federal financial

management

status report

and

five year plan

June 1999

Executive Office of the President

Office of Management and Budget

Washington D.C.

executive summary
chief financial officers (cfo) council financial 

management vision statement

Shaping an environment in which government officials use high quality financial and

performance information to make effective policy, management, stewardship, and

program decisions.

1999 cfo council priorities and objectives

The CFO Council supports six priorities. The 1999 Federal Financial Management Status

Report and Five Year Plan discusses key objectives for implementing each priority, with specific

tasks and milestones.

Priority 1: Improve Financial Accountability

• Update accounting standards to provide the basis for Federal financial statements and consistent,

reliable financial information;

• Prepare annual financial statements and obtain unqualified opinions for all CFO Act agencies,

agency components, and the Federal Government as a whole; 

• Implement the Government Performance and Results Act (GPRA); and

• Issue Accountability Reports.

Priority 2: Improve Financial Management Systems

• Provide a financial management systems environment in which financial systems can be successfully planned, developed, operated, and maintained;

• Establish governmentwide systems requirements that support information standards; and

• Improve the availability of systems that meet governmentwide systems requirements.

Priority 3: Develop Human Resources

• Implement methods to assist agencies in recruiting and retaining qualified financial management

personnel;

• Strengthen qualification standards for financial management personnel; and

• Promote effective financial management education and training within the Federal Government.

Priority 4: Improve Management of Receivables

• Fully implement the Debt Collection Improvement Act; and

• Increase loan asset sales for delinquent debt and write-off of uncollectible debt.

Priority 5: Use Electronic Commerce To Improve Financial Management

• Improve electronic services to individuals; and

• Improve payments and collections.

Priority 6: Improve Administration of Federal Grant Programs

• Implement revised governmentwide audit requirements for grants (OMB Circular A-133);

• Develop an efficient, effective, and customer-oriented grant payment process; and

• Complete a feasibility study for a single grants-management circular.
executive summary

The 1999 Federal Financial Management Status Report and Five Year Plan describes the

Administration's recent accomplishments and plans for strengthening Federal financial

management as required by the Chief Financial Officers (CFO) Act of 1990, as

amended. Over the past year, the CFO Council, Office of Management and Budget

(OMB), and Department of the Treasury (Treasury) made substantial progress in the

six priority areas described in this report. This pamphlet summarizes the key accomplishments and future initiatives of each priority as described in the 1999 report.

Priority 1: Improve Financial Accountablity

accomplishments:

Accounting Standards for the Federal Government Recommended. The Secretary of the

Treasury, the Director of OMB, and the Comptroller General of the United States

established the Federal Accounting Standards Advisory Board (FASAB) in October

1990 to recommend accounting standards for the Federal Government. Since its last

report in the 1998 Five Year Plan, FASAB recommended the following standards and

clarifications of previous standards:

• Amendments to Accounting for Property, Plant, and Equipment - Definitions;

• Recognition of Contingent Liabilities Arising from Litigation;

• Material Revenue-Related Transactions Disclosures;

• Management Discussion and Analysis (Standards);

• Management Discussion and Analysis (Concepts);

• Amendments for Deferred Maintenance Reporting 

(under congressional review); and

• Accounting for Internal Use Software (also under congressional review).

Governmentwide and Agency-wide Audited Financial Statements Issued. Upon agency

submissions of the FY 1998 adjusted trial balances on February 1, 1999, the

Department of the Treasury issued timely governmentwide audited consolidated financial statements for the second year in a row. These statements were issued as part of

the FY 1998 Financial Report of the United States Government. 

For FY 1998, all 24 CFO Act agencies prepared financial statements covering all of

their accounts and activities, and 13 of the 24 received or are expected to receive

unqualified opinions. This is an increase of two over 1997. Twenty-one of the 24

1
agencies are expected to receive an unqualified audit opinion on their FY 1999 statements. Table 1 presents the results of audits of agency financial statements.

2

Table 1. Agency-wide Unqualified Audit Opinions on Financial Statements

1996 1997 1998 1999 2000

USDA

Commerce

DOD1

Education

DOE

HHS

HUD

DOI

DOJ

DOL

State

DOT

Treasury

VA

AID

EPA

FEMA

GSA

NASA

NRC

NSF

OPM

SBA

SSA

Actual Goal

Agency

6 11 13 21 23 Total

Unqualified

= Unqualified Opinion

1 DOD is making progress in meeting the audited financial statement requirements of the

CFO Act. However, significant and longstanding systems deficiencies preclude DOD from

projecting an unqualified consolidated audited financial statement until after 2000.
Participation in Accountability Reporting Increased. Eighteen agencies are producing

Accountability Reports for FY 1998, compared to 12 in 1997. As of June 1998, 15 of

the 18 pilot agencies issued their FY 1998 Accountability Reports.

Full Implementation of the Certificate of Excellence Program Approved by CFO Council.

A pilot evaluation of six FY 1997 Accountability Reports–Department of Housing and

Urban Development (HUD), Department of the Interior (DOI), Department of

Labor (DOL), Treasury, Department of Veterans Affairs (VA), and Social Security

Administration (SSA)–was conducted by the Association of Government Accountants

(AGA) under its Certificate of Excellence in Accountability Reporting program. On

the basis of the pilot results, the CFO Council approved full implementation of the

Certificate of Excellence program.

More Reliable Financial Information Available. Better financial information has enabled

Congress and the Executive Branch to effectively evaluate the cost and performance of

Federal programs and activities. For example, better financial information at the

Health Care Financing Administration (HCFA) led to reductions in improper payments. The Department of Health and Human Services (HHS) Inspector General

(IG), while auditing the financial statements of the HCFA for 1996, 1997, and 1998,

performed an extensive analysis of the extent and causes of improper payments in the

Medicare program. As a result, HCFA reported estimated improper payments of

$12.6 billion (7.1 percent) for 1998, down from about $20.3 billion (11 percent) for

1997, and $23.2 billion (14 percent) for 1996. 

future initiatives:

Obtain an Unqualified Opinion on the Governmentwide Financial Statements. A recent

General Accounting Office (GAO) audit report identified the major obstacles that

must be addressed to achieve the Administration’s goal of obtaining an unqualified

opinion on the FY 1999 financial statements. Table 2 summarizes these obstacles.

3
In accordance with the President’s directive, agency heads have prepared action plans

with milestones for resolving these financial reporting deficiencies and are submitting

quarterly reports to OMB on their progress. In a 1999 report, the OMB Director recognized the goal of obtaining an unqualified audit opinion on the FY 1999 consolidated Federal Government financial statements as “daunting,” principally due to the magnitude of DOD challenges and the complexity of eliminating intra-governmental

transactions. DOD now targets a departmentwide clean opinion for FY 2003. 

Increase Participation in Accountability Reporting. OMB’s statutory authority to conduct the Accountability Report program ends December 31, 1999. The

Administration has developed a legislative proposal to provide OMB authority to allow

CFO agencies to continue to produce these comprehensive reports. To further streamline reporting requirements, this legislative proposal would also permit the full integration of IG Act reports with agency Accountability Reports. The goal is for all CFO

4

Table 2. Obstacles to an Unqualified Opinion on the Governmentwide Financial Statements

Intra-governmental

Transactions 

Property, Plant,

Equipment (PP&E),

and Inventory

Loans Receivable and

Loan Guarantee

Liabilities

Environmental and

Disposal Liabilities

Health Benefits and

Other Liabilities

Improper Payments

and Unreconciled

Disbursements 

Reconcile Change in

Net Position with

Budget Result 

Agencies need to properly identify and eliminate transactions between Federal Government

entities.

Agencies Affected: Most agencies

The Federal Government does not have auditable information about the dollar value of assets

held to support its domestic and global operations. 

Agencies Affected: DOD and Department of Transportation (DOT) for PP&E

Most Federal credit agencies responsible for Federal lending programs need to properly report

the cost of loan programs.

Agencies Affected: Department of Agriculture (USDA), Department of Education, HHS,

HUD, and VA

Environmental and disposal liabilities are materially understated because no estimate was

reported for liabilities associated with certain major weapons systems. Also, significant portions of the reported liability for waste-related nuclear weapons lacked adequate documentation.

Agencies Affected: DOD and Department of Energy (DOE)

Auditable systems and data are not available to support estimates of significant portions of

military health and other post-retirement benefits’ liabilities. Also, some agencies need to

properly calculate estimates of accounts payable and other liabilities, such as those associated

with litigation.

Agencies Affected: DOD for health benefits and various agencies for other liabilities

Agencies need to determine the full extent of improper payments, i.e., payments made for

other than authorized purposes. Unresolved gross differences also exist between agencies and

Treasury records of cash disbursements.

Agencies Affected: Grant-making agencies for improper payments and most agencies for

resolving differences with Treasury

The Federal Government needs to establish a process to more effectively reconcile the reported change in net position with the reported budget surplus/deficit.

Agency Affected: Treasury

Functional Issues Description /Agencies Affected
5

agencies to produce Accountability Reports for FY 2001. (See Table 3.)

Priority 2: Improve Financial Management Systems 

accomplishments:

Joint Financial Management Improvement Program (JFMIP) Program Management

Office (PMO) Established. In November 1998, Public Law 105-277 provided one-year

authority for the establishment of the JFMIP PMO. The PMO was established in

1998, with resources provided by the 24 CFO agencies through a share of Federal

charge card rebates. This joint investment in the JFMIP PMO reflects the governmentwide effort to improve Federal financial systems through the development of common

tools and information sharing. The PMO’s responsibilities include developing financial management systems requirements, addressing systems integration issues, developing comprehensive testing vehicles, serving as an information clearinghouse for Federal

financial systems, and facilitating communication with the private sector.

Core Financial Systems Qualification Process Improved. The CFO Council, based upon

surveys and studies, recommended 1) separating the core financial systems software

qualification process from the procurement process, and 2) developing an open testing

and qualification process, to assure that vendor software complies with functional

requirements. In June 1999, JFMIP began testing vendor core financial system software to qualify vendor software for Federal agency use in FY 2000. The mandatory

core financial management systems requirements describe the capabilities necessary for

a Federal financial system to function and comply with Federal laws, accounting standards, and policies. 

Core Financial Management Systems Procurement Process Improved. In September 1999,

the General Services Administration (GSA) will eliminate the mandatory financial

Table 3. Goals for CFO Agency Accountability Reports FY 1999 - 2001

1997 1998

(Actual) (Actual) 1999 2000 2001*

*DOD has not committed to producing an Accountability Report for 2001.

Number of

24 CFO 

Agencies 

Participating in 

Pilot 12 18 22 23 23 
management systems software schedule for core accounting systems, effective FY 2000.

GSA will offer core financial systems software through the Federal Supply Service IT

70 Schedule. OMB and Federal Acquisition Regulation policies were amended to support elimination of the mandatory schedule and established the new JFMIP roles and

responsibilities for software testing and qualification processes. 

Systems Requirements Developed. JFMIP reissued Core Financial System Requirements

(February 1999) and Human Resource and Payroll Systems Requirements (April

1999). It also issued system requirements exposure drafts for Travel Systems (January

1999), Direct Loans (December 1998), Seized Property and Forfeited Assets (June

1998), and Guaranteed Loans (June 1998).

future initiatives:

Ensure Year 2000 Compliance. Over the next several months, CFO agencies will continue to ensure that financial management systems critical to their missions are capable

of meeting the requirements of the year 2000. As of June 1999, the CFO agencies

reported that 85 percent of their critical financial management applications are year

2000 compliant.

Assess Agency Financial Management System Infrastructures. The CFO Council will

explore partnering with the Information Technology Resource Board (ITRB) to provide comprehensive assessments of specific aspects of agency financial management systems. Specific review criteria will be developed. The ITRB is a legislatively-established

group charged with assisting agencies in assessing specifically defined aspects of information technology systems including financial management systems. 

Evaluate the U.S. Government Standard General Ledger (SGL). In 2000, the structure

and processes used to update the SGL will be analyzed. The purpose of the study is to

determine how governmentwide and agency financial information needs are best

served. 

Improve Computer Security for Financial Systems. Computer security is a significant

issue for the Federal Government. Finding effective approaches to ensure the integrity

of financial data is of particular interest to the CFO community. In FY 2000, the

CFO Council will work with the CIO Council and IGs to formulate appropriate

approaches for securing financial management systems and financial data within the

Federal Government.

6
7

Priority 3: Develop Human Resources

accomplishments:

Training Guidelines for Federal Financial Management Personnel Established. The

Statement of Principles for Federal Financial Education and Training established CFO

Council policy on the quality of education and training. The Statement provides

guidelines for planning and evaluating both education and training programs. It has

been widely distributed to the financial and human resources communities, as well as

to training and education providers. 

Recruitment Strategies Improved. Recruiting and Retaining Financial Management

Employees–Useful Tools, with a cover letter from the Director of the Office of

Personnel Management (OPM), was jointly issued by OPM and the CFO Council

Human Resources Committee (HRC). This publication summarizes current personnel authorities available to improve recruitment and retention. For ease of use, it is

organized around common problems reported by financial managers. 

future initiatives:

Implement Qualification and Classification Standards. The revised OPM standards for

GS-510 accountants will be implemented as a nine-month pilot in volunteer agencies.

The HRC will work with the agencies, OPM, and the financial community to evaluate the pilots. The HRC will also work with OPM as it revises standards for other

financial management professions. These projected revisions will be based on the

CFO Council and JFMIP standards published in the core competency documents.

Improve Recruitment and Retention. Recognizing that many CFO agencies have limited

resources they can devote to recruitment, the HRC is working to encourage cross-servicing arrangements for recruiting financial management staff. This may include publicizing a consolidated list of Federal financial management job opportunities at colleges

and universities, adapting existing automated tools for screening applicants, and sharing candidates across agencies.

Improve Professional Education. The HRC will take an active role in the Federal

Training Technology Initiative (FTTI), established by the President’s Executive Order

13111, Using Technology To Improve Training Opportunities for Federal Government

Employees. HRC will facilitate discussions between Federal financial managers and

outside training providers to encourage excellent, cost-effective training for Federal

financial management staff. 
Priority 4: Improve Management of Recievables

accomplishments:

Treasury Offset Program Expanded. In calendar year 1998, $2 billion was collected

through the Treasury tax refund offset program. Of this amount, $1.1 billion represented delinquent child support obligations and $864 million was delinquent Federal

non-tax debt, mainly delinquent student loans. The Tax Refund Offset Program and

the Treasury Offset Program (TOP) have been merged into a single, enhanced offset

process for the 1999 tax processing cycle. The value of debts in the TOP debtors database is now $68.3 billion ($22.2 billion non-tax debt and $46.1 billion child support).

Agency Debt Referral to Treasury Increased. Treasury, in close consultation with Federal

agencies, evaluated the Federal Government’s debt to assess how much is eligible for

referral to Treasury for offset and cross-servicing, as well as the amount of referred debt

that is collectible by Treasury. As indicated in Table 4, there is $60 billion in non-tax

delinquent debt owed to the Federal Government. Of this, $31 billion is eligible for

Treasury offset. Of the $31 billion eligible for the offset, $8 billion is also eligible for

Treasury cross-servicing.

8

Table 4. Summary Analysis of Delinquent Debt for the Federal Government 

(as of September 30, 1998)

Estimated Delinquent Debt

($s in billions)

Total Government $60.0

Less Than 180 Days ($13.6)

Delinquent Debt Over 180 Days $46.4

Debt Excluded from Offset ($15.2)1

Eligible for Referral to Treasury for Offset $31.2

Debt Excluded from Cross-Servicing ($23.1)2

Debt Eligible for Referral to Treasury 

for Cross-Servicing $8.1

1. The $15.2 billion is ineligible for transfer to Treasury because of the following exemptions:

the borrower has declared bankruptcy; the debt is owed by a foreign government; the debt is

in forbearance or a formal appeals process; or the debt is in foreclosure.

2. The $23.1 billion is ineligible to refer to Treasury for cross-servicing for the following exclusions: the debt is at a designated debt collection center or has been granted a cross-servicing

exemption; the debt is at the Department of Justice for litigation; the debt is eligible for

internal offset; the debt is with a third party for collection; or the agency has an approved

asset sale program.
future initiatives:

Increase Agency Debt Referral to Treasury. At the March 18, 1999, Federal Credit Policy

Working Group (FCPWG) meeting, it was agreed that agencies should establish target

dates for referral of debts over 180 days delinquent. FY 1999 goals for referral of debt

by the major debt collection agencies are provided in Table 5. Treasury has also

requested referral schedules from all other CFO agencies. The aggregate total of the

agency referral schedules will be submitted to Congress in this report for next year. 

Priority 5: Use Electronic Commerce to Improve Financial

Management

accomplishments:

Usage of Purchase Cards Increased. In FY 1998, several executive branch agencies used

purchase cards for 90 percent of purchases under $2,500. Additional agencies

achieved levels above 80 percent. Approximately 340,000 cardholders used purchase

cards for more than 16 million transactions worth in excess of $7 billion, saving an

9

Table 5. Debt Referral Goals for 1999

Treasury Offset Cross-servicing

Agency Percent of Eligible Debt Percent of Eligible Debt

to be Referred in 1999 to be Referred in 1999

USDA 90% 80%

Education1 100% 100%

HUD2 28% 39%

SBA 100% 100%

VA3 90% 1%

1. Education’s cross-servicing numbers only include institutional liability debt.

Education has been designated as a debt collection center to service its own student

loan debt.

2. HUD has scheduled an asset sale in the amount of $1.14 billion for 2000. HUD

continues to refer Title I debts monthly, which are approximately 39 percent of its

eligible debt for cross-servicing and 28 percent for offset. 

3. In March 2000, VA will electronically refer 90 percent of eligible debt for 

cross-servicing. 
estimated $800 million in administrative costs. Agencies have increased purchase card

use, as reflected in Chart 1.

Usage of Electronic Funds Transfer

(EFT) Increased. In FY 1998, 68 percent of Treasury’s 772 million non-tax

payment transactions on behalf of

non-defense agencies were made electronically. For the first half of FY

1999, 73 percent of these payments

were made electronically. (See Chart

2.) Over 85 percent of the Federal

Government’s payments are made to

individuals. Efforts to use electronic

payments have targeted large volume

programs first. Three out of every

four social security and veteran benefit

payments, nine out of every 10

Federal retirement payments, and 96

percent of all Federal salary payments

are made by EFT today. The number

of vendor payments made electronically has grown to 50 percent.

future initiatives:

Implement Electronic Transfer Account (ETA) Payments: Recipients of Federal payments

who do not have a bank account are eligible to open a low-cost Treasury-designated

ETA at participating financial institutions. In calendar year 1999, Treasury will begin

enrolling financial institutions and recipients in the program.

Expand the Use of Financial Electronic Data Interchange (EDI). EDI provides standardized structures for transmitting transaction data. Treasury will continue to expand the

use of Financial EDI with VA. This will provide VA with electronic payments and

remittance detail for the Health Care Claim/Payment Transaction Sets to automate its

10

0

2

4

6

8

10

12

14

16

18

20

Fiscal Year

$ Billions

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Chart 1. Purchase Card Use 

Dollars in Billions

0

20

40

60

80

100

FY95 FY96 FY97 FY98 FY99

Chart 2. Total Non-Tax Payments 

Made Electronically

1995 to 1999 
collection of third party health care reimbursements from insurance providers.

Treasury will also expand the use of Financial EDI with the Department of Education.

Education will be using EDI to receive electronic payment and remittance information

for its Direct Student Loan program, which collects over $2 billion annually.

Expand the Internet Credit Card Collections E-Money Program: Treasury will continue to

expand the Internet credit card collections program to allow the public to make payments over the web for fees, fines, purchases, and donations to Federal agencies.

Currently five Federal agencies participate in the Internet credit card collection program, with approximately eight more to be added by the end of 1999.

Enhance Electronic Federal Tax Payment System (EFTPS). Treasury created EFTPS to

modernize tax collections, moving Federal tax payments from a paper-based system to

an electronic one. Enhancements to EFTPS include developing and implementing

new methods to allow taxpayers to authorize the IRS to deduct tax payments from

their bank accounts.

Priority 6: Improve Administration of Federal Grant Programs 

accomplishments:

Number of Grant Systems Reduced. In June 1998, the CFO Council adopted a plan to

reduce the number of cash draw-down systems used by the Federal Government.

Members agreed to cease all new systems development and designated two existing systems for use by all Federal civilian agencies (the HHS’ Payment Management System

(PMS) and Treasury’s Automated Standard Application for Payment System (ASAP))

and a third system for all DOD organizations. By October 2002, only these three

grant systems will be in use and all proprietary grant systems will be discontinued.

Indirect Cost Rate Calculation Standardized. In June 1998, OMB revised Circulars 

A-21 “Cost Principles for Educational Institutions” and A-122 “Cost Principles for

Non-Profit Organizations.” This was done to standardize the methods for determining the percentage of a Federal grant that may be used to cover facilities and administrative costs -- this percentage is commonly called the indirect cost rate. OMB, with

assistance from Federal agencies, also developed a draft standard format for educational

institutions to use in submitting their indirect cost rate proposals. The format was

released as a proposal for comment in June 1999. 

11
future initiative:

Streamline Grant Application, Management, and Reporting Processes. OMB and the

Federal agencies will continue to study ways to streamline various grant procedures,

i.e., design common forms for grant application and financial reporting, review the

General Terms and Conditions for grants and contracts, and study the feasibility of

creating a single grants-management circular. 

conclusion

Improving Federal financial management is necessary to achieve the Federal

Government's program performance goals. The CFO Council and the central agencies -- OMB, GSA, OPM, and Treasury -- played important roles in setting standards,

policies, and removing obstacles to reforming the way agencies do their work. CFOs

are working within their agencies and through the CFO Council to achieve the critical

objectives described in this plan. They will continue to pursue high standards of fiscal

discipline to make significant contributions to the improved management of their

agencies and the Federal Government. The detailed 1999 Federal Financial

Management Status Report and Five Year Plan can be found on the Internet at

http://www.whitehouse.gov/OMB/financial.

12
USDA Sally Thompson Allan Johnson (A)

Commerce Linda J. Bilmes (N) Anthony Musick

DOD William J. Lynn III Nelson Toye

Education Tom Skelly (A) Mark Carney

DOE Michael Telson Elizabeth Smedley

HHS John Callahan George Strader

HUD vacant William E. Dobrzykowski

DOI John Berry R. Schuyler Lesher

DOJ Stephen Colgate (A) Therese McAuliffe

DOL Kenneth M. Bresnahan (N) Brenda Kyle

State Bert T. Edwards Larry Eisenhart

DOT Jack Basso David Kleinberg

Treasury Nancy Killefer Steve App

VA Edward A. Powell Frank W. Sullivan

AID Michael Smokovich Elmer S. Owens

EPA Sallyanne Harper Michael Ryan

FEMA Gary D. Johnson James L. Taylor

GSA William B. Early, Jr. vacant

NASA Arnold Holz Kenneth J. Winter

NSF Joseph Kull Albert Muhlbauer

NRC Jesse L. Funches Peter Rabideau

OPM J. Gilbert Seaux Donna Ballard

SBA Joseph Loddo (A) Gregory Walter

SSA Yvette Jackson Thomas G. Staples

Agency Chief Financial Officer Deputy 

Chief Financial Officer

Chief Financial Officers and Deputy Chief Financial Officers

(A) Acting (N) Nominee
http://www.whitehouse.gov/OMB/financial