Summary: GAO discussed the federal government's need to reform its financial management system. GAO noted that the government's reliance on a second-rate financial management system which does not provide reliable, accurate, or consistent information and lacks fundamental internal controls: (1) hinders government decisions regarding the budget deficit, effective program management, and safeguarding of assets; and (2) results in inaccurate program costs, delinquent debts, late payments, unresolved accounting problems, fraud, and excess inflation dividends. GAO also noted that its draft financial management improvement legislation would: (1) establish an Under Secretary of the Treasury for Federal Financial Management as the government's chief financial officer (CFO); (2) create a primary, separate focus on management issues that is not possible under the Office of Management and Budget; (3) require CFO to develop a long-range, governmentwide financial management improvement plan; (4) require executive branch departments and agencies to establish corresponding financial management leadership positions; and (5) require agencies to prepare audited annual financial statements. GAO believes that federal financial management reform: (1) will be a long-term project; and (2) could benefit from studying state initiatives to improve their financial management systems.
