U.S. Department of the Treasury

(Archived Content)

Mr. Chairman and members of the Subcommittee, I am pleased to submit a statement today on the Financial Report of the United States Government. I would like to thank you, Mr. Chairman, Ms. Schakowsky, and other members of the Subcommittee for focusing on improving Federal Government financial accountability and reporting.

While the fiscal year 2000 Financial Report meets the statutory deadline again this year, I believe that reporting financial results 6 months after the close of a fiscal year is simply not good enough. While incremental progress is being made each year by the Federal financial management community, incremental progress will not move us forward quickly enough to close what I see as the gap between the current state of financial management and a condition that would adequately meet our responsibilities to the American people.

I believe that we need to establish some challenging objectives for governmental financial management; objectives that parallel those found in the private sector that will force people to think creatively. We should start with the amount of time it takes to close our books. When I was in the private sector, we closed the books and had an audit opinion in 3 working days. We need the Government to establish a similar goal. This will force Government to look at the closing process differently than it does today. It will require transaction-based systems to produce the reports, instead of the after-the-fact accounting we utilize today. It will also require the establishment of more frequent agency reporting. In short, it will go a long way toward making Governmental accounting more useful, both to agency management and to Congress by improving the quality of the data.

In order to achieve this goal, we need to work together as a government. Treasury can lead this effort, but the agencies are the key to success. We need to do 3 things now. First, we need agencies to identify short-term process improvements to reduce the closing time. Second, in the longer term, we need to reexamine our overall financial management process to look for ways changes to our systems can help. Finally, Treasury, in conjunction with the Office of Management and Budget (OMB) and the General Accounting Office (GAO), will conduct a comprehensive review of the financial statement production process to establish the specific goals for the timing of future financial reporting and to build goals for the content of the reports so that they will become more meaningful.

I want to emphasize one previous point. We must expand the audience for our reports by making them more useful. Looking through this year's report I see a number of ways that it could be improved. First, it has too much information in many areas and not enough in others. No one will take the time to wade through all this supplementary data. The report needs to be put on a serious diet. Second, all reports need a reference point. Financial statements without comparative results are meaningless. We need to add last year's amounts to our reports. Third, we need to find ways to include detail schedules to show the financial results of each component unit. Finally, the Government should directly track and report agency progress toward meeting important financial management goals in areas such as internal controls, and transaction processing.

I believe that the work that has been done to date is valuable and is an important starting point. Together we should improve these reports to become more useful both within the Executive Branch management and to Congress. Mr. Hammond's statement addresses many of our challenges and concerns in greater detail.