Abstract: In an era of limited resources, governments are under great pressure to reform their administrative systems. Local governments have been forced to consider innovative management tools to improve service while financial resources shrink. The tools include Activity-Based Costing (ABC), ActivityBased Management (ABM), Total Quality Management (TQM), benchmarking process reengineering and the balanced scorecard. Some government leaders believe they have found the answer to the challenge of improving quality and increasing productivity@ Others dismiss these contemporary management tools as another fad that produces only failure in a cycle of grand promises and disappointment. In light of the prevalence of traditional budgeting and financial management techniques, such as revenue and expenditures forecasting and the monitoring of financial trends, we examine the effectiveness and usefulness of some contemporary management techniques: ABC, ABM, benchmarking, process reengineering, TQM and the balanced scorecard. This article describes a survey in which government administrators were asked about their use of and attitudes toward these contemporary tools. Tools Included in the Survey Innovative management tools that have become more prominent over the last decade are included in the study. Traditional budgeting and financial management tools, such as line item budgeting and financial trend monitoring, are not included as they are proven tools that are necessary for the accountability of local jurisdictions The following six tools are included in this study. Activity-Based Costing (ABC): A procedure that measures the cost of products, services and customers. ABC uses the costs of activities as building blocks. ABC first assigns resource costs to the activities performed by the organization. Activity costs are then assigned to the products, customers and services that benefit from or are creating the demand for the activities. The ABC concept was developed by Robin Cooper and Robert S. Kaplan from the Harvard Business School. They have published a series of articles advocating the use of ABC since 1988.1 Activity-Based Management (ABM): The management processes that use the information provided by an activity-based costing analysis to improve organizational performance. ABM includes performing activities more efficiently, eliminating the need to perform certain activities that do not add value for customers, improving the design of products and developing better relationships with customers and suppliers.2 The goal of ABM is to satisfy customers while making fewer demands on organizational resources. ABM was introduced in management accounting literature in 1992.3 Benchmarking: The process of studying and comparing how other organizations perform similar activities and processes. The other organizations can be either internal or external and are selected because they are known to have excellent performance. Xerox coined the term benchmarking in 1979. The approach has been in use for a number of years, although it was often called by different names. An early benchmarking article appeared in Harvard Business Review in 1987.4 Process Reengineering: "The fund mental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service and speed."' Process reengineering was first introduced by M. Hammer in 1990 but did not gain wide dissemination until after the publication of Hammer and J. Champy's book on reengineering in 1993. Total Quality Management (TQM): A commitment to quality that involves a clear vision of what the organization does, its quality values and goals, how it's going to achieve them, who its customers are, their needs, the needs of its employees and a focus on processes. Edwards Deming launched the TQM movement when he published his book Quality, Productivity and Competitive Position in 1982. …

Abstract: Clearly, stakeholders of all organizations are demanding ever-higher levels of accountability. Colleges and universities are urged to improve academic accountability by developing better outcome measures to assess their students' learning. At the same time, the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB) continue to refine the financial reporting models of these same colleges and universities to enhance accountability on the business side. With the issuance of the new GASB reporting model in June 1999, state and local government financial accountability has been enhanced. Opportunities and responsibilities for practicing accountability, or accountancy, in the government and not-for-profit areas have never been greater. Accountability in these areas is practiced by accountants employed by the various governmental and not-for-profit entities as well as by the many outside, independent auditors who review their processes and reports. A great number of these personnel have been educated as certified public accountants. Many commentators have long believed that these practicing accountants require more familiarity with governmental/not-for-profit accounting than had been recognized in the CPA exam's topical coverage. The Research Question The content and format of the May 1994, Uniform CPA exam was substantially changed from its previous version. The object of the research project reported here was to determine how this change in the CPA exam affected coverage of governmental/not-for-profit accounting topics and how the new exam relates to college and university curricula in these areas. A sample of schools who reported their CPA exam pass rates on the May exams of the years 1991 through 1996 was prepared. Exam results were available from the National Association of State Boards of Accountancy (NASBA).1 The pass rate of a school is the percentage of first-time test takers without advanced degrees who pass a particular exam part. This sample of 108 schools from 40 states included the pass rates on the sections covering accounting knowledge before and after exam restructuring. The pass rates of a school were compared to the results of an analysis of the schools' accounting programs to determine whether that school required either a course in govemmental/not-for-profit accounting or a course in advanced accounting that included a module on governmental/not-for-prof it accounting. Are students from programs that include an instructional component on governmental/not-for-profit accounting more likely to pass the newly structured CPA examination than other students? We expected that students whose academic programs required some coverage of governmental/not-for-profit accounting would be better prepared for the new CPA exam. Specifically, we expected to find that a governmental/not-for-profit requirement in a school's accounting program would have no impact on pass rates under the old exam format. In contrast, we expected that such a requirement would affect a school's pass rates for accounting material under the new exam format. Changes to the CPA Exam in 1994 Recent changes to the exam started with new question formats in May 1992, and culminated in a shorter, restructured exam in May 1994? Recognition that many candidates may have only spotty preparation in the areas of governmental/not-for-profit accounting may possibly have had some influence on this ongoing redesign of the CPA exam. While the proportion of exam time devoted to accounting topics was reduced overall, relative emphasis on governmental/not-for-profit accounting was notably expanded.3 The exam restructuring process continues today with consideration of possible computerization of the exam. The AICPA Board of Examiners is also considering reporting only pass/fail results to candidates rather than scores.4 The format changes that appeared in the May 1994, Uniform CPA exam were substantial. …

Abstract: The purpose of a service level agreement (SLA) is to define the responsibilities and relationships between a client or service department and a provider of support services It aims to clarify expectations on the quality of support delivery and its costs The agreement can serve as an informal contract between departments within an organization or between organizations when a formal contract is undesirable or even impossible2 The process is internal to the organization as it establishes quality standards at a price the users of central support services are willing to pay Whether external parties compete against the internal provider to provide such services depends on the political will of the organization Funding for public services in the United Kingdom has declined in recent years There is also a trend toward devolved or delegated budgets and the market testing of public sector functions Central support departments are therefore subject to increasing scrutiny by front-line service departments More than ever, budget managers are questioning the cost and quality of services from "overhead" departments and considering whether external providers could offer the same services at a better value This trend is set to continue as the most recent UK government initiative to encourage "best value"' in public services is aimed at delivering quality service at a price people are willing to pay The result is a continuing requirement to deliver efficient services Therefore, public bodies are introducing SLAs or exploring the idea in some or all of their support areas This article examines the progress in implementing SLAs within local government in a sample of local authorities in England and Wales4 It covers such areas as the traditional method of allocating overheads in UK local government, the potential content of SLAs, the advantages and disadvantages of such agreements and alternative methods of charging for financial services It concludes with the view that service level agreements have the potential to lead to better resource management The Traditional Approach5 Local authorities in England and Wales are required to divide their overheads into three distinct elements:' * management that comprises direction, supervision and guidance by the council, its committees and senior officers; * overheads from which no user benefits; and * Support services such as finance, information technology, management services, administrative buildings etc These three categories require distinct accounting treatments The first category, corporate management costs, is not charged to front-line services but to an account essentially showing the costs of democracy The goal is to isolate costs that would not be faced by private companies This prevents local authority services that are subject to competitive tendering being placed at a disadvantage in the market testing process7 The second category includes specialized expenses They would include the back funding of pension increases and longterm unrealizable assets, such as computer mainframes that are unused because work was lost as a result of competitive tendering This category of overheads is exempt from apportionment and is borne as a central cost The third category of costs must be charged to services Traditionally, there has been no written agreement between support service providers and users on how to determine charges and service quality Providers work within their own departmental instructions, and any influence users exert on the quality of service is informal or through supervisors The main method of apportionment is a staff time analysis that requires support staff to complete timesheets regularly Costs are then allocated to front-line departments on the basis of time spent on particular services Costs for administrative buildings are pooled and then apportioned on the basis of floor space initially occupied by all departments and functions …

Abstract: With the start of the new millennium, government entities face the implementation of a new, sweeping Governmental Accounting Standards Board (GASB) reporting model. Often the most challenging aspect of such a major project is getting started, particularly for smaller governments with minimal staffing. The good news for these smallest governments, also known as Phase HIll governments, is that they have extensive time to prepare. If their revenues are less than $10 million for the first fiscal year ending after June 15, 1999, implementation is not required until the first fiscal year beginning after June 15,2003. Larger entities will implement GASB 34 in the two previous years, depending on size. Though these dates seem distant, now is the time to begin planning. This article was inspired by interviews with personnel from a small local government. The interviews were part of a project to reformat the financial statements and obtain comments from the government's users and staff regarding GASB 34 reports. The process revealed that implementation will require forethought and will not be solely a mechanical, numerical procedure. The purpose of this article is to prime government financial statement preparers on the basic decision-making and planning needed before the implementation year. GASB 34 will affect numerous aspects of financial accounting, reporting and budgeting, and state and local government entities of all sizes should formulate an action plan. Some steps will take more or less effort, depending on record keeping and availability of capable personnel. It is possible that some of the required information may not have been previously compiled. It is important to note that GASB 34 allows each entity to make certain choices in preparing its financial statements. Regardless of the unique circumstances for each government entity, the following options should be thoroughly researched: Form a Task Force Each government entity should appoint at least two people to spearhead the implementation effort Even in smaller entities, selecting one person to be the resident expert can be a mistake due to the size and complexity of tasks and the need for multiple perspectives. The task force should include at least one person with broad knowledge of the entity's activities and the corresponding accounting. If possible, another task force member should have detailed knowledge of the government's infrastructure. Amember of the oversight board should also be a task force member serving as a liaison between the finance function and the oversight board. Governments should provide a budget for the task force and relieve members of other responsibilities if necessary. Get Plugged In Your government entity may be unique, but it is not alone. All state and local government entities are dealing with similar issues, make use of others' expertise. Professional associations, such as the Association of Government Accountants, American Institute of Certified Public Accountants, Government Finance Officers Association and state CPA societies will provide guidance to those affected by GASB 34. The task force should contact these associations and, if practical, become involved. Remote governments can seek out the associations' newsletters, journals or implementation guides. Some organizations also have information on their websites (see Figure I for examples of sites). Do not forget about GASB-they have a vested interest in successful implementation and will be providing guidance. Train and Educate Training that has both breadth and depth is crucial. First, the task force leaders should be trained on every aspect of the statement; this may include completing self-study and attending workshops and conferences. They will be the guidance counselors for others affected by this change. Next, the accounting staff implementing the changes should be trained. Finally, the oversight board will need user-friendly education so they can properly read, interpret and act on information they receive in this new format. …

Abstract: This summer as 1,400 AGA members gathered in San Francisco for the Association's 49th annual meeting, one couldn't help but wonder what Robert W. King would have thought of the Association he founded nearly 50 years ago. What a remarkable journey it has been since that September day in 1950 when King gathered a small group of federal accountants and began the Federal Government Accountants Association. That charter group had high hopes that FGAA's members could work together to improve government financial management. As it turned out, a lot of other remarkable things happened along the way-things like lifelong friendships, professional growth, personal development and momentous change in government, due in no small part to the efforts of FGAA and its successor, AGA. "Let me say that this Association has been the most satisfying and rewarding part of my professional career," said T. Jack Gary Jr., CGFM, a charter member and the Association's third National President. As AGA celebrates its 50th Anniversary it is clear that much has been accomplished as the membership worked together to build an Association that supports government financial managers at all levels while promoting and advocating for the profession. Apparently we have done something right. "Without a doubt, AGA membership and participation in the organization's governance enhanced my career a great deal," said Arthur L. Litke, CGFM, 1973-1974 National President, who passed away in July. "AGA membership 'opened the door' to many opportunities for displaying my capabilities to executives and organizations, which led to a very successful career progression to highest levels of government and professional organizations," said Nathan Cutler, CGFM, 1968-1969 National President and executive vice president from1975 to 1977. Each and every person who has been a member of AGA during its 50 years can take pride in the Association that we have built together, rich with a history or promoting excellence in government financial management while enhancing the careers of those who choose to be public servants. Humble Beginnings As World War II ended, the country entered a period of unprecedented prosperity. But the federal government's finances were a mess. The stage was set for an association of professionals to bring accountability to the federal government, which had sunk some $13 billion into the funding of the Marshall Plan to rebuild Europe and had opened its doors to nearly 300,000 homeless Europeans displaced by the war. Founded on September 14,1950, the goals of the Federal Government Accountants Association-the forerunner of the Association of Government Accountants-are not all that different from the objectives we pursue today. Some of the players are different-state and local financial managers now make up nearly half our membership, which is far more diverse than the small group of federal accountants who founded this Association. We are accountants, auditors, budget managers, systems managers, human resources managers and much more. But within the original goals of the FGAA, is the foundation for the AGA of today These goals were: to unite professional accountants for constructive endeavors; to encourage and provide a means for free interchange of ideas; to aid in,the improvement of accounting and auditing; and to contribute to the improvement of education. In 1975, when the organization's name was changed to the Association of Government Accountants, two additional objectives were added: to enhance the professional image of financial managers and management in government service; and to encourage expansion and improvement of service to the public. Fifty Years Later Today, AGA's programs and services align with the Association's founding tenets and hold true to the ideals of uniting the profession and serving the public. …

Abstract: The purpose of this letter is not to argue for or against GASB Statement No. 34. Rather it is to suggest that this financial reporting model is part of broad changes taking place in government policy and management in the United States and elsewhere. GASB 34 is an integral facet of the push toward privatization, deregulation, contracting out and tax and spending caps. As such, it fits with academic and ideological movements that go by various names, including the new public management and public choice. As a New York Times article on June 6, 1999 noted, GASB 34 means, "Local Governments May Have to Operate More Like Businesses." The Times article continues that it "would make many costs that are now hidden and shifted to future administrations far more apparent." This letter also inquires about future changes in government accounting. In short, the letter addresses three questions: What might explain these governmental changes, including GASB 34, how long will they continue and what might be the forces providing greater balance between a commercialoriented and public service-rooted government accounting system? What explains a move away from government accounting driven by its attention to annual cash budgets and fund controls and toward accrual and consolidation? The idea of using commercial accounting for government was broached in the 1890s. Traditionally, in the U.S., strong, wellorganized groups set the political agenda and generally prevail. Since at least the 1920s the various associations of government officials opposed many aspects of government accounting grounded on commercial models. They prevailed. Government unions, including teachers' unions, have not been enthusiastic about privatization, deregulation and contracting out. All of these techniques have a similar bent toward either running government like a business or reducing government. This array of political and professional forces supported deep government involvement as a major vehicle for societal progress as well as the use of annual cash budgets and fund controls to measure accountability. These forces were often referred to as the iron triangle. Clients seeking government intervention and aid teamed with legislative committees holding the purse strings and government administrators providing the goods and services. A government accounting system that was open to provide or promise now and pay later placed limited control on the iron triangle. GASB 34 favors a new set of political values and political actors. In particular, changing global forces and conditions that reinforce competitions and markets over government dominion provide one important reason for the political values and the partisans winning these government accounting and other government management battles. In some respects, when global competition and markets are important, the range of situations affected by the market expands beyond the price of commercial goods and manage ment of business operations. Governments, traditionally seen as sovereign and apart from the mainstream of markets, lose some of that sovereign protection to forces pushing toward economic decisions based on cost and price. In a global-driven world, government financial reports that are ambiguous or questionable on cost of goods and services lose credibility, and, as a result, can be ignored or diminished in importance. Groups, even well-organized ones such as the various associations of government officials find themselves on the defensive in these new cost, price and product cultures. Also potentially working against government prowess is that elements critical to the power of global markets, such as flexible exchange rates and free flow of capital, place a greater premium on governments acting and reporting in a businesslike fashion. GASB 34 follows that premium. In this market milieu, it is possible that interest group organizations matter less, especially those affiliated with government intervention. …

Abstract: THE FALSE CLAIMS ACT AND ITS "QUIT TAM" PROVISION--A PRIMER In the battle against fraud, the government has an effective weapon called the civil False Claims Act ("the Act"). The Act takes aim at the world's second oldest profession-stealing. The United States has been using the Act to fight fraud since the Civil War. The Act encourages whistleblowers,2 through its qui tam enforcement provisions, to report fraud. Qui tar3 enforcement has existed for hundreds of years and allows persons with evidence of wrong-- doing to sue dishonest government contractors on behalf of the government and share in any recovery obtained. The Act imposes triple damages and large penalties against companies and individuals that defraud the government. The Act has been particularly effective in the battle against defense and health care fraud but it can be used whenever a false claim is submitted to the government. Since the Act was amended in 1986, the amount of fraud exposed and dollars recovered has exploded and will undoubtedly continue to rise. ORIGINS OF THE FALSE CLAIMS ACT AND "QUI TAM" English Common Law and the Founding Fathers Qui tam actions arose from 13th century English common law as a legal method to supplement the King's power. Qui tam actions have existed in this country ever since the beginning of our government. In fact, the first Congress authorized qui tarn suits in at least 10 of the first 14 statutes imposing penalties. Currently, there are at least five qui tam provisions in the United States Code. The Civil War and Lincoln In 1863, America was engulfed in civil war but the War Department found itself inept in its own ongoing battle against unscrupulous and corrupt government contractors. The crooked contractors diminished the Union soldiers' ability to fight by depleting its resources through fraud. For example, when the War Department paid "[flor sugar it often got sand; for coffee, rye; for leather, something no better than brown paper; for sound horses and mules, spavined beasts and dying donkeys; and for serviceable muskets and pistols, the experimental and failures of sanguine inventors, or the refuse of shops and foreign armories."4 Consequently, the unethical contractors became notoriously rich. Congress and Lincoln decided that the government needed additional "citizen soldiers," including the private bar, to do battle against scheming government contractors. As a result, at Lincoln's urging, Congress passed the False Claims Act in 1863 and it was nicknamed the "Lincoln Law." The New and Improved "Lincoln Law" In modern days, fraud against the government again became big business as the budget expanded. Congress galvanized around a burgeoning federal deficit and its belief that defense contractors and others were-to hum an old tune-swindling the government. Thus, in 1986, Congress reinvigorated "Lincoln's Law" with the express intention of encouraging more private enforcement by giving whistleblowers increased incentives to come forward. When it amended the Act, Congress expanded the whistleblower's role in the action and increased the "bounty" provision. Congress allowed whistleblowers to play an active role in the litigation. Whistleblowers were even given the opportunity to challenge the fairness and adequacy of a govemment-negotiated settlement. Most important, whistleblowers were guaranteed a minimum 15 percent of the amount received by the government in a successful action. Consequently, the Act has become the federal weapon of first choice and our nation's most effective resource in the fight against fraud in nearly every federal program. LIABILITY The Act forbids anyone from knowingly submitting, or causing someone else to submit, false claims for payment of federal funds. Violators of the Act are liable for three times the government's damages plus civil penalties of $5,000 to $10,000 for each false claim. …

Abstract: Fifty years.. five decades.. a half-century. That's a long, long time. The Association of Government Accountants survived, served its members well, made a difference and continues to do so. Its earned reputation has been one of excellence, professionalism and improvement in public sector financial management. From its beginning, the best and brightest of governmental financial managers sought out the collegialism and camaraderie of AGA. In 1952, the American Institute of Certified Public Accountants (AICPA) recognized the membership of the newly founded FGAA as representative of the best accounting talent in the federal government. In the next 35 years, AGA repeatedly lived up to this early vote of confidence. The centennial issue of The Journal of Accountancy, in 1987, listed the all-time leaders of the accounting profession in America-calling them the 14 individuals who made a difference. One so honored was Andrew Barr, an active, longtime AGA member and a Past National President. The same issue cited a 100-year honor roll of some 80 accounting professionals who contributed significantly to improving federal financial management. More than 40 were or had been active AGA members. AGA's prominence was attained in many ways. I believe its preeminence is intimately related to two laws, passed some 40 years apart. The Budget and Accounting Procedures Act of 1950 culminated three decades of study, research, hearings and involvement by many future members of the soon-to-be-formed Federal Government Accountants Association, which later became AGA. The act required that governmentwide accounting principles, standards and related accounting requirements be defined; a system of central accounting and reporting be established; a governmentwide budget process be implemented; and departments and agencies establish sound financial systems and controls. The 1950 act repealed 106 other acts or parts of acts. AGA and its members spent much of the following years, and much of their careers, trying to attain these congressional objectives. But, having passed this and other laws, Congress did not enthusiastically assist in promulgating and requiring departments to adopt uniform fiscal practices, and Congress did not support a governmentwide basis of accounting or mandate departmental and governmentwide financial statements. Not unexpectedly, in the 1970s and 1980s, the public's perception of federal financial management moved from somewhat credible to incredulous. The 1980s were years when the federal government was accused of making less than factual financial statements on shrinking surpluses and growing deficits. The 1987 federal fiscal year closed on September 30 with private sector financial analysts and the financial news media taking serious issue with the published federal deficit. Many calculated a federal deficit several magnitudes larger than the official September 30 number. Later disclosures showed that federal deficits were considerably larger than had been reported. Federal bailouts in the 1980s were of catastrophic proportions. Federal accounting and reporting made it impossible to document the extent of the problems or even how they remained undetected for so long. "Black Monday," October 19, 1987, came and went and with its passing, citizens lost more than $500 billion in market values. The reasons for the financial meltdown were many and varied, but no analysis of why omitted the failure of the federal government to effectively manage, consistently account and honestly report on its fiscal results. At the time, the U.S. General Accounting Office reported that nongovernmental cash was deducted from federal employees' paychecks and then treated as federal receipts in 1987. And, forward to be reported as 1988 costs. The press reported the "official" federal deficit at September 30, 1987 was attributable to "one-year-only money," and "fake accounting. …

Abstract: The Governmental Accounting Standards Board (GASB) Statement 34, "Basic Financial Statementsand Management's Discussion and Analysis-for State and Local Governments," is the most significant government accounting standard issued since the 1930s. The statement replaces the current general purpose financial statements with an integrated set of fund-based and government-wide financial statements. Two types of changes are made by Statement 34. Some changes refine and improve financial statements that governments have issued for more than two decades. The other changes are the requirements for new, government-wide financial statements and management's discussion and analysis. The management's discussion and analysis is required supplementary information that precedes the financial statements and provides an analytical overview of the statements. In essence, it is a highly structured, detailed letter of transmittal. All of the financial statements required by Statement 34 are listed below. Except for the governmental fund statements, the financial statements are presented using the flow of economic resources (revenue and expense) measurement focus and accrual basis of accounting. The governmental fund statements are reported using the flow of current financial resources measurement focus and the modified accrual basis of accounting. The eight fundbased statements and two governmentwide statements are: Fund-Based Financial Statements Governmental funds (Figure 1) * Statement of net assets (balance sheet) * Statement of revenues, expenditures and changes in fund balances * General fund and major special revenue funds, statement of revenues, expenditures and changes in fund balances-budget and actual. (Alternatively, the budgetary comparison statement may be presented as required supplementary information.) Proprietary funds (Figure 2) * Statement of net assets (balance sheet) * Statement of revenues, expenses and changes in net assets * Statement of cash flows (direct method required) Fiduciary funds and fiduciary component units (Figure 3) * Statement of net assets (balance sheet) * Statement of changes in net assets Government-wide Financial Statements Government-wide statement of net assets (Figure 4) Government-wide statement of activities (Figure 5) Fund-Based Financial Statements The essentials of the fund-based financial statements are illustrated in Figures 1-3; those of the governmentwide statements are illustrated in Figures 4 and 5. In reviewing the fund-based statements, observe the most notable differences between these statements and the combined statements required by current generally accepted accounting principles (GAAP): * A distinct set of financial statements is presented for each fund category. * The presentation of major (the most significant) individual governmental funds (rather than fund types) and of major individual enterprise funds. * The replacement of the proprietary fund equity classifications--contributed capital and retained earnings-with new classifications: invested in capital assets, net of related debt, restricted net assets and unrestricted net assets. * Net income is not presented for proprietary funds * Transfers are not distinguished as operating or residual equity, but are treated alike. * The direct method of reporting cash flows from operating activities is required. In addition, significant changes are made to the fund structure used by governments and the fund-based statements and government-wide statements are reconciled to achieve an integrated reporting model. Government-wide Statements The government-wide financial statements report data in separate columns for governmental activities, businesstype activities, and the primary government totals and discretely presented component units totals. …

Abstract: The Problem Last year the President and Congress lauded a surplus of $123 billion. The presidential candidates compete for popular ways to spend huge future surpluses. Butthe surpluses are in the trust and special funds and are locked away by law-highway fund profits of $10 billion lastyear can only be spent for highways. In 1999, to meet current expenses, the U.S. Department of the Treasury borrowed $130 billion. The national debt, held by private and government owners, at year-end was $5,606 billion. Debt interest was $354 billion, our second largest 1999 outlay. Last June the President forecast that the total national debt atthe end of 2005 would be more than $6 trillion. How can we claim a surplus of $123 billion and yet borrow $130 billion? History tells the story. President George Washington enjoyed a national debt of $75 million-a lot of money in those days. By 1836 President Andrew Jackson had a debt of merely$1 million. The debt went up during the Civil War, totaling $2.6 billion by 1868. The debt dropped to $1.6 billion after a major debt reduction effort from 1872 to 1892. Then came World War I with a high of$26 billion. In peacetime the debt declined to a mere $17.6 billion,thanks in part to Treasury Secretary Andrew Melton. Wrth the Great Depression and World War II the debt progressed steadily upward for 51 years. The Debt Limit In 1917 the President and Treasury were given authority to borrow within a legal limit. In 1940 the debt limit was set by statute at$49 billion. Congress has raised the debt limit about 90times to $5,950 billion. In 1940 the limit was $370 per U.S. citizen. Today it amounts to $22,450 per person. Ratherthan limiting spending, it has only been an expression of a pious hope. How Much is Too Much? Thomas Jefferson made a cogent observation: "...spending moneyto be paid by posterity...is but swindling futurity on a large scale...lt is incumbent on every generation to pay its own debts as it goes...What is to hinder them from creating a perpetual debt?" In local government, long-term borrowings are considered proper only for major capital outlays such as roads, bridges or city halls, to be paid off within the life of the physical facility. Long-term borrowing should never be used for operating expenses. Ratios to gross national product mean little. Probably the best test is the market for public borrowing-what interest rates are necessaryto sell obligations? The Two Debts Over many years, Congress has created several hundred earmarked funds, each with sources of receipts and purposes of outlays defined by law. About 260 of these funds were arbitrarily designated by Congress as "trusts,' a distinction without a difference. Major trust funds include Social Security highways, airports and several retirement funds. Trust funds also include "American Elephant Conservation" and "Midshipman's Store, Naval Academy" In addition,there are a number of earmarked funds such as the Postal Service, which are not trust funds. Congress has required that trust funds invest their cash surpluses in U.S. Treasury obligations. As a result, the national debt comprises obligations to the public and obligations to the trust and other funds. The following shows in billions the debt owed at year-end in recent years: Social Security and other retirement funds may need to earn surpluses against future actuarial needs, but there is little need for many trusts to build up balances. The False Exclusion of Internal Debt Economists look only atthe debt due the public, saying "Those internal debts will all wash out." But the two kinds of obligations are equally valid. The "net interest" of $227 billion used in the budget in 1999 is false-it does not count the interest on the government debt. …

Abstract: The Governmental Accounting Standards Board (GASB) describes Statement 34 as "...the most comprehensive governmental accounting rule ever developed." Unfortunately, the statement has serious defects, but they can be remedied. Background In the early 20th century, many government organizations controlled spending by a system called fund accounting. In 1984, when GASB was established, state and local governments were still using the system, even though many organizations had found that an accrual accounting system provided better control at a lower cost. In 1990 GASB issued Statement 11, which required an accrual accounting system, but it was not implemented.1 In 1995 the board issued an Exposure Draft that required two sets of financial statements, one based on the accrual system, essentially as described in Statement 11 (now called the governmentwide system) and the other based on fund accounting. Statement 34 continued the requirement for two sets of statements with two sets of rules. This is the principal cause of its defects. Government-wide Financial Statements Interperiod Equity The rules for the government-wide financial statements are based on the interperiod equity concept2 Basically, it means that financial performance was equitable if revenues at least equaled expenses of that year. The transactions that are included in the revenues and expenses in the current year do not quite correspond to the government-wide rules in Statement 34. Fund-Accountinq Financial Statements Accountability Fund-accounting financial statements are based on accountability, which has several facets. One has to do with financial condition and results of operations. Another is compliance with a legally adopted budget. A third is "assisting in determining compliance with finance-related laws, rules and regulations." We believe reports on the funds named in Statement 34 are not necessary to meet the accountability objective. Accountability requires only a report of compliance or noncompliance-a yes/no statement.3 Analysis of Funds Statement 34 requires that information on 11 types of funds be reported. Data reported in several funds are also available in the government-wide system, and in some cases, the rules are confusing. As just one example, the rules for the general fund are significantly different from those applicable to the measurement of revenues and expenses in government-wide accounting. In the government-wide system, outflows of resources are measured as expenses, but in the fund-accounting system they are measured as expenditures. An expense is reported when a resource is consumed and charged to the agency consuming it. An expenditure is reported when the resource is received and charged to the agency receiving it. Thus, the two systems report different amounts for items with the same label. The confusion and extra bookkeeping required by the general fund are justified only if the resulting information describes an important aspect of performance that is not visible in the government-wide system; no such justification is given. There also are differences in the measurement of revenues. Property taxes in fund accounting are measured as revenue when they are "available"during the period for which they are levied or shortly thereafter. But property taxes in the government-wide system are measured at the assessed amount, less an allowance for unpaid taxes. Requiring both a fund-accounting system and a government-wide system requires more record-keeping. Statement 34 is different from all other standards. Instead of stating which alternative, expense or expenditure, is the preferred way of reporting outflows, it requires both. Most standards require the use of expenses. No reason is given for believing that expenses are more important for business-type activities, and expenditures are more important for government activities. …

Abstract: I have often heard the comment that the Governmental Accounting Standards Board (GASB) paid no attention to its constituents when it adopted the new reporting model for state and local governments. If you prepare financial statements, you may feel that way. You may say to yourself, "Full accrual? Who needs it? Depreciation? That's for the private sector. It has no useful purpose in government. And depreciating infrastructure-that's ridiculous! Who wants this stuff, anyway?" Although I do not agree with many of the provisions of Statement 34, 1 can attest to the fairness of the process. All constituents had an opportunity to express their views at virtually every step of the process-an Invitation to Comment, Preliminary Views and an Exposure Draft. Unfortunately, most of the 70,000-plus government units did not voice their views. Even though the reporting model received more comments than any item in the board's 15-year history, the 400 responses represented less than 1 percent of all possible governments. Most of the comments came from constituent organizationsthe Association of Government Accountants (AGA), the Government Finance Officers Association (GFOA) and the American Institute of Certified Public Accountants (AICPA). Accounting firms, large and small, and a number of larger governments responded as well. I was a member of GASB's Reporting Model Task Force, which met four times to deliberate adoption of Statement 34. The number of members increased to ensure that virtually all constituents were represented. A number of task force members represented GFOA, representing primarily local government, and the National Association of State Auditors, Comptrollers and Treasurers (NASACT), representing primarily state governments. A number of task force members were auditors in the private sector, some represented large constituent organizations, others came from bond rating agencies, insurers and purchasers of state and local government bond issues. At the first meeting, it was evident that it would be difficult to obtain a consensus among the major constituent organizations. There were disagreements even within the organizations about particular proposals. As we continued to meet, the gap never narrowed. Furthermore, GASB did not often have a simple majority on many issues. I recall, in particular, near the end of the second meeting, GASB Chairman Tom L. Allen, CGFM, posed a question as to the measurement focus and basis of accounting that should be used in the new model. Six task force members voted for the flow of economic resources and six for the flow of financial resources. …

Abstract: Ten years ago Congress enacted the Chief Financial Officers Act (CFO Act). That statute touched off a decade of unprecedented achievements in the federal government's financial management. More important, the Act set in motion-and hopefully in concrete-processes that are making accountability an integral part of the government's practices and programs. This article describes the most significant achievements resulting from the Act. It also identifies and discusses the challenges in ensuring that accountability will continue as a cornerstone of government management. Establishing the Infrastructure The stated purposes of the Chief Financial officers Act were to: * bring more effective general and financial management practices to the federal government; * provide for improvement in each agency's financial management systems; and * ensure reliable and timely financial reporting. To undertake this ambitious agenda, the Office of Federal Financial Management (OFFM), established by the CFO Act within the Office of Management and Budget (OMB), developed the necessary infrastructure based on an eight-part program. The eight parts were: * Organization-The OFFM was organized; the responsibilities and authorities for the CFO positions in each of the 23 agencies covered by the CFO Act were defined;1 the initial CFOs and deputy CFOs were appointed; and a CFO Council, composed of a governmentwide chief financial officer, the head of the OFFM (titled the controller), and the agency CFOs and deputy CFOs, was established to advise the governmentwide CFO on financial management matters and coordinate the implementation of financial management improvements. * Personnel-Since personnel is the key ingredient in any activity, programs were started to assess the adequacy of financial management staffs' professional qualifications and capabilities; recommend ways to correct problems that impaired staff capacities; and provide OFFM's advice regarding qualifications, recruitment, performance and retention to agencies. * Accounting Standards-The Federal Accounting Standards Advisory Board (FASAB) was established through a memorandum of understanding among OMB, the U.S. Department of the Treasury, and the U.S. General Accounting Office. FASAB's mission was to develop and recommend accounting standards with which agencies could prepare and auditors could audit general purpose financial statements. Simultaneously, OFFM defined the "form and content" for the agencies` financial statements. * Financial Systems-A policy was established requiring each agency to move from numerous duplicative, inconsistent and antiquated systems to a single, integrated financial management system that would encompass financial systems and the financial portions of mixed systems. Introduced into the reviews of agencies' budget requests was an in-depth analysis of their plans and progress for new financial management systems. * Internal Control-The emphasis on strengthening and evaluating internal controls, begun with passage of the Federal Managers' Financial Integrity Act (FMFIA) in 1982, was continued. Auditors were directed to identify differences between the weaknesses management reported pursuant to the FMFIA requirements and weaknesses detected in financial audits. Asset Management-To manage the federal government's assets more productively, programs were started to make extensive use of electronic means to move cash to states, vendors, employees and benefit recipients; and to use a wide variety of techniques, including income tax refund offset and private sector collection agencies, to pursue delinquent debts. * Federal Assistance-Since financial management of $200 billion of federal funds is shared with the states and other federal grant recipients, this part was addressed by strengthening the rules for administering the funds. Particular attention was paid to helping recipients expand the use of financial audits to increase the credibility of their reported financial information and controls and assure compliance with the grant programs' requirements. …

Abstract: Over the past five decades, the auditing profession has revolutionized its place in government, and AGA and its members have been at the forefront.The audit community can look back with great pride as it has moved from voucher auditing to performance auditing and program evaluation.We have experienced a dramatic growth in professionalism and expertise. We can proudly look to the formulation of government auditing standards, which are at the heart of our profession. I applaud AGA's National President, Bill Broadus, CGFM, Past National President Don Scantlebury, and Mort Dittenhofer, CGFM,for their important contributions in developing and promoting general acceptance of these standards. We have seen the birth of the inspector general concept and have witnessed the establishment of a strong network of state and local auditors. We have seen the evolution of the single audit concept and the partnerships between auditors at all levels of government and the private sector in implementing this important management tool. Our audits are ever more complex, with greater context sophistication, whether we are performing computer security reviews or determining whether a program is working as intended. At the same time, our continued traditional focus on internal controls and financial statement auditing have fostered efforts to reduce fraud, waste, abuse and mismanagement and to increase accountability. The past 50 years have truly been an era of great achievement for the auditing profession. But we cannot rest on our laurels and must prepare ourselves for the future. Here, I will focus on four overarching challenges that the auditing profession must address-technology, devolution, user expectations and human capital-so that 50 years from now our work will continue to be vibrant and relevant. Reliance Upon Technology First, technology is a key to reduce the cost of government, while dramatically increasing service delivery. E-commerce, e-government, e-everything will be the byword. We are in the age of technology for which the most dramatic changes will be in the future. To quote Karen Carpenter, "We've Only Just Begun." Things are moving very quickly whether it is online service, communications, paperless offices, integrated systems or cross-servicing. Internet usage has skyrocketed from a few hundred sites in 1981 to 100,000 in 1990 to more than 300 million people online in March 2000. Each year, billions are being spent on information technology projects that are being heralded as the solutions to long-standing cost, control and service delivery challenges. For the federal government, this will amount to about $40 billion this year. Unfortunately, all too often, projects cost more than expected, are years late and under-perform. The past is littered with far too many expensive failures. The audit community must play an increasing role in advising management on these investments, at each and every stage of development, not just at the end, when someone plugs in the computer and the new system goes up in smoke. We have to play a proactive role, applying a constructive engagement approach. The age of technology brings an added dimension as the concept of internal control is being dramatically redefined. I have heard computer security referred to as the "new frontier in fraud." But it has even broader connotation as we rapidly move to a society where technology impacts on every facet of our lives-a global society, with no bounds, that is integrated or tied together through technology. We have seen first hand the ease with which the Melissa and ILOVEYOU viruses penetrated systems worldwide. To date, intrusion abilities have outdistanced the ability to protect systems, and I am afraid that while problems with computer hacking have been widely publicized, many top managers in government as well as the private sector do not yet understand the full range of risk in this new environment. To quote former FBI and CIA Director William Webster, in releasing a report on cyberwarfare and crime, produced by a panel of current and former senior national security officials, "It's time for us to recognize that we have a range of enemies today, not only military enemies but criminals, terrorists and others who have the same capabilities to do major damage to the infrastructure upon which we all depend. …