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  Gee...this is what I've been saying pretty much since DFAS brought me here (8 years ago) to help with FFMIA compliance (because I'm a CPA) - that the Comptroller General who foisted auditable accrual based financial statements on the Federal government should be boiled in red ink. Any benefits will never outweigh the costs we've already spent. Yes, there are benefits to auditable budgetary statements (which is what state and local governments do) and to managerial accounting - but we can do both of those without doing auditable accrual based financial accounting, and a lot cheaper too.

  As for the claim that having these types of financial statements allows the taxpayers to hold us accountable - the corporate analogy would be to small shareholders of larger corporations...and there's a (false) assumption that enough of those type of people read and understand a corporation's financial statements to act on them in a way that will affect the corporation's actions. But reality doesn't work that way - it's the banks and big investment funds (etc.) that use the financial statements to make decisions that will affect the corporation. The only thing a small shareholder can use them for is to decide whether to invest in a particular company or not - which is NOT a choice taxpayers have. For the Federal government, the people that have the power equivalent to the banks and big investment funds are Congress and the political appointees - and they're going to make their decisions based on political considerations (by definition that's what they do), and whether or not we have good audited accrual based financial statements or not isn't going to make a whit of difference in their decision. To think otherwise is to be in a fantasy world.

  (As for the comments about A-76 and service contracts - I don't see what they have to do with this article...other than that if we didn't have to do audited accrual based financial statements, we might have enough resources to do a better job at managerial accounting.)

  Michaël Posted May 28, 2008 3:47 PM
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  What's distressing from his comments is the lack of commitment to A76. Unless ALL government jobs are bid out every 5 years the taxpayer will continue to see a never bloating of the workforce. A76 is the only means that the taxpayers have to insure their dollars are buying the minimum overhead for the war fighter. DOD was establish to fight our nations battles not to be an Oasis for landcrabs and feather merchants

  Dan ketter Posted May 28, 2008 11:09 AM
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  I agree with Mr. Hanks whole-heartedly. The CFO Act has been 90% a contractor/auditor make-work program that has done little or nothing to improve the core financial functions of most government agencies. The Federal government is a cash-based business. Trying to strap-on an accrual accounting system to yield financial statements has been a cruel joke at best. Clinger-Cohen isn't far behind. Despite all the architecture work done, basic services and especially security remain a huge issue. Both of these laws mostly have generated what the government loves--lots of meetings and plans and documents and way to create the illusion of progress without having to get down in the weeds and fix real problems.

  RickT Posted May 28, 2008 8:46 AM
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  While I must claim that I am biased, I am an accountant and believe in the value of audited financial statements. I have worked in both the private and public sectors and I think the arguments this author makes are old - we've heard all this before from those who don't understand the field of accounting. The author states that audited financial statements, "provide three kinds of information: what a business is worth, its income and its cash flow." This is a very narrow view of financial reporting which belies a very limited understanding of the subject. I think this kind of information is exactly what taxpayers need to know to make informed decisions regarding which programs deserve their support and which do not. This author seems to think that the only stakeholders here are DOD managers and he's forgotten who is funding it all. Those appropriation dollars don't come from CONGRESS, they come from YOU and from ME, the TAXPAYERS - Congress is merely the conduit. Taxpayers need to be able to see what agencies have purchased with their money and how much they still owe (balance sheet). They need to know where agencies get their money and just how it has been spent (statement of changes in net position). They also need to know that those statements have been prepared properly and the information is reasonably reliable (audit is necessary). I do feel that good managerial accounting information is also extremely important, but this author's assumption that these two needs are mutually exclusive is ridiculous. Speaking as a former corporate accountant, I can tell you that businesses manage to produce audited financial statements and still provide good managerial cost information to internal decision makers every day. Certainly the talented people we have at DOD are no less capable.

  Just an Accountant Posted May 28, 2008 8:10 AM
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  We need to take a good look at service contracts and using good solid analysis if it would be cheeper for a Gov. Employee to do the job or if it is cheeper for a contractor to do the job. This should be done on an annual basis and reported to congress. On many service contracts it would be cheeper if the government brought it back in house, but government employees do not contribute as much money to political election or re-election campanies. I have seen Government equilevent positions a full two grades higher than the person performing the job to ensure the contractor is cheeper. Also I have seen contractors grade creep over a two to three year period to increase profit and pay more than the government. All of this should be tracked theough the CFO office with good auditors and price/cost analysis performing the oversite and asking the hard questions. Doing this would go a long way to using Managerial Accounting in developing the business case for any program. Of course there are jobs and programs the government does not and can not develope the expertize to accomplish and the contractors should continue to do these vital rolls.

  Chuck Posted May 28, 2008 7:58 AM