Chief Financial Officers Act of 1990 and Federal Financial Management Act of 1994
| Author | Jean Harris |
| Pages | 112-115 |
Page 112
The Chief Financial Officer Act of 1990 (CFO Act) provided tight financial control over agency operations and the central coordination of financial management functions to support an efficient administration of the executive branch. It centralized organization of federal financial management, required long-term strategic planning to sustain modernization, and began the development of projects to produce audited financial statements for the federal government. As Title IV of the Government Management Reform Act of 1994, the Federal Financial Management Act of 1994 extended the scope of the CFO Act by requiring agency-wide financial statements and a consolidated government-wide financial statement.
By the late 1980s, it was apparent that the financial systems of the federal government were in a deplorable state. The savings and loan crisis had developed undetected, financial scandals had occurred in the Department of Housing and Urban Development, numerous high-risk programs had been identified, and seriously deficient systems of internal control were common.
Page 113
Financial management systems were obsolete and inefficient. Management, program funding, and revenue-generating activities were impaired. Hundreds of separate accounting systems made monitoring, comparison, and auditing difficult. Enormous investments to upgrade financial systems were failing to achieve the benefits of integration because planning and coordination were lacking.
No one federal official or agency had statutory responsibility for coordination of federal financial management practices. Congress was concerned that management functions and innovations were being neglected as a result of the preoccupation of the Office of Management and Budget (OMB) with the budget.
In 1990 the CFO Act was adopted to improve the general and financial management practices of the federal government by establishing a structure for the central coordination of financial management. The act provided for the implementation of accounting systems and internal controls to produce reliable financial information and to deter waste, fraud, and abuse. Additionally, the act required extensive changes in reporting to improve the information available to administrators and to the Congress.
The CFO Act changed federal financial management in three ways: It created a new organizational structure for financial management, it encouraged the development of new and compatible accounting systems, and it required new forms of reporting.
Three basic changes to organizational structure were introduced in the CFO Act to provide for central coordination of financial management. In addition, a coordinating council was created. First, to heighten management priorities and centralize primary accountability, the act provided for the statutory appointment by the president of a deputy director for management to report directly to the...
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