Comments on AICPA financial management proposal, November 22, 1989.

• Author: Burk, William M.

Comments on AICPA Financial Management Proposal

November 22, 1989

This is in response to your October 20, 1989, letter requesting Tax Executives Institute's support for a four-point plan proposed by the American Institute of Certified Public Accountants for the financial management of the federal government. Although we decline your invitation to participate in the AIRPA's December 11 colloquium on the report, we appreciate the opportunity to comment on the AICPA proposal.

Tax Executives Institute generally shares the AICPA goal of improving the financial reporting system for the federal government. As explained below, however, the Institute does have reservations about several aspects of the AICPA's proposal.

In a report prepared by an AICPA Task Force on Improving Federal Financial Management, the AICPA recommended the following:

* The appointment of a Chief Financial Officer (CFO) in the Executive Branch and a controller in each federal agency and department.

* The establishment of a Presidential Commission to recommend consistent accounting and reporting standards for federal agencies and departments.

* The preparation and publication of financial statements government-wide and by each federal agency and department.

* The annual audit of federal finnancial statements by independent auditors.

AICPA Task Force on Improving Federal Financial Management, Federal Financial Management: Issues & Solutions 58-59 (1989)(hereinafter cited as the "AICPA Report").

TEI shares the AICPA's concern that existing financial management practices of the federal government, if allowed to continue, may "undermine the credibility of government data used to discuss and define the true magnitude of the federal government's financial problems." See AICPA Report at 3-4. We also agree that rectifying these financial issues in any meaningful way will require enabling legislation.

The Institute generally supports the AICPA's four-point proposal as a rational and thoughtful starting point upon which a sound federal financial management program may be built. We remain concerned, however, about several aspects of the proposal.

The cornerstone of the AICPA's proposal is the appointment of a chief financial officer for the Executive Branch. TEI endorses the appointment of an Executive Branch CFO. We agree that financial management responsibility and authority within the government should be centralized; we agree that the CFO's term of office should be fixed and long; and...