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Experts push financial reporting overhaul
Thursday - 2/17/2011, 1:15pm EST
By Meg Beasley
Federal News Radio
As the administration and Congress begin the battle of the budget, a task group report suggests the numbers might be even more complicated than most of the country realizes.
"Let's be honest. This is one of the most important, and most boring hearings in Congressional history," Rep. Jim Cooper (D-Tenn.) said during the Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management's first in a series of hearings on financial reform Wednesday.
The subcommittee heard from three experts about recommendations from the Federal Accounting Standards Advisory Board (FASAB).
"Our focus is to look at financial information of the federal government, particularly how that information is reported and then acted upon," said subcommittee chairman Todd Platts (R-Pa.). "Specifically we are looking at the Consolidated Financial Report (CFR) and how we can make it more useful. The question we are asking is how we take than information and make it more useful, not just to Congress, but to the American people."
Platts said that given the $14 trillion deficit, the public is paying attention to whether Congress is spending tax dollars responsibly - or not.
The task force identified serious problems with the financial information government auditors collect and how they report it. It focused primarily on the CFR, a record of how agencies have spent money and the costs of unfunded but obligated programs such as Medicare.
"The static, paper-based reports the government delivers today contain important information," said Jonathan Breul, a member of the task force and a former Office of Management and Budget official. "However, those reports are not presented or available in a way that makes them easy to use or easy to understand."
The task force conducted a user-needs study which showed citizens, executives and managers in both the private and public sector had difficulty understanding information in federal financial reports.
The task force developed ten recommendations it says will improve the usefulness of the CFR. Four of the recommendations focus on ways to enhance the communication of the data by making it easier to access, search and understand.
"The government needs to use modern technology to inform the presentation of that information and adapt to the way users want to receive that information and are much more likely to use that information," Breul said.
The task force recommended moving all financial data to a central website that lets users choose the level of detail. Users, whether the public, members of Congress, or federal employees, would all have access to everything from summary tables to specific amounts spent on a certain project.
Breul said the success of websites like Recovery.gov is due to citizens' ability to trace how their tax dollars are spent - in their districts or on programs they think are important. He said that level of access for all government financial data is critical.
He added that the consolidated financial report isn't a best seller - steps should be taken to make it more approachable and user friendly such as adding colorful graphs and other visual aids.
The task force also found that the presentation of the information isn't the only problem when it comes to creating a better understanding of the nation's financial situation. They said undue focus on budget numbers, as bad as the debt may seem, actually creates a false sense of the country's fiscal health.
Budget numbers are reported on a cash basis while the CFR is reported on an accrual basis. Accrual accounting takes time in to consideration - forcing agencies to take long term obligations or economic cycles into account. The CFR is the only federal accounting document to use accrual accounting - individual agencies only report budget numbers.
Cooper said every large organization in the country, from businesses to local governments, is required by law to use cash and accrual accounting. He said it's the difference between looking at your checkbook balance versus your credit card debt.
Cooper said the government's refusal to follow the standards it set for the rest of the business world is irresponsible hypocrisy.
"According to cash accounting, our debt is on the order of $14 trillion," Cooper said. "But if you look at our unfunded obligations, it's more like $50, $60, who knows how many trillions of dollars. Our debt this year isn't $1.5 trillion or so; it's more like $2 trillion. When are we going to get real on these numbers? The business mantra is you can't measure it you can't manage it. We are refusing to measure the dimensions of our problem. It is not a lack of information, there is a willful blindness to that information."