantee community, streamlined and simplified various grants management procedures. In 1993, OMB reissued Circular A–110, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and other Non-Profit Organizations, with a new format that provided consistent requirements for grants

for all non-profit organizations (other than

state and local governments). In 1995,

OMB revised and reformatted Circular

A–87, Cost Principles for State, Local, and

Indian Tribal Governments, to improve its

consistency with the other cost principle

circulars, i.e., A–21, Cost Principles for

Educational Institutions and A–122, Cost

Principles for Non-Profit Organizations.

Cost principles are used to determine allowable and unallowable expenditures for

Federal grants.

• Improved Grant Audits: As a result of the

Single Audit Act Amendments of 1996, we

have both streamlined audits of Federal

grants and made them more effective. To

implement this law, OMB issued a revised

Circular A–133, Audits of States, Local

Governments, and Non-Profit Organizations, which: (1) brought all non-Federal

entities under common audit requirements; (2) required that detailed audit coverage be determined based on risks to the

Federal Government; (3) required more

timely audit reporting; and (4) created a

Government-wide database of the results
50 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

of the over 25,000 single audits performed

annually.

• With the cooperation of the agencies, OMB

annually issues the Circular A–133 Compliance Supplement, which identifies for

auditors the key compliance requirements

and suggested audit procedures for 141 of

the largest Federal grant programs.

In addition to these accomplishments, longterm grant reform initiatives are underway

for the next decade. Streamlining Federal

grants management was designated as a

Priority Management Objective in the President’s 2001 budget. The agencies are working

to make it easier for state, local, and tribal

governments and non-profit organizations to

apply for Federal grants and, as recipients,

report their progress. Also, on November

20, 1999, the President signed Public Law

106–107, the Federal Financial Assistance

Management Improvement Act of 1999. This

law requires OMB to direct, coordinate, and

assist the agencies in a process to: (1)

streamline application and reporting forms

used in the administration of grants; (2)

provide uniform administrative requirements

for use in all Federal grant programs; and

(3) provide an electronic option for the administration of grants. Recent accomplishments

of the grant community are outlined below.

Accomplishments in the Past Year

Improving the Framework of Grant

Policy

Issued Draft Grant Financial System Requirements: In early 1999, the JFMIP asked

the CFO Council’s Grants Management Committee to develop a document to provide

guidance to agencies on the requirements

for a grant financial system. The result

of their work, Grant Financial System Requirements, was issued as an exposure draft

seeking public comment in October 1999.

After review of public comments, the document

was issued in final form in June 2000,

and is available at www.jfmip.gov.

Simplifying Federal Programs’

Administrative Requirements

• Defined Data Access Policy: On March 16,

2000, 15 agencies published a joint notice

of interim final revision to amend their

codifications of OMB Circular A–110. This

joint notice defines procedures that agencies will use to provide the public access

to Federally-funded research data, after it

has been published and cited in an action

that has the force and effect of law. This

notice implements the final revision to the

Circular, issued on September 1, 1999, as

required by the FY 1999 Omnibus Appropriations Act.

• Inventoried Grant Application and Reporting Forms: On March 29, 2000, OMB sent

Congress an inventory of Federal grant

programs, which was compiled with the

assistance of 22 agencies. The inventory

provides a listing of all application and

reporting forms used by almost 1,000 programs. It will serve as a starting point

for future efforts to streamline the administration of grant programs, as Public Law

106–107 requires.

• Developed Standard Format for Facilities

and Administrative Proposals: OMB, with

assistance from the agencies and university representatives, developed a standard

format for submitting the facilities and administrative proposal in accordance with

Circular A–21. The standard format will

streamline the overhead rate negotiation

process between the Federal Government

and educational institutions and assist

them in completing their proposals more

effectively. The format will also help cognizant agencies responsible for overhead

cost rate negotiation to review proposals

on a more consistent basis. The proposed

standard format was published on August

12, 1999 and will be effective for all proposals submitted on or after July 1, 2001.

Exploring Electronic Processing Options

• Established Internet Site for Single Point

of Entry: The Interagency Electronic

Grants Committee (IAEGC) has established an Internet site for its Federal

Commons project (www.fedcommons.gov)

and begun to pilot test its concept of a

single point of entry for Federal grant programs. The agencies have begun to create

the necessary architecture that will allow

information to be passed from this site to
CHAPTER V. IMPROVE ADMINISTRATION OF FEDERAL GRANT PROGRAMS 51

agency-specific systems, such as HUD’s

Departmental Grants Management System or EPA’s Integrated Grants Management System, and vice versa.

• Connected Grant Efforts to Other Electronic Initiatives: The IAEGC has worked

with GSA to create a connection between

the Federal Commons project and

Firstgov.gov, a portal to all Federal

websites. We have also linked to

FedBigOps.gov, which currently provides a

central listing of procurement opportunities for the Federal Government and could

be expanded to accommodate postings of

grant funding availabilities. It is also collaborating with the CIO Council in piloting its Federal Commons architecture as

a demonstration of the Federal Enterprise

Architecture Framework.

• Issued Grants Data Dictionary: The

IAEGC has published a dictionary of data

elements covering all information requirements for grant applications and awards

used by participating Federal agencies.

This document forms the basis for the addition of remaining grant transaction data,

as well as for mapping among the various

technologies to be employed in transmitting the data (e.g., EDI, HTML, and XML).

Streamlining the Delivery of Payments

• Issued Advance Notice On ‘‘Pooling’’ Cash

Drawdowns: On May 1, 2000, OMB issued

an advance notice of proposed revision to

Circular A–110. The advance notice seeks

comments on a proposal by the CFO Council to require agencies to offer recipients

the option to request cash advances on a

pooled basis, which might reduce the burden on grantees. Before formally making

this recommendation, the CFO Council is

seeking comments from recipients and

agencies on the merits of pooled and

grant-by-grant payment systems.

• Consolidated Payment Systems: Over the

past year, the civilian agencies have begun

to designate which of two payments systems they will use to process their grant

payments. Currently, there are numerous

payment systems in use throughout the

Federal Government. Table 10 shows

which agencies have selected either the

HHS Payment Management System (PMS)

or the Treasury’s Standard Application for

Payments (ASAP), the two systems designated by the CFO Council in its 1998

plan to consolidate payment systems.

Furthering Audit and Oversight Policy

• Issued Compliance Supplement: In March

2000, with assistance from an agency-led

working group, OMB issued the third annual revision to the Circular A–133 Compliance Supplement. The supplement identifies compliance requirements for Federal

programs and provides audit objectives

and procedures for more consistent audits

of Federal awards, pursuant to the Single

Audit Act Amendments of 1996. The 2000

supplement updated the descriptions of 77

of the 118 programs previously included

and added 23 more, bringing the total

number of programs covered to 141.

• Implemented Single Audit Electronic Submission System: The Federal Audit Clearinghouse (FAC) system receives, distributes, and maintains a Government-wide

database of audit reports prepared under

OMB Circular A–133. A data collection

form (SF–SAC) is used to summarize the

results of the audit reports and serves as

the input for the FAC database. In January 2000, the FAC implemented a system

to allow auditees to electronically file their

SF–SACs. This enhancement will expedite

processing and distribution of audit reports to agencies.

• Tested Reliability of FAC Database: DOC’s

Office of Inspector General confirmed that

the information in the FAC database is

reliable.

Initiatives

Improving the Framework of Grants

Policy

OMB’s Government-wide grants management policies are adopted by the agencies

and are intended to apply to all Federal

grant programs. Congress may refer to these

documents when it authorizes programs in

statute. However, when requirements contained in these laws are different than OMB

policy, the law supersedes. Agencies often
52 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

Table 10. Agency Grant Payment System Selections

Agency Selection

USDA .......................................... ASAP/PMS

DOC ............................................ ASAP

Education ................................... (pending)

DOD ............................................ DPPS 1

DOE ............................................ ASAP

HHS ............................................ PMS

HUD ............................................ PMS

DOI ............................................. ASAP/PMS

DOJ ............................................. ASAP

DOL ............................................ PMS

State ........................................... PMS

Treasury ..................................... PMS

DOT ............................................ PMS

VA ............................................... ASAP

AID ............................................. PMS

EPA ............................................. ASAP

FEMA ......................................... PMS

GSA ............................................. (no grants)

NASA .......................................... PMS

NSF ............................................. ASAP

NRC ............................................ (no grants)

OPM ............................................ (no grants)

SBA ............................................. PMS

SSA ............................................. ASAP

1 All DOD grant payments will be consolidated into the Defense Procurement Payment System.

try to provide additional explanation of the

requirements found in a program’s authorizing

legislation and OMB policy by adopting regulations specific to that program.

Across the Federal Government, the location

of the grants policy-making function varies.

While CFOs often have responsibility for

overseeing grants policy, that is not always

the case. The organizational structure under

which the grant function is located is important in the development and implementation

of grant policies applicable to the agencies’

programs. Table 11 shows that of the 14

agencies that have the most significant

amounts of grant-making activity, seven have

CFOs that oversee the grants management

function. (Agencies are noted in italics.) Of

the seven agencies that annually administer

at least $4 billion in grants, three have

CFOs that oversee the grant function.

• Workforce Investment Act: The Workforce

Investment Act of 1998 (WIA) establishes

a system of one-stop job training centers

where individuals can get access to a host

of different Federal services in one location, effective July 1, 2000. The agencies

are working to integrate delivery of the

services covered by the legislation. DOL,

with assistance from other agencies and

OMB, has developed unified planning

guidance so states can submit a single application for multiple grant programs. In

addition, DOL issued guidelines for developing cost allocation plans at local onestop centers that document and allocate

costs among various Federal programs.
CHAPTER V. IMPROVE ADMINISTRATION OF FEDERAL GRANT PROGRAMS 53

Table 11. Location of Grants Policy-Making Function

Agency Office

USDA .......................................... CFO

DOC ............................................ CFO

DOD ............................................ Under Secretary—Acquisition, Technology,

and Logistics

ED ............................................... CFO

DOE ............................................ Senior Procurement Executive

HHS ............................................ CFO

HUD ............................................ Deputy Secretary

DOI ............................................. CFO

DOJ ............................................. Assistant Attorney General—Justice Programs

DOL ............................................ Senior Procurement Executive

DOT ............................................ Senior Procurement Executive

EPA ............................................. Assistant Administrator—Administration

and Resources Management

FEMA ......................................... CFO

NSF ............................................. CFO

Agencies where CFOs oversee grants management are noted in italics.

• Grants Committee: HHS chairs the CFO

Council’s Grants Management Committee,

and has proposed an organization plan for

this group to be in place for the coming

year. The Grants Management Committee

will continue to offer agencies a vehicle

for providing feedback to OMB on issues

of concern to the Federal grants management community.

• Organizational Study: The CFO Council’s

Grants Management Committee will study

the placement of the grants management

policy function in agency organizations

(e.g., CFO’s office, procurement executive’s

office, or other management offices). This

study will lead to a discussion with the

agencies about the effectiveness of various

structures, and how we can better coordinate policy decisions that affect the grants

community.

Simplifying Federal Programs’

Administrative Requirements

• Entitlement Grants: USDA and HHS will

make entitlement grant programs (e.g.,

Medicaid and food stamp administration)

subject to the requirements of the A–102

common rule, Uniform Administrative Requirements for Grants and Cooperative

Agreements to State and Local Governments.

• Standard Terms and Conditions: An interagency task force will review the Federal

Demonstration Partnership’s (FDP) recommendations for standardizing the terms

and conditions agencies attach to their

grant awards. FDP, an organization representing 65 universities and 11 agencies,

has drafted a single set of terms and conditions applicable to Federal research programs administered by universities. A review of these program requirements may

provide insights into how the administrative requirements of OMB circulars can be

improved.

• Update to Debarment and Suspension Regulations: An interagency committee has

suggested revisions to the Governmentwide common rule that implements Executive Order 12549, Debarment and Suspension. This Executive Order establishes a

Government-wide system so all agencies
54 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

follow the same procedures when taking

action against a grantee. The agencies are

proposing technical and substantive revisions to the common rule that will further

improve grant debarment and suspension

policy and make it more consistent with

the Federal Acquisition Regulation, which

sets out similar policy for procurement.

The agencies will seek public comment before finalizing the revision.

• Simplification Workgroups: As part of the

process required to implement Public Law

106–107, the agencies will form workgroups to review the forms and terms/conditions used in grant programs. These

groups will also focus on reasons for and

against pursuing a single administrative

requirements document. The agencies will

be encouraged to consult with non-Federal

partners, using means such as HHS’

GrantsNet at www.financenet.gov. These

groups will make recommendations to address the duplication encountered by grant

recipients when they administer funds

under multiple grant programs.

• Consistent Cost Circulars: OMB will lead

the agencies in an effort to make the three

cost principles’ circulars consistent, wherever possible. The cost principles are used

to determine allowable and unallowable

expenditures for Federal grants. OMB and

the agencies have reviewed the impact of

combining the cost principles’ circulars

into one document. Although a single document provides some advantages, the

agencies believe the three grantee communities covered by the circulars are too diverse to warrant a single cost principle

document. HHS will also update the Hospital Cost Principles (45 CFR 74, Appendix

E) as part of this effort.

Exploring Electronic Options

• Federal Commons Initiative: The Federal

Commons has emerged as the most promising means of making the ‘‘common face

for Federal grants’’ a reality. It will use

standard parameters (e.g., transaction sets

for proposals and awards) and flexible

technology. The portal will accommodate

differences among recipients’ electronic

systems; it therefore will include both an

Electronic Data Interchange connection

and a web-based connection. The Federal

Commons will eliminate burdens on recipients by making differences between Federal agencies’ systems and processes transparent to non-Federal users. Over the

course of the next year, the Federal Commons will move toward allowing electronic

registration of grantees and standard posting of funding opportunities.

• Pilot Testing: Those agencies that provide

significant amounts of grant funding to

state and local governments have moved

to create a pilot to collect information

about the forms and requirements applicable to these awards. Those agencies that

provide significant amounts of grant funding to research-based organizations have

begun to pilot-test the registration of organizations and users, and the administration of organizational and user profiles.

Streamlining the Delivery of Payments

• Pooling Cash Drawdowns: After reviewing

comments from interested parties, the

CFO Council’s Grants Management Committee will decide how to proceed with the

proposal to allow grantees to draw cash

advances on a pooled basis.

• Payment Systems: Treasury and HHS will

make additional enhancements to ASAP

and PMS during the next three years to

meet the requirements of agencies that

have agreed to be cross-serviced by their

systems.

Furthering Audit and Oversight Policy

• Issue Compliance Supplement: The agencyled working group is preparing the 2001

supplement to update the 141 programs

currently included and add 10 new programs.

• Cognizant Agency Audit Organization

Guidelines: The PCIE’s Audit Committee

plans to update the guidelines the agency

Inspectors General follow in monitoring

Circular A–133 audits.

• Revise SF–SAC: An interagency working

group of FAC users will review the

SF–SAC that is used to summarize audit

report results. This group will determine
CHAPTER V. IMPROVE ADMINISTRATION OF FEDERAL GRANT PROGRAMS 55

if additional data elements are needed and

look for ways to simplify the form to make

it less burdensome.

• FAC Website: The search criteria in the

FAC system are being expanded to allow

searches on all of the fields in the database, allow wild card searches, and limit

searches to a specific year. Also, FAC is

being enhanced to allow searches to include reports which have been checked-in

but not yet processed.

• Recipients Not Filing Required Single

Audit Reports: An interagency working

group will work to develop a method for

the FAC to identify recipients who have

not filed the required Single Audit reports,

based upon information provided by the

grant-making agencies. This will be done

in coordination with PMS and ASAP.

MILESTONES TO ACHIEVE GOALS

Improve the Framework of Grants Policy

Tasks: Milestones:

Complete a study of agency organizational placement of the grants policy

function (CFO Council’s Grants Management Committee) ............................. May 2001

Simplify the Requirements to Administer Federal Programs

Tasks: Milestones:

Establish simplification workgroups to review forms (application and reporting) and terms and conditions (Agencies) ......................................................... June 2000

Issue proposed revision to grant debarment and suspension common rule

(Agencies) ............................................................................................................. December 2000

Cover entitlement programs under A–102 common rule (USDA and HHS) ..... December 2000

Issue findings on a study to combine A–102, Grants and Cooperative Agreements with State and Local Governments and A–110, Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and other Non-Profit Organizations (OMB and agencies) May 2001

Propose changes to cost principles circulars to ensure uniformity where possible (OMB and agencies) ................................................................................... May 2001

Report on findings of simplification workgroups (Agencies) ............................... May 2001
56 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

MILESTONES TO ACHIEVE GOALS—Continued

Explore Electronic Processing Options

Tasks: Milestones:

Implement state and local grant-making agency pilot (Agencies) ...................... July 2000

Roll-out the Commons Project, i.e., organization profiles and funding availabilities (Agencies) .............................................................................................. September 2000

Streamline the Delivery of Payments

Tasks: Milestones:

Offer ASAP or PMS services to recipients (Agencies) .......................................... October 2000

Evaluate proposed revision to Circular A–110 on pooling of payments (CFO

Council’s Grants Management Committee) ...................................................... December 2000

Implement grant payment systems (Agencies) ..................................................... October 2002

Complete ASAP and PMS enhancements (Treasury and HHS) ......................... December 2002

Further Audit and Oversight Policy

Tasks: Milestones:

Upgrade search capabilities of FAC Internet home page (DOC) ........................ August 2000

Revise SF–SAC (OMB and agencies) .................................................................... October 2000

Issue updated guidelines for cognizant agency audit organizations (PCIE) ...... December 2000

Establish a method to identify entities not reporting Single Audit results

(OMB and agencies) ............................................................................................ April 2001

Issue an update to A–133 Compliance Supplement with 10 new programs

and updates to the 141 programs currently covered (OMB) ........................... April 2001

Related Internet sites for Chapter 5 topics:

www.whitehouse.gov/omb/grants

www.hhs.gov/progorg/grantsnet

www.jfmip.gov

www.financenet.gov/iaegc
57

APPENDICES
59

APPENDIX I. AGENCY PERFORMANCE ON FINANCIAL

STATEMENTS

Table 12. Clean and Timely Audit Opinions on Agency-wide Financial

Statements

Agency

Actual

1996 1997 1998 1999

USDA ......................................................................... bbb ✔ b ✔

Commerce .................................................................. bbb ■ ✔

DOD * ........................................................................ b b ✔ b ✔ b ✔

Education .................................................................. b ■ b b ✔

DOE ........................................................................... ■ ■✔ b ✔ ■✔

HHS ........................................................................... bbb ✔ ■✔

HUD .......................................................................... b b ■ b

DOI ............................................................................ b ■■■

DOJ ............................................................................ b b ✔ b ✔ b ✔

DOL ........................................................................... b ✔ ■✔ ■✔ ■✔

State .......................................................................... b ■■■

DOT ........................................................................... bbb ■

Treasury * .................................................................. bbbb ✔

VA .............................................................................. b ✔ b b ✔ ■

AID ............................................................................ b ✔ b ✔ b ✔ b ✔

EPA ............................................................................ b ■✔ ■ b ✔

FEMA ........................................................................ b b ■✔ ■✔

GSA ............................................................................ ■✔ ■✔ ■✔ ■✔

NASA ......................................................................... ■ ■✔ ■✔ ■✔

NRC ........................................................................... ■ ■✔ ■✔ ■✔

NSF ............................................................................ b ✔ b ✔ ■✔ ■✔

OPM ** ...................................................................... b b ✔ b ✔ b ✔

SBA ............................................................................ ■ ■✔ ■ ■✔

SSA ............................................................................ ■✔ ■✔ ■✔ ■✔

Total Clean/Timely ................................................ 6 / 6 11/13 12/15 15/19

■ = Clean (Unqualified) Opinion

b = Not Clean (Disclaimer or Qualified)

✔ = Timely

* = Multiple systems modifications preclude the agency from projecting a clean consolidated

audited financial statement until after 2001.

** = For 1996 through 1999 OPM prepared financial statements for its agency components

only. OPM plans to prepare agency-wide financial statements beginning in 2000.
60 THE FEDERAL FINANCIAL MANAGEMENT STATUS REPORT AND 5–YEAR PLAN

The following Government Corporations are required to submit audited financial statements to

OMB:

Community Development Financial Institutions Fund

Corporation for National and Community Service

Export-Import Bank of the United States (EX/IM)

Federal Crop Insurance Corporation

Federal Deposit Insurance Corporation

Federal Home Loan Banks

Federal Housing Administration Fund

Federal Prison Industries, Incorporated

Financing Corporation

Government National Mortgage Association

National Credit Union Administration Central Liquidity Facility

Overseas Private Investment Corporation

*Panama Canal Commission

Pension Benefit Guaranty Corporation

Resolution Funding Corporation

Rural Telephone Bank

Saint Lawrence Seaway Development Corporation

Tennessee Valley Authority

* The Commission operated the Panama Canal as a Government corporation until the Panama Canal Treaty of 1977

terminated on December 31, 1999, when the Republic of Panama assumed full responsibility for the canal.
APPENDIX I. AGENCY PERFORMANCE ON FINANCIAL STATEMENTS 61

INTERNET ADDRESSES FOR 1999 PILOT

ACCOUNTABILITY REPORTS

Pilot Department or Agency Publication Date Internet Address

Commerce .................. 3/1/00 http://www.doc.gov/ofm

Education ................... 3/1/00 http://www.ed.gov/offices/OCFO

DOE ............................ 2/25/00 http://www.cfo.doe.gov

HHS ............................ 2/29/00 http://www.hhs.gov/of/reports/account

HUD ........................... 3/6/00 http://www.hud.gov/cfo/cfoacct.html

DOI ............................. 5/31/00 http://www.doi.gov/pfm

DOJ ............................ 4/5/00 http://www.usdoj.gov/05publications/

DOL ............................ 3/31/00 http://www.dol.gov/dol/ocfo/public/publications/main.htm

State ........................... 8/31/00 http://www.state.gov/www/dept/fmp

Treasury ..................... 2/20/00 http://www.treas.gov/tcfoc

VA ............................... 5/2/00 http://www.va.gov/cfo

AID ............................. 3/1/00 http://www.usaid.gov

FEMA ......................... 3/1/00 http://www.fema.gov/ofm

GSA ............................ 3/1/00 http://www.gsa.gov/staff/pa/annrpt/

annrpt.htm

NASA ......................... 2/29/00 http://www.hq.nasa.gov

NRC ............................ 4/1/00 http://www.nrc.gov/NRC/planning.html

NSF ............................ 4/7/00 http://www.nsf.gov/bfa/dfm

SBA ............................ 4/5/00 http://www.financenet.gov/financenet/fed/

docs/docsbrpt.htm

SSA ............................. 11/18/99 http://www.ssa.gov/finance
63

APPENDIX II. FINANCIAL STATEMENT PREPARATION BY

COMPONENTS OF EXECUTIVE DEPARTMENTS AND

AGENCIES

(Required to Prepare Audited Financial Statements as Designated by OMB)

Table 13. Clean and Timely Audit Opinions on Agency Component Financial

Statements

Agency

Actual

1996 1997 1998 1999

USDA

Food and Nutrition Service .............................. b b ■✔ ■✔

Forest Service .................................................... bb b ✔ b ✔

Rural Development ........................................... bb b ✔ b ✔

DOD

Air Force General Fund * ................................. b b ✔ b ✔ b ✔

Air Force Working Capital Fund * ................... b b ✔ b ✔ b ✔

Army General Fund * ........................................ b b ✔ b ✔ b ✔

Army Working Capital Fund * ......................... b b ✔ b ✔ b ✔

Navy General Fund * ........................................ b b ✔ b ✔ b ✔

Navy Working Capital Fund * .......................... b b ✔ b ✔ b ✔

DOD Military Retirement Trust Fund ............ ■ ■✔ ■✔ ■✔

Army Corps of Engineers Civil Works ............ b b ✔ b ✔ b ✔

HHS

Health Care Financing Administration ........... bb b ✔ ■✔

DOT

Federal Aviation Administration ..................... bbb ■

Highway Trust Fund ......................................... ■ b b ■

TREASURY

Bureau of Alcohol, Tobacco and Firearms ....... ■ ■ ■ ■✔

Internal Revenue Service * ............................... b ■ b b ✔

U. S. Customs Service ....................................... ■ ■ ■ ■✔

OPM

Civil Service Retirement ................................... b ■✔ ■✔ ■✔

Federal Employees Health Benefits Program b b ✔ ■✔ ■✔

Federal Employees Life Insurance Program ... b ■✔ ■✔ ■✔

Total Clean/Timely ................................. 4 / 0 6 / 11 7 / 15 10/18

■ = Clean (Unqualified) Opinion

b = Not Clean (Disclaimer or Qualified)

✔ = Timely

AA* = Multiple systems modifications preclude the agency from projecting a clean consolidated

audited financial statement until after 2001.
65

APPENDIX III. FEDERAL MANAGERS’

FINANCIAL INTEGRITY ACT TABLES

The Federal Managers’ Financial Integrity

Act (FMFIA) of 1982 requires that annually

the head of each executive agency submit

a statement on whether there is reasonable

assurance that the agency’s controls are

achieving their intended objectives and the

agency’s financial management systems conform with government-wide requirements.

Tables 12 and 13 include the number

of ‘‘material weaknesses,’’ (reporting pursuant

to section two of the FMFIA), and financial

system ‘‘non-conformances,’’ (reporting pursuant to section four of the FMFIA), reported

by agencies in their 1999 FMFIA or accountability reports. Section two reporting of material weaknesses refers to the overall adequacy

and effectiveness of agency management controls. Section four reporting of non-compliance

refers to compliance with Government-wide

standards for financial systems.

Table 14. Section Two Reporting in Agency FMFIA Reports

Agency

Adequate and Effective

Management Controls

Number of Material Weaknesses

Yes No

Pending as

of 12/31/98

Newly

Reported in

1999

Corrected

in 1999

Pending as

of 12/31/99

USDA ......................................... *X 28 7 7 28

Commerce .................................. *X 4 0 1 3

DOD ............................................ *X 130 38 57 111

Education ................................... X 4 3 1 6

DOE ............................................ X 9 2 0 **10

HHS ............................................ *X 6 1 0 **6

HUD ........................................... *X 6 0 3 3

DOI ............................................. X 16 4 3 17

DOJ ............................................ X ***16 0 7 9

DOL ............................................ *X 6033

State ........................................... *X 10 0 7 3

DOT ............................................ X 1001

Treasury ..................................... X 28 13 8 33

VA ............................................... X 6 0 1 5

EPA ............................................ X 4 0 1 3

NASA .......................................... X 0 0 0 0

AID ............................................. *X 9 0 2 7

FEMA ......................................... X 1 0 1 0

GSA ............................................ X 6 0 1 5

NRC ............................................ X 0 0 0 0

NSF ............................................ X 0 0 0 0

OPM ........................................... *X 13 0 2 11

SBA ............................................. *X 5243

SSA ............................................. X 1 0 0 1

Total .......................................... 24 0 309 70 109 268

Note: As reported to OMB by the agencies.

* These agencies report reasonable assurance that their systems of management control comply with the objectives of

FMFIA section two except as noted and qualified in their FMFIA or Accountability Reports.

** The rows for DOE and HHS do not add because both agencies consolidated two material weaknesses into one.

*** The 19 pending weaknesses reported in last year’s report erroneously included three weaknesses that were closed

in 1998.
66 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

Table 15. Section Four Reporting in Agency FMFIA Reports

Agency

Compliance of Financial

Management Systems

with Government-wide

Requirements

Number of Material Non-Conformances

Yes No

Pending as

of 12/31/98

Newly

Reported in

1999

Corrected

in 1999

Pending as

of 12/31/99

USDA ......................................... X 11 0 3 8

Commerce .................................. X 1 2 1 2

DOD ............................................ *X 192 10 49 153

Education ................................... *X 2 0 0 2

DOE ............................................ X 1 1 0 2

HHS ............................................ X 0000

HUD ........................................... *X 2 0 0 2

DOI ............................................. X 0000

DOJ ............................................ X 1 0 0 1

DOL ............................................ *X 0202

State ........................................... X 5 0 0 5

DOT ............................................ X 0000

Treasury ..................................... X 32 4 20 16

VA ............................................... *X 4 0 0 4

EPA ............................................ X 0 0 0 0

NASA .......................................... X 0 0 0 0

AID ............................................. *X 1 0 0 1

FEMA ......................................... X 3 0 0 3

GSA ............................................ X 3 2 2 3

NRC ............................................ X 0 0 0 0

NSF ............................................ X 0 0 0 0

OPM ........................................... *X 2 0 2 0

SBA ............................................. *X 2112

SSA ............................................. X 0 0 0 0

Total .......................................... 20 4 262 22 78 206

Note: As reported to OMB by the agencies.

* These agencies report reasonable assurance except as noted and qualified in their FMFIA or Accountability Reports.
67

APPENDIX IV. FEDERAL ACCOUNTING

STANDARDS ADVISORY BOARD (FASAB)

DOCUMENTS

FASAB’s current Internet site is: http://www.financenet.gov/financenet/

fed/fasab/
Table 16. FASAB Documents 1 2 Number Title Date Issued FY to Implement GPO N

Other I

F ...... C ...... SFFAC 1 ... Objectives of Federal Financial Reporting ........................ 9/2/1993 ............ N/A ............ On FinF ...... C ...... SFFAC 2 ... Entity and Display .............................................................. 6/6/1995 ............ N/A ............ 041.00F ...... C ...... SFFAC 3 ... Management’s Discussion & Analysis ............................... April 1999 ......... N/A ............ 041.00F ...... S ...... SFFAS 1 ... Accounting for Selected Assets and Liabilities ................. 3/30/1993 .......... 1994 .......... On FinF ...... S ...... SFFAS 2 ... Accounting for Direct Loans and Loan Guarantees ......... 8/23/1993 .......... 1994 .......... On FinF ...... S ...... SFFAS 3 ... Accounting for Inventory and Related Property ............... 10/27/1993 ........ 1994 .......... On FinF ...... S ...... SFFAS 4 ... Managerial Cost Accounting Concepts & Standards ........ 7/31/1995 .......... 1998 .......... 041.00F ...... S ...... SFFAS 5 ... Accounting for Liabilities of the Federal Government ..... 12/20/1995 ........ 1997 .......... 041.00F ...... S ...... SFFAS 6 ... Accounting for Property, Plant & Equipment (PP&E) ..... 11/30/1995 ........ 1998 .......... 041.00F ...... S ...... SFFAS 7 ... Accounting for Revenue and Other Financing Sources .... 5/10/1996 .......... 1998 .......... 041.00F ...... S ...... SFFAS 8 ... Supplementary Stewardship Reporting ............................. 6/11/1996 .......... 1998 .......... 041.00F ...... S ...... SFFAS 9 ... Deferral of Implementation Date for SFFAS 4 ................. 10/3/1997 .......... 1998 .......... 041.00F ...... S ...... SFFAS 10 .. Accounting for Internal Use Software ............................... 10/9/1998 .......... 2001 .......... 041.00F ...... S ...... SFFAS 11 .. Amendments to Accounting for PP&E—Definitions ......... 12/15/1998 ........ 1999 .......... 041.00F ...... S ...... SFFAS 12 .. Recognition of Contingent Liabilities from Litigation ...... 2/5/1999 ............ 1998 .......... 041.00F ...... S ...... SFFAS 13 .. Deferral of Para.65.2—Material Rev.—Related Trans- actions ............................................................................... 2/5/1999 ............ 1999 .......... 041.00F ...... S ...... SFFAS 14 .. Amendments to Deferred Maintenance Reporting ........... April 1999 ......... 1999 .......... 041.00F ...... S ...... SFFAS 15 .. Management’s Discussion & Analysis ............................... April 1999 ......... 1999 .......... 041.00F ...... S ...... SFFAS 16 .. Amendments to Accounting for PP&E—Multi-Use Herit- age Assets ......................................................................... July 1999 .......... 2000 .......... 041.00F ...... S ...... SFFAS 17 .. Accounting for Social Insurance ......................................... August 1999 ..... 2000 .......... 041.00F ...... S ...... SFFAS 18 .. Amendments to Accounting Standards for Direct & Guaranteed Loans ............................................................ 5/19/2000 .......... 2001 .......... 020.000F ...... R ...... Research Report ..... Accounting for the Natural Resources of the Federal Government ....................................................................... June 2000 ......... Availab

FASAFina

F ...... ED ... N/A ............ Credit Program Reconciliation and Technical Amend- ments to SFFAS 2 and SFFAS 18 .................................. May 1999 .......... 8/10/20F ...... IFV .. N/A ............ Accounting for the Cost of Capital by Federal Entities ... July 1996 .......... DeferreF ...... I ....... I–1 ............. Reporting on Indian Trust Funds ...................................... 3/12/1997 .......... On FinF ...... I ....... I–2 ............. Accounting for Treasury Judgment Fund Transactions ... 3/12/1997 .......... On FinF ...... I ....... I–3 ............. Measurement Date for Pension and Retirement Health Care Liabilities ................................................................. 8/29/1997 .......... On FinF ...... I ....... I–4 ............. Accounting for Pension Payments in Excess of Pension Expense ............................................................................. 12/19/1997 ........ On FinF ...... I ....... I–5 ............. Recognition by Recipient Entities of Receivable Non- exchange Revenue ............................................................ December 1998 On FinF ...... R ...... Report 1 .... Overview of Federal Financial Accounting Concepts and Standards .......................................................................... 12/31/1996 ........ Availab

FASA
Table 16. FASAB Documents—Continued 1 2 Number Title Date Issued FY to Implement GPO N

Other I

F ...... Cod ... Volume 1 ... FASAB Volume 1, Original Statements ............................ March 1997 ...... On FinA ...... TR ... TR 1 .......... Audit Legal Letter Guidance .............................................. 3/1/1998 ............ 041.00A ...... TR ... TR 2 .......... Environmental Liabilities Guidance .................................. 3/15/1998 .......... 041.00A ...... TR ... TR 3 .......... Preparing and Auditing Estimates for Direct and Guar- anteed Loans .................................................................... February 1999 .. On FinA ...... TR ... TR 4 .......... Reporting on Non-valued Seized and Forfeited Property 07/31/99 ............ On Fin

Key: * To obtain copies from GPO call (202) 512–1800 or go to the Internet site www.access.gpo.gov. Column 1: F = FASAB; A = AAPC Column 2: C = Concept; S = Standard; ED = Exposure Draft; IFV = Invitation for Views; I = Interpretation; R = Report; Cod. = Codification; TR = 

Column 3: SFFAC = Statement of Federal Financial Accounting Concept SFFAS = Statement of Federal Financial Accounting Standards SRAS = Statement of Recommended Accounting Standards N/A = Not Applicable.
71

LIST OF CHARTS AND TABLES

Page

CHARTS

Chart 1. Federal Financial Statements: Improving in Timeliness and Quality .......... 10

Chart 2. Increased Use of Common Administrative Services Through Franchise

Fund Pilots ..................................................................................................... 24

Chart 3. Collections by Private Collection Agencies ...................................................... 41

Chart 4. Non-Tax Receivables ......................................................................................... 42

TABLES

Table 1. Challenges to Improving Federal Financial Reporting ................................... 14

Table 2. CFO Agency Use of Government-wide Small Purchase Bankcards .............. 22

Table 3. Accounts Receivable and Delinquent Debt ...................................................... 38

Table 4. Government-wide Collection of Non-tax Receivables ...................................... 39

Table 5. Civil Cash Collections on Litigated Debt ......................................................... 39

Table 6. Number of Civil Debts Referred to the Department of Justice ..................... 40

Table 7. Debt Referral to Treasury for Offset ................................................................ 41

Table 8. Debt Referral to Treasury for Cross-Servicing ................................................ 42

Table 9. Use of CAIVRS for Loan Inquiries ................................................................... 44

Table 10. Agency Grant Payment System Selections ...................................................... 52

Table 11. Location of Grants Policy-Making Function .................................................... 53

Table 12. Clean and Timely Audit Opinions on Agency-wide Financial Statements ... 59

Table 13. Clean and Timely Audit Opinions on Agency Component Financial Statements ............................................................................................................... 61

Table 14. Section Two Reporting in Agency FMFIA Reports ......................................... 63

Table 15. Section Four Reporting in Agency FMFIA Reports ........................................ 64

Table 16. FASAB Documents ............................................................................................ 66
73

ABBREVIATIONS

AAFS Access America for Students

AAPC Accounting and Auditing Policy Committee

ACES Access Certificates for Electronic Services

AGA Association of Government Accountants

AICPA American Institute of Certified Public Accountants

ASAP Treasury’s Standard Application for Payments

CCR Central Contractor Registration

CFO Chief Financial Officer

CIO Chief Information Officer

CNC Currently Not Collectible

CPIC Capital Planning and Investment Control

DCIA Debt Collection Improvement Act of 1996

DFAS Defense Finance and Accounting Service

EBT Electronic Benefits Transfer

EFT Electronic Funds Transfer

EFTPS Electronic Federal Tax Payment System

EPIC Electronic Processes Initiatives Committee

EX/IM Export-Import Bank of the United States

FAC Federal Audit Clearinghouse

FACTS Federal Agencies’ Centralized Trial-Balance System

FASAB Federal Accounting Standards Advisory Board

FCPWG Federal Credit Policy Working Group

FCRA Federal Credit Reform Act of 1990

FDIC Federal Deposit Insurance Corporation

FDP Federal Demonstration Partnership

FFMIA Federal Financial Management Improvement Act of 1996

FHA Federal Housing Administration

FITEC Financial Implementation Team for Electronic Commerce

FLX Federal Learning eXchange

FMFIA Federal Managers’ Financial Integrity Act of 1982

FMS Treasury Financial Management Service

FTA Federation of Tax Administrators

GAAP Generally Accepted Accounting Principles

GAO General Accounting Office

GMRA Government Management Reform Act of 1994

GOALS Government On-Line Accounting Link System

GPEA Government Paperwork Elimination Act of 1998

GPRA Government Performance and Results Act of 1993

GPADS Government Portfolio Analysis Database

IAEGC Inter-agency Electronic Grants Committee

IG Inspector General

IPAC Intra-Governmental Payment and Collection System

IRS Internal Revenue Service

ITRB Information Technology Resources Board

JFMIP Joint Financial Management Improvement Program

KSAs Knowledge, Skills, and Abilities

NIST National Institute for Standards and Technology

NPR National Performance Review/National Partnership for Reinventing Government
74 2000 FEDERAL FINANCIAL MANAGEMENT REPORT

OMB Office of Management and Budget

PCAs Private Collection Agencies

PCIE President’s Council on Integrity and Efficiency

PFA Program Financial Advisors

PIN Personal Identification Numbers

PKI Public Key Infrastructure

PMI Presidential Management Intern

PMS HHS Payment Management System

PP&E Property, Plant and Equipment, and Inventories

RHS USDA Rural Housing Service

RTC Resolution Trust Corporation

SF–SAC Data Collection Form

SGL Standard General Ledger

TOP Treasury Offset Program

TROR Treasury Report on Receivables

Y2K Year 2000

CFO ACT AGENCIES

USDA Department of Agriculture

DOC Department of Commerce

DOD Department of Defense

Education Department of Education

DOE Department of Energy

HHS Department of Health and Human Services

HUD Department of Housing and Urban Development

DOI Department of the Interior

DOJ Department of Justice

DOL Department of Labor

State Department of State

DOT Department of Transportation

Treasury Department of the Treasury

VA Department of Veterans Affairs

AID Agency for International Development

EPA Environmental Protection Agency

FEMA Federal Emergency Management Agency

GSA General Services Administration

NASA National Aeronautics and Space Administration

NSF National Science Foundation

NRC Nuclear Regulatory Commission

OPM Office of Personnel Management

SBA Small Business Administration

SSA Social Security Administration
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1

CHIEF FINANCIAL OFFICERS COUNCIL

Chair: Sally Katzen, Deputy Director for Management, OMB

Executive Vice Chair: John Callahan, Assistant Secretary for Management and

Budget, HHS

Joshua Gotbaum, Executive Associate Director and Controller, OMB

Donald Hammond, Fiscal Assistant Secretary, Department of the Treasury

Agency Chief Financial Officer Deputy Chief Financial Officer

USDA ........................................ Sally Thompson Patricia Healy

Commerce ................................. Linda J. Bilmes James Taylor

DOD .......................................... William J. Lynn III Nelson Toye

Education .................................. Tom Skelly (A) Mark Carney

DOE ........................................... Michael Telson Thomas Palmieri

HHS ........................................... John Callahan George Strader

HUD .......................................... Victoria L. Bateman (A) Victoria L. Bateman

DOI ............................................ Lisa Guide (A) R. Schuyler Lesher

DOJ ........................................... Stephen Colgate Therese McAuliffe

DOL ........................................... Kenneth M. Bresnahan Brenda Kyle

State .......................................... Bert T. Edwards Larry Eisenhart

DOT ........................................... Jack Basso David Kleinberg

Treasury .................................... Lisa Ross Steve App

VA .............................................. W. Todd Grams (A) W. Todd Grams

AID ............................................ Michael Smokovich Elmer S. Owens

EPA ........................................... Michael Ryan (A) Michael Ryan

FEMA ........................................ Patricia A. English (A) Matt Jadacki

GSA ........................................... William B. Early, Jr. Liz Gustafson

NASA ........................................ Arnold Holz Kenneth J. Winter

NRC ........................................... Jesse L. Funches Peter Rabideau

NSF ........................................... Thomas Cooley (A) Donald G. McCrory

OPM .......................................... Kathleen McGettigan Donna Ballard

SBA ........................................... Joseph Loddo Gregory A. Walter

SSA ............................................ Yvette Jackson Thomas G. Staples

(A) Acting