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Improving Financial Management

Build a Strong Financial Management Infrastructure

Travelers on the Pennsylvania Turnpike often remark about the narrow lanes and tunnels and other design features that are inferior to most of the segments of the interstate highway system today. Many are unaware that it was the earliest of the high- speed, limited access highways, on the leading edge of highway design at the time it was built over a half-century ago. As money was allocated in the 1950s through 1980s to build new interstate highways using the latest technology and following higher standards, the pioneering Pennsylvania Turnpike became outdated, but continued to serve tens of thousands of motorists.

A similar problem exists with federal financial management. Accounting systems were among the first applications of computer technology in the U.S. government. They were installed on large central computers in the 1960s and 1970s by individual agencies without much redesign of the manual practices or much thought given to consistency among agencies.

Leadership, planning, standards, experienced and fully trained managers and employees, the incentives of competition, and technology--these are the elements needed to build a strong financial management infrastructure. They are all within view but slightly out of focus. After many partially successful legislative and executive branch initiatives, most of the elements for fundamental change are present.

Generally accepted accounting principles (standards) for the federal government are being established, wide accessibility of data through technology is being developed, and the Chief Financial Officers Act of 1990 and the Government Performance and Results Act of 1993 offer a solid legislative foundation for progress. The Chief Financial Officers Act established chief financial officers in every department and major agency and required audited financial statements. The Government Performance and Results Act will require performance measures, focusing on the outcome of programs.

With information technology today permitting databases accessible through telecommunications, the opportunity for systems with clear standards, timely and accessible data, and stronger accountability is here. Leadership and a clearly defined plan can create a solid and modern financial infrastructure to replace the multitude of systems and standards that exist today. The recommendations in this section of the report can accomplish these objectives in the next several years.

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