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2011   Financial Report of the United States Government

Management's Discussion & Analysis

Financial Management Progress and Priorities

The Office of Federal Financial Management (OFFM) within the Office of Management and Budget (OMB) is responsible for the Federal Government’s financial management policy and manages government-wide financial management priorities.  This section summarizes recent progress and outlines several key initiatives intended to achieve improved results moving forward.

Progress To Date

Since the passage of the CFO Act of 1990, the Federal financial community has made important strides in instilling strong accounting and financial reporting practices.  This year, for the first time since the passage of the CFO Act over 20 years ago, 23 of the 24 CFO Act agencies obtained an opinion from the independent auditors on their financial statements.24  Over the past 20 years, an increasing number of Federal agencies have initiated and sustained disciplined and consistent financial reporting operations, implemented effective internal controls around financial reporting, and have successfully integrated transaction processing and accounting records.  These efforts have resulted in improved results on financial statement audits. Out of the 24 major “CFO Act” agencies, there were 21 clean opinions, 2 qualified opinions, and only one remaining disclaimer in FY 2011.  In addition, the number of auditor-identified material weaknesses stands at 31, an approximate 50 percent decline from the 61 material weaknesses that were identified at the start of this past decade.

The foundations for the accomplishments achieved over the past 20 years are numerous.  In particular, and as envisioned by OMB Circular No. A-123, Management’s Responsibility for Internal Control, the Federal financial management community approached these reporting challenges holistically, integrating both programmatic and financial management disciplines in building successful financial reporting programs.  Given the size and complexity of the programs and transactions involved, these results would not have been possible without the advances in Federal financial management.

Ongoing Challenges

Despite the progress identified above, critical gaps in financial management performance remain.  Weaknesses in basic financial management practices and other limitations continue to prevent one major agency, and the Government as a whole, from achieving an audit opinion.  The cost of maintaining effective financial operations is increasing, driven largely by the growing and high costs agencies are incurring to modernize agency financial systems.  While Federal agencies have mobilized resources to meet the new and growing demand for real-time transparency into where Federal dollars are going, more work is necessary to sustain these solutions in a cost-effective manner over the long term.  Federal agencies reported approximately $115 billion in improper payments in FY 2011 and continue to maintain thousands of unneeded real property assets on their books.  These instances of Government waste compromise the integrity of Federal programs, lead to damaging inefficiencies, and erode citizens’ trust in Government. However, initiatives as outlined below are resulting in progress with these issues and are putting the Government in a better position.

Improvement Initiatives

It has never been more vital that the Government’s financial managers are performing at high levels to meet these challenges and are maximizing the return on every dollar invested in financial management activities.  To do so, three areas emerge as the optimal priority areas for the Federal financial management community: 

Eliminating Waste

Closing the Efficiency and Technology Gap in Financial Operations

Promoting Accountability and Innovation through Open Government

The sweeping challenges we face in the Government today require our financial managers to move beyond the status quo and to generate a higher return on investment for our financial management activities.  The Financial Management Community has made critical progress – decreasing the reported government-wide improper payment rate, from 5.29 percent in FY 2010 to 4.69 percent in FY 2011 and increasing the amount of recaptured improper payments by approximately 80 percent.  In addition, the agencies are on target to exceed the goal of $3 billion in savings from real property by September 30, 2012.  The steps outlined above leverage the tools and capacities in place today, and refocus energies on critical and emerging priorities – cutting wasteful spending, improving the efficiency of our operations and information technology, and laying a foundation for data quality and collaboration as we enter a new era of transparency and open Government.

Footnotes

24 The Department of Homeland Security had the  Balance Sheet and the Statement of Custodial Activity audited and received a qualified opinion on these statements. The Department of State received a clean opinion on the Statements of Net Costs and the Statement of Budgetary Resources, and a qualified opinion on  the Balance Sheet and Statement of Changes in Net Position.   HHS received a clean opinion on all statements except the Statement of Social Insurance and the Statement of Changes in Social Insurance, both of which received a disclaimer of opinion.  The Department of Defense received a disclaimed opinion on all statements subject to audit.(Back to Content)


Last Updated:  February 16, 2012