Concepts – The Financial Report
FASAB Contact: FASAB Staff, firstname.lastname@example.org, 202-512-7350
|Request for Comment||Comment Letters||Final Pronouncement|
|Federal Financial Reporting|
|Federal Financial Reporting (PDF)|
The issuance of Statement of Federal Financial Accounting Concepts (SFFAC) 8, Federal Financial Reporting, on September 22, 2017, effectively concluded the concepts phase of the financial reporting model project. For information on the standards phase of the project, please see the reporting model phase I: MD&A and stewardship investments improvements project (formerly the reporting model phase I: streamlining project).
The FASAB has noted that essential features of a sound framework of objectives and fundamental concepts include describing the financial statements used to present elements, identifying means of communicating information necessary to meet reporting objectives, and describing when to use a particular means of communication. This project will address these features and is the third phase of the FASAB’s five-phased Conceptual Framework Acceleration Plan (see the chart below).
The Financial Report project focuses on the financial report and its key components for communicating information, such as management’s discussion and analysis (MD&A), financial statements, notes, required supplemental information (RSI), and other accompanying information (OAI). The project will:
- describe the financial statements used to present the elements critical to meeting financial reporting objectives and explain what statements are essential to meeting the objectives; and
- provide guidance for determining when a means of communicating information should be used.
To accomplish its objective, the project includes identifying financial reporting objectives not yet addressed through financial statements and suggesting alternatives to meeting them. Two primary topics that will be studied in this area are sustainability and performance reporting. Also, the project will review prior concepts and standards and consider financial reporting issues that have developed since the FASAB issued its initial set of concepts and standards about a dozen years ago.
Ultimately, the project will help ensure that federal financial accounting standards are based on a sound framework of objectives and concepts regarding the nature of accounting, financial statements, and other communications methods.
HISTORY OF BOARD DELIBERATIONS (reverse chronology)
October 25-26, 2017
The Board discussed two proposals for improving the content of financial reports. The first proposal would provide flexibility in reporting the remaining item of required supplementary stewardship information (RSSI), stewardship investments, and eliminate the RSSI category. The second proposal would permit management to refer users to more detailed performance reports when preparing management’s discussion and analysis (MD&A). The flexibilities would be responsive to input from preparers and auditors regarding users’ access to and preference for other sources of information.
Given the flexibilities, Board members were concerned that financial reports would not present information needed to achieve the reporting objectives. Board members noted that financial report users need information on expenses that provide long-term benefits, such as investments in human capital, research and development, and non-federal physical property. In addition, users need information about the reporting entity’s performance.
Consequently, staff will conduct additional research to determine 1) how stewardship investment information might be improved, 2) what MD&A concepts could be considered for standards, and 3) what performance reporting concerns could be addressed through OMB form and content guidance.
Issue Papers for October 25-26, 2017 – Tab B (PDF)
April 26-27, 2017 Board Meeting
FASAB will be conducting roundtable discussions on streamlining federal financial reporting standards and note disclosures. During its April 2017 meeting, Board members discussed the need to review existing standards and determine 1) how to reduce the burden on preparers, 2) what FASAB requirements may require clarification, and 3) what reporting matters should be considered in developing an ideal model over the long term. Board members noted that agency resources are increasingly constrained and financial reports have grown in size. Lengthy reports may appear too voluminous to be useful. In addition, management’s discussion and analysis (MD&A) is intended to be a brief overview. However, in practice, MD&A is often an extensive presentation. Board members also noted financial reports may present redundant information, and there may be information that is not being presented as the Board intended.
In addition, during its February 2017 meeting, the Board approved a project to review and streamline existing note disclosures. To streamline note disclosures, the Board intends to review the materiality guidance and identify and develop a set of principles for note disclosures. Consequently, FASAB staff has engaged the federal financial management community in roundtable discussions regarding the Board’s concerns. At the June 2017 meeting, staff will present to the Board standards that may need improvement.
February 22, 2017
FASAB reviewed constituent comments regarding the Federal Financial Reporting exposure draft (ED). The Federal Financial Reporting ED proposes concepts to (1) assist the Board in developing reporting models for the federal government and its component reporting entities and (2) provide a platform for addressing current and evolving federal financial reporting needs. The Board received comments from16 constituents who generally agreed with the proposed Statement. In addition to providing comments or suggested edits to help clarify concepts discussed in this ED, respondents also provided comments that will be helpful for future standards setting. Given the constituents’ level of agreement, the Board determined a public hearing would be unnecessary. The Board discussed revisions to the ED, and FASAB staff is in the process of preparing a revised ED for the April meeting.
October 19-20, 2016 Board Meeting
The Federal Financial Reporting project was not discussed at the October 2016 meeting.
On September 29, 2016, the Board released for comment the proposed Statement of Federal Financial Accounting Concepts (SFFAC) entitled Federal Financial Reporting. The proposed concepts would assist the Board in developing reporting models for the federal government and its component reporting entities and provide a platform for addressing current and evolving federal financial reporting needs.
The federal government and its component reporting entities are making an immense body of data and information available to the public. Due to this increased access to information, users of federal financial information need to better understand the relationship between information required by generally accepted accounting principles (GAAP) and other reported information. Users also need to better understand the relationship among the types of information GAAP requires, such as budget, cost, and performance information, and the relationship between GAAP-based information presented by the government-wide reporting entity and component reporting entities. “The identification and explanation of concepts provides a platform that will enhance the Board’s deliberations on the types of information that should be presented to inform users of the government’s operating performance, stewardship, and budgetary integrity,” according to Chairman Showalter.
The Board requests comments on the ED by January 6, 2017, and encourages respondents to provide responses to all of the questions raised and the reasons for their positions. The ED and the specific questions raised are available at the FASAB website in PDF and Word format, respectively (http://www.fasab.gov/documents-for-comment/).
August 24-25, 2016 Board Meeting
The Board discussed edits to a draft exposure draft (ED) concepts statement. The ED discusses the role of financial statements and required supplementary information (RSI) and their relationship to other reported financial information. The ED also provides a platform to address current and evolving reporting needs and capabilities and discusses concepts to guide the Board in developing reporting models for the government-wide and component reporting entities. The Board plans to issue the ED by the end of September 2016.
Issue Paper for August 2016 – Tab D
June 29-30, 2016 Board Meeting
The Board and Ross Simms, assistant director, discussed enhancements to a draft exposure draft (ED) concepts statement on financial statements and required supplementary information (RSI). The draft ED proposes concepts regarding the role of financial statements and RSI and their relationship to other information presented to help achieve the reporting objectives. The proposed concepts will address current and evolving reporting needs and capabilities and will assist the Board in developing reporting models for the government-wide and component reporting entities.
The Board discussed whether the ED should define the term “financial condition” or include a reference to a discussion on financial condition presented in Statement of Federal Financial Accounting Concepts (SFFAC) 1, Objectives of Federal Financial Reporting. The Board determined the ED should 1) include language that distinguishes financial condition from financial position; 2) reference the discussion of financial condition in SFFAC 1; and 3) discuss that sustainability is one indicator of financial condition.
The Board also agreed that the ED would present aspirations for the types of information that government-wide and component reporting entities should present, including performance information. The Board discussed the performance results section of the ED and determined the focus should be on addressing the operating performance objective and its relationship to the stewardship objective, rather than focusing solely on the stewardship objective. Focusing solely on the stewardship objective may suggest the need for information on broad outcomes for the nation. The Board also reviewed other sections of the ED and planned to review a pre-ballot draft ED during the August 2016 meeting.
Issue Paper for June 2016 – Tab C
April 27-28, 2016 Board Meeting
The Board continued to discuss proposed concepts for the government-wide and component reporting entity reporting models, reviewing a draft exposure draft (ED) during the meeting. The concepts would guide the Board in developing standards for the two models and would assist the financial reporting community in understanding the purpose of the information required by GAAP.
The Board discussed some of the terms used in the draft ED and agreed to replace the term general purpose federal financial report (GPFFR) with another term that better reflects the ED’s focus. The ED solely focuses on financial statements and required supplementary information (RSI), while the term GPFFR is broader and refers to financial statements, RSI, and other information. The Board also discussed changes to better describe the types of information that the government-wide and component reporting entities should present, as well as the Board’s role with respect to reporting performance information and summary level information.
Issue Paper for April 2016 – Tab D
February 24-25, 2016 Board Meeting
The Board reviewed key terms in the draft ED Concepts Statement. The ED proposes concepts regarding the government-wide and component reporting entity reporting models, and the Board sought to clarify these intended concepts. The Board discussed the definition of generally accepted accounting principles (GAAP) and its role within performance and budgetary information. The Board agreed that federal GAAP includes both basic financial statements and required supplementary information, and GAAP directly affects performance information and budgetary results. Although the Board does not determine the performance measures, performance information should be included in financial reports to help users assess the results of using budgetary resources. In addition, given the various aspects of budgeting and the variety of terms used to describe it, staff will review the budgetary terms written in the ED and make clearer the budgetary information that users need.
In addition, the Board discussed the definition of general purpose federal financial reports (GPFFRs). The ED proposes that the government-wide and component reporting entity financial reports are types of GPFFRs. While the reports are intended to be comprehensive, they may not be a single source of information. Also, constituents and other standards-setters may use the term GPFFR differently from the approach taken in the ED. Consequently, staff will research the use of the term and revisit its use in the ED.
The ED proposes that component reporting entities provide program-level information to show users the amounts expended on programs of interest. The Board determined that this approach needed explanation, given the different perspectives on the term program. Thus, staff will develop language to explain the intent of the proposal.
The Board discussed other changes to enhance the intent of the proposed guidance, and staff will present revisions at the April 2016 meeting.
Issue Paper for February 2016 – Tab G
December 16-17, 2015 Board Meeting
During its December 2015 meeting, FASAB held a panel discussion to help determine what information is needed for reporting on the government’s financial condition. Experts informed FASAB that long-term projections of debt held by the public are important for reporting on the government’s financial condition. The discussion panel included:
- Barry Anderson, Independent Consultant on U.S. and International Budget Issues, and former FASAB member; and
- Julie Topoleski, Chief, Long-Term Analysis Unit, Congressional Budget Office (CBO).
The panel emphasized the need for long-term projections when assessing the government’s financial condition. Mandatory spending is two-thirds of the federal budget and growing; consequently, the nation is facing significant intergenerational demographic issues.
Panel members noted the CBO graph of Federal Debt Held by the Public is an effective tool for communicating the government’s financial condition with the public. It provides a long-term projection of debt as a percentage of gross domestic product (GDP) and helps users consider historical aspects, as well as the future direction of the debt. To ensure that the public understands the information, panel members discussed the need for simplicity and using pictorial representations of data.
Following the panel discussion, the Board discussed the existing concept of financial condition and selected a framework to guide development of an Ideal Reporting Model Concepts Statement. The Board determined the concept of financial position was important for reporting on the government’s financial condition and that this concept applied to both the financial report of the U.S. government (FR) and component reporting entities. However, financial position for a component has a different meaning. Components generally receive appropriations rather than direct revenues and use the funding to provide programs and services rather than to accumulate assets. The Board also determined that the role of the Board, with respect to the concepts of financial position discussed in SFFAC 1, may need to be refreshed in light of more recent conceptual guidance.
In addition, the Board agreed that long-term information is important for reporting on the government’s financial condition, and members acknowledged that the Board has already issued standards that require long-term projections. Also, although SFFAC 1 discusses the need for information about the national economy and society, the Board did not believe this discussion would significantly affect their efforts to develop an ideal reporting model.
Regarding a framework to guide development of an Ideal Reporting Model Concepts Statement, the Board concluded a comprehensive framework is needed. As the Statement is developed, the Board can then deliberate specific concepts and decide what to revise or to remove and the order of the topics. Accordingly, the Board selected a framework developed by Mr. Steinberg, which included new and existing concepts and topics that members had suggested over time.
October 21-22, 2015 Board Meeting
FASAB discussed concepts for an ideal reporting model. The Board continued its deliberations on a draft ideal reporting model concepts statement and members noted that the draft appeared to repeat existing concepts. Rather than determine whether to focus on new concepts and amend the existing concepts as needed, the Board decided to first ensure that they have identified all the concepts that would help them develop standards for an ideal reporting model.
The Board agreed that the ideal reporting model concepts statement should discuss: GAAP-based reporting and its relationship to other information being reported; the need for financial reports to explain the relationship among financial statements; the need for program level information and the attributes of a program for financial reporting purposes; an updated definition of financial condition; and budgetary information, including budget to actual comparisons, the role of the Board with respect to budgetary information, and an explanation of budgetary resources. Board members will review an outline of the concepts determined to date and suggest changes.
Issue Paper for October 2015 – Tab A
August 26-27, 2015 Board Meeting
The Board discussed an ideal reporting model draft concepts statement and agreed to include several enhancements. The Board acknowledged that the draft included guidance from earlier concepts statements and agreed that it should include introductory statements discussing what the Board intends to accomplish and how the concepts presented relate to the Board’s earlier conceptual guidance. Also, the Board discussed the issues that the concepts statement should include regarding performance and cost information, primarily the timing differences in reporting performance, budgetary, and financial information.
In addition, the Board appeared to support the idea of clarifying FASAB’s role in relation to the objectives of financial reporting. The concepts statement should include a discussion regarding the reporting objectives for which the Board, as a GAAP standards-setter, might have a direct versus supportive role. Board members also agreed that the concepts statement should include a diagram or picture depicting the relationship between financial reports, including financial statements, disclosures, and required supplementary information, and other financial reporting sources. However, the Board determined that it is not necessary to add illustrative financial statements to the concepts statement and will pursue issuing an exposure draft concepts statement before the December 2015 meeting.
June 24-25, 2015 Board Meeting
The Board discussed revenue reporting practices and a draft concepts statement for an ideal reporting model. During the Board’s educational session on revenue reporting, the Board recognized some of the complexities involved in reporting revenue at the component level. For instance, FASAB provides explicit guidance on how to classify various revenue transactions and, although an agency may collect and report exchange revenue on the Statement of Net Cost, it may not have the authority to spend those collections. Legislation must provide the agency with the authority to spend the collections or the agency must deposit the funds in the general fund of the Treasury. Also, in all cases, the funds that components collect are subject to appropriation and the agency must apply budgetary reporting controls. As a result, the Statement of Budgetary Resources may report appropriation amounts even when the Statement of Changes in Net Position shows no appropriations used or unexpended. Board members discussed the need to make component level reporting less challenging for readers to understand.
The Board also discussed major sections of a draft concepts statement for an ideal reporting model. FASAB members deliberated a draft concepts statement that included concepts regarding the financial reporting objectives and FASAB’s priorities with respect to those objectives; reporting on financial condition at the government-wide level; the scope of financial reporting; financial statements and their relationship to other financial information sources; component entity reporting; and reporting budgetary information. The Board decided that the section discussing FASAB’s priorities was not needed because the Board’s priories have been communicated in its Strategic Directions document and the priorities are subject to change. Also, Board members suggested that the concepts provide general, aspirational guidance and determined revisions. Staff will present a revised draft concepts statement for the August 2015 meeting.
Issue Paper for June 2015 – Tab B
April 29-30, 2015 Board Meeting
The Board is discussing the main aspects of an ideal reporting model concepts statement. During the Board’s April 2015 meeting, Board members reviewed an outline of reporting model conceptual guidance. The Board developed the outline during the February 2015 meeting and it presented plans for discussing several topics, including: the two levels of the federal government’s stewardship; intergovernmental financial dependency; financial statements and the interrelationships among them; budgetary reporting; performance reporting; and cost accounting. Although the current conceptual framework discusses some features of these topics, the Board believed that these topics are important for developing an ideal reporting model. Also, the outline proposed a discussion on national indicators. Members were generally not supportive of discussing this topic given that government policies do not always directly influence the indicators.
FASAB staff will begin proposing detailed concepts at the next Board meeting. Members believed that discussing the various topics could help clarify the role of the Board and how financial reports presented in conformity with generally accepted accounting principles (GAAP) should relate to non-GAAP sources.
Issue Paper for April 2015 – Tab A
February 25-26, 2015 Board Meeting
The FASAB developed a tentative listing of concepts to help guide development of an ideal reporting model. During its February 2015 meeting, the Board continued its discussions on a concepts statement for an ideal reporting model. The initial issue concerned whether: (1) the framework in the concepts statement should be general and assist in the classification and aggregation of flows reported in government-wide or component entity financial statements; or (2) specific rules for classification or aggregation should be discussed in the statement. The Board agreed that concepts should be general; however, members expressed concern that some level of specificity was needed to guide the Board without constraining future standards setting.
Members expressed concern about whether the concepts should include illustrations of financial statements and whether concepts should reflect an ‘aspirational’ reporting model or describe current practice. Consequently, the Board decided to: 1) develop an inventory of concepts and topics that might be included in the concepts statement; and 2) discuss the inventory items during the April 2015 meeting.
In addition, the Board deliberated budgetary reporting and what actions should be taken given the issues noted during its December 2014 discussion with budget experts. During that meeting, budget experts discussed unique aspects of the federal budget, such as only one-third of federal spending is subject to annual appropriations and they noted that users have difficulty understanding the current Statement of Budgetary Resources. The Board agreed with the staff proposal to defer decisions about concepts and standards related specifically to budgetary reporting until concepts for the other components of the financial reporting model are developed.
Issue Paper for February 2015 – Tab A
December 17-18, 2014 Board Meeting
FASAB discussed budgetary reporting with panels of experts. Financial reporting should assist the federal government in fulfilling its duty to be publicly accountable for monies raised through taxes and other means and, during its December 2014 meeting, FASAB met with two panels of experts to determine what information would help best achieve this objective. The first panel focused on useful budgetary information to present in the consolidated financial report of the U.S. government (CFR) and the panel members included:
- Robert L. Bixby, Executive Director, Concord Coalition
- Paul L. Posner, Professor and Director of the Masters in Public Administration Program, George Mason University
- C. Eugene Steuerle, Richard B. Fisher Chair and Institute Fellow, The Urban Institute
They discussed some of the challenges in classifying expenditures in a report intended for the general public and discussed some alternatives. For instance, the public tends to focus on individual programs rather than functions or categories typically used by analysts and the area of their concern changes. Also, it is important to distinguish mandatory and discretionary spending. The public should be aware that most of the budget involves mandatory rather than discretionary spending. In addition, reporting by sub-functions may be helpful because they correspond to the commitments of the federal government and could help inform discussions on broader missions and goals.
The panel also discussed a range of concerns for the FASAB to consider. For instance, it was noted that it is important to determine how to report on tax expenditures and the government’s interdependence on other sectors of the economy. Also, long-term projections are being used to help financial report readers understand the future and the public may not fully understand present value accounting. As the use of projections grows, the Board might consider working with others such as the Office of Management and Budget, Government Accountability Office, and Congressional Budget Office to establish some benchmarks and conventions. In addition, the Board was urged to consider what information should be presented in the very first table of the financial report because readers are not likely to review the entire document. Given the range of topics that could be of interest to the public, the Board could ensure that reporting focuses on particular topics for a particular time period rather than trying to ensure that reporting captures the full range of topics.
The second panel focused on useful budgetary information to present in agency financial reports and the panel members included:
- Carol S. Johnson, Program Examiner, OMB
- S. Anthony (Tony) McCann, Adjunct Lecturer, University of Maryland
- Denise Wu, Principal, CliftonLarsenAllen LLP
The panel discussed concerns with existing budgetary information and possibilities for improvement. Primarily, they noted the multiple federal sources that present budgetary information and the appearance of redundancy. Also, it was noted that while both the Statement of Budgetary Resources (SBR) and the Schedule of Spending (SOS) provide budgetary information, the SBR did not appear to be user-friendly and was too highly aggregated. They also stressed the need for clear and consistent use of terms among the financial statements and schedules. Currently, terms such as “spending” and “obligations” are being used interchangeably when the terms have different meanings. Consequently, the presentations could confuse readers.
Panel members also discussed the need for more detailed information and information by program. Users are more likely to seek information by program rather than other classification approaches. In addition, it was noted that financial statements and in particular the disclosures can provide useful information not found in other reports that present budgetary information.
In addition, the Board discussed a draft concepts statement regarding the reporting model and provided comments to FASAB staff. FASAB staff plans to provide a revised draft during the February 2015 meeting.
October 22-23, 2014 Board Meeting
FASAB discussed an ideal agency level reporting model with a panel of experts. Agency level financial reporting experts met with the Board and discussed their views on an ideal reporting model. They emphasized that the process of preparing financial statements and having them audited has improved internal controls over financial information and the reliability of the data that can be used for other reporting. However, financial statements are intended to present highly summarized departmental level information while users are seeking detailed information to answer questions about programs, such as the appropriation received, how it was used, and what benefits were derived. Technology can help users better understand financial information and guide them from highly summarized information (financial statements) to the detailed information provided through other sources. Also, disclosures could be minimized. In addition, the panel cautioned against simply expanding the existing model and suggested statements that could be removed or information that could be streamlined. Thus, the Board should consider the costs involved in preparing the statements and their usefulness as they revisit the model. The panel members:
- Gordon Alston, Director of Financial Reporting and Internal Controls, Department of Commerce
- Sheila Conley, Deputy Assistant Secretary for Finance and Deputy Chief Financial Officer, Department of Health and Human Services
- Donjette Gilmore, Director of Accounting and Finance Policy, Department of Defense
- Douglas Glenn, Deputy Chief Financial Officer, Department of Interior
- Katherine Palmer, Associate Deputy Assistant Secretary for Financial Policy, Department of Veterans Affairs
- Laurie Park, Deputy Assistant Secretary for Finance, Department of Veterans Affairs
The Board also discussed concepts for an ideal model and agreed that:
- There are different levels of reporting, the government-wide and component levels, and they have different characteristics that should be discussed in the conceptual statement.
- The government as a whole is the economic entity and its components are not self-sustaining entities.
- The government-wide financial report should help citizens and citizen intermediaries understand the major goods and services and other activities that the federal government provides and where they can obtain detailed information in components.
- The government as a whole and its components have different financing structures and focus.
- Although it may be challenging for external users to understand, the relationships and differences between the government-wide and component level financing should be explained.
Also, the Board believed that the concepts should acknowledge that the process of preparing financial statements instills discipline and a user could be an individual that relies on information that results from the discipline imposed. However, the individual may not necessarily directly use the financial statements.
In addition, Adam Crahen, a systems accountant with the Department of Interior, briefed the Board on how the department uses data analytics software to access and present information for decision-making. Elizabeth Curda, an assistant director with the Government Accountability Office, briefed the Board on the government’s efforts to implement the Government Performance and Results Modernization Act.
August 27-28, 2014 Board Meeting
As part of its ideal reporting model project, the FASAB discussed how to ideally classify costs so that users have a better understanding of the operating performance of the federal government. FASAB members discussed different schemes for classifying cost on the face of the statement of net cost and the merits and challenges associated with the approaches. The discussion primarily focused on the government-wide level and whether to classify cost by function, program, or agency.
Some members supported a function-based scheme, such as presenting the cost of national defense, transportation, and agriculture. This classification approach is well-established in the federal government and is currently being used for budget and other types of reporting to inform the public. However, other members noted that the approach had been used in earlier versions of the government-wide financial statements and it was determined that some descriptions confused users. They maintained that the meaning of some functions is not clear which makes it difficult to perform analyses. Instead, by presenting cost by agency, users can go directly from the government-wide report to the agency reports and review the details of their audited financial statements.
Also, some members supported the notion of presenting costs by program, such as a presentation of the top 25 programs. FASAB’s conceptual guidance and recent user needs research has shown that users seek information about programs. However, members noted challenges in defining the term “program” and questioned the practicality of preparing the presentation.
In addition, members discussed the need to have definitions of each class (function, program, agency, etc.) so that preparers, auditors, users, and other interested parties understand the scope of each class and the information being presented. Also, some members expressed the need to present cross-agency programs or services and how to align reporting on costs with the efforts to report on performance. The Board acknowledged that agencies are engaged in substantial efforts to report on their performance and flows information should be aligned with that process. Consequently, the Board plans to obtain input from the CFO community and continue the classification discussion.
June 25-26, 2014 Board Meeting
The Board agreed on the starting point for developing the ideal reporting model. Earlier this year, in April, the Board members presented their views on an ideal reporting model and many topics arose that could be considered the next steps for the project. For instance, some members noted that the reporting objectives are broad and refer to what should be achieved by financial reporting in general rather than financial statements in particular. Consequently, some members believed that stronger focus on financial statements would help ensure consensus regarding what the Board plans to accomplish. Also, members noted that there are various dimensions that could be considered for reporting information, such as cost by programs within agencies and cost by programs that involve multiple agencies, and the Board would need to determine what would be ideal. Accordingly, during the June 2014 meeting, FASAB began discussing these and other topics to determine its next steps for the ideal model project.
The Board generally considered that, given its existing resources and the need to make timely progress, the current framework of objectives was adequate for guiding development of the ideal reporting model. As a result, the Board decided to start with cost and budgetary flows and conceptually how they should be aggregated and disaggregated. Also, the Board plans to address how to reconcile cost and budget at a level that would be understandable to users. Included in this effort would be the guidance needed to support improving the government-wide reporting process. The Board’s research has consistently indicated that external users are interested in better understanding the composition of cost and budgetary information and how the two relate.
April 23-24, 2014 Board Meeting
During it April 2014 meeting, the Board discussed the National Academy of Public Administration’s (NAPA) report, Financial and Related Information for Decision-Making: Enhancing Management Information to Support Operational Effectiveness and Priority Goals. FASAB contracted with NAPA to help the Board learn more about the financial information needs of executives and managers and preparers’ needs for resources to guide financial information development. The research would inform the Board on: the availability of good financial and related information; the effective use of financial data by senior managers; the current and desired role of the Chief Financial Officer (CFO); and, if gaps exist, what options are most likely to be helpful in closing those gaps. The NAPA team consisted of the following members:
NAPA Fellows and Panel Members
G. Edward DeSeve, Chair
The NAPA team conducted a series of discussions with 27 federal executives and senior managers with operating responsibility for agencies, bureaus, offices, divisions, or comparable organizational units. To facilitate the conversations, the team used a discussion guide that included both multiple choice and qualitative questions. The following are excerpts of their principal findings:
Availability of information: Data generally are highly accurate and granular, but federal agencies face challenges in analyzing and transforming data into readily understood, actionable information for executive decision-making— especially the linking of budget, costs, and performance.
Use of information: The degree to which financial data are effectively used for decision-making is heavily driven by each organization’s revenue source and operational approach. Agencies tended toward one of two general camps: 1) user fee-based revenue and/or production-oriented, direct operations agencies, where external pressure for transparency fosters the creation and use of financial and cost analysis for decision-making by executives and senior managers; and 2) appropriations-based revenue and/or regulatory, policy, and grant-making agencies, which generally have fewer needs for detailed financial and cost analysis. Both types of agencies can utilize financial data more effectively if leadership instills a culture that pays attention to costs and performance by creating structures and incentives that encourage employees to carefully examine these issues.
Role of the CFO organization: CFO organizations will increasingly need to offer valuable decision-making support to executives and senior managers. They should continue to evolve from a legacy core focus on transaction processing and compliance to a more modern approach that features sophisticated cost and performance analysis tailored to the decision-making requirements of agency leadership.
To address the gaps observed and meet the decision-making needs of executives and managers, NAPA discusses six recommendations:
- Federal agencies should strengthen the CFO staff’s knowledge of program operations in order to increase their ability to act as business partners to agency program leadership.
- Federal agencies should emphasize development of the CFO staff skillsets to ensure that traditional accounting is augmented by data analytics.
- In order to connect financial and cost information to program outcomes, federal agencies should link budgeted resources to costs, outputs, and performance.
- In order to ensure that relevant information is available in a readily accessible and user-friendly format, federal agencies should develop financial and programmatic dashboards specifically tailored to the decision-making requirements of executives.
- Federal agencies should enhance existing reporting systems to integrate financial, operational, and HR-related information.
- Congress and OMB should create specific legislative and regulatory catalysts, such as the 2009 American Recovery and Reinvestment Act reporting requirements, to focus agency attention on developing clear cost and outcome data.
To download the complete report please see https://files.fasab.gov/pdffiles/14_4_NAPA_REPORT.pdf.
Also, each of the Board members presented their views of an ideal reporting model. Members discussed agency and government-wide reporting and discussed ways of better reporting items of information, such as operating performance and budget information. During the June 2014 meeting, the Board plans to review an analysis of the discussions, noting common themes and differences for further discussion.
March 5-6, 2014 Board Meeting
FASAB members plan to present their individual views of an ideal reporting model in April 2014. An ideal reporting model is intended to provide a conceptual vision of what the Board would like to achieve through generally accepted accounting principles (GAAP). To help narrow the range of topics that the presentations and resulting discussions might consider, members determined the financial reporting objectives that would be the focus of the presentations. Accordingly, for the purposes of the ideal reporting model presentations, the Board decided to focus on Budgetary Integrity, in general, and each of the sub-objectives of Operating Performance. Also, the presentations would address certain aspects of the Stewardship objective which calls for information on the government and the nation. Members decided to focus on providing information regarding the government, rather than the nation and, accordingly, presentations would address the government’s financial position and the sustainability of public services – two of the three Stewardship sub-objectives. Members may voluntarily address the third sub-objective concerning the government’s contribution to the nation’s current and future well-being. In addition, members plan to consider users’ needs and other matters noted concerning the reporting model.
December 18-19, 2013 Board Meeting
At this stage of the reporting model project, the Board sought to better understand the information needs of users and identify possible voids in meeting those needs. Because the financial reporting objectives provide a framework for discussing users’ needs, the Board began revisiting the four objectives of federal financial reporting – Budgetary Integrity, Operating Performance, Stewardship, and Systems and Control. During the December 2013 meeting, the Board focused on the Stewardship objective which concerns providing information to assist users in assessing the impact on the country of the government’s operations and investments and how the government’s and the nation’s financial condition has changed and may change in the future.
The Board noted that the objective involves ‘financial reporting’ versus ‘financial statements’ and that many sources other than financial statements contribute to achieving the objective. For instance, information about the national economy may be found in the President’s Budget and Management’s Discussion and Analysis (MD&A) provides performance information. The Board believed that any discussion of the reporting model should include an explanation of the Board’s role and what it has accomplished with respect to the objective. The Board also discussed the topic of tax expenditures and noted that although the topic is complex and information is being provided by other sources, the reporting model should include a description of tax expenditures and a separate project should be initiated to study the topic.
In addition, the Board acknowledged that users seek cost and other information arrayed in different ways or aggregated at different levels, such as government-wide, agency, or program. Therefore, the question is how the Board might play a role in helping users obtain the information that would assist them in their assessments. For the March 2014 meeting, the Board will discuss the Operating Performance objective which concerns assisting users in evaluating the service efforts, costs, and accomplishments of the reporting entity; the manner in which these efforts and accomplishments have been financed; and the management of the entity’s assets and liabilities. To facilitate the discussion, FASAB staff will provide pictorial presentations to illustrate how the existing model contributes to this objective.
October 23-24, 2013 Board Meeting
FASAB staff has engaged a task force and the National Academy of Public Administration (NAPA) to assist in developing an ideal reporting model. At the initial task force meeting, participants discussed high-level features of an electronic, web-based model. However, while exploring the possibilities of various features, participants noted the challenge in discussing matters in abstract and suggested building a web-based mockup. Also, staff engaged NAPA to study financial and related information needs for managerial and reporting purposes. The study would inform development of the ideal reporting model and support the Board’s managerial cost accounting project.
During the October 2013 meeting, the Board discussed building a web-based mockup and determined that additional information was needed at this stage of the project. Primarily, members believed that the project involves two aspects: (1) the what – what information should be provided given that there are different users with different information needs; and (2) the how – how should the information be presented, including the tools needed to provide access to the information. Members believed that it would be best to understand ‘the what’ aspect before developing ‘the how.’ Accordingly, FASAB staff will focus on the what for the December 2013 meeting.
August 28-29, 2013 Board Meeting
Task force members are being consulted on an ideal reporting model. The Board believes that an ideal reporting model should not be constrained by considering existing systems and processes, but represents what could be achieved over the long-term. Staff plans to present a draft framework for an ideal model during the October 2013 FASAB meeting.
June 19, 2013 Board Meeting
The financial reporting model project was not on the Board’s agenda for the June 19, 2013 meeting.
April 24-25, 2013 Board Meeting
During the April 2013 meeting the Board discussed the plans for a web-based educational outreach project. The web-based educational outreach effort would involve developing a website thatintegrates videos, graphics, and textual explanations to guide users in how to find answers toquestions they may have about federal department and agency finances. Board members raisedconcerns about the timing of the project, given the Board’s current technical agenda and limitedresources and other matters that should be considered, such as the expected outcomes and how theproject would relate to existing educational tools. Consequently, staff will continue to focus on theprimary project, developing the conceptual reporting model, and will develop additional details for theeducational outreach plan.
February 27-28, 2013 Board Meeting
During the February 2013 meeting, the Board discussed the next steps for the reporting model project. Staff presented the following alternatives for next steps: integrating budget, cost, and service performance information; revisiting managerial cost accounting standards; disaggregating cost information; distinguishing transfer payments from program administrative costs; and clarifying conceptual guidance on displaying costs. The Board discussed the merits of these topics, but determined that a model of the ideal presentation is needed to serve as the end goal and help guide their direction. Consequently, the Board decided to develop a conceptual model that integrates budget, cost, and service performance information. Development of the model would not be constrained by considering existing systems and what the Board could accomplish immediately. Also, the model will take a holistic view and consider the other topics discussed and include explanations on why the resulting construct should be considered ideal.
December 19-20, 2012 Board Meeting
During the December 2012 meeting, the Board discussed whether to revisit Statement of Federal Financial Accounting Standard (SFFAS) 4, Managerial Cost Accounting Standards and Concepts, and the complexities involved in reporting cost and performance information. The Board’s task forces on cost, budget, and performance information recommended revisiting SFFAS 4 to help provide the information that users expect and help the federal government better manage its costs. Members noted that the recommended project is broad and involves matters that are not exclusively within FASAB’s purview. Also, coordination with the Office of Management and Budget (OMB), Department of the Treasury (Treasury), and possibly the Government Accountability Office (GAO) would be fundamental to any cost accounting effort the Board decides to initiate. Consequently, for the February 2013 meeting, staff will discuss the key issue(s) and, given the role of FASAB, the issue(s) the Board should address and the scope of a project that could be completed within a reasonable time period.
Also, the Board discussed the merits of an online educational tool for users and staff will begin its development. In addition, the Board plans to discuss recommendations to streamline reporting requirements. It was noted that streamlining reporting requirements involve auditing and other issues that are beyond FASAB’s role.
October 24-25, 2012 Board Meeting
During the October 2012 meeting, FASAB discussed the preliminary recommendation of the task forces organized to determine improvements in reporting cost, budget, and performance information. The task forces recommended that FASAB revisit SFFAS 4, Managerial Cost Accounting Standards and Concepts, to help ensure that the guidance is updated to support users of budget and performance information and provide cost information that meets the expectations of financial information users. The task forces noted that as part of the SFFAS 4 project, FASAB should consider the following:
- Recent changes in legislative and administrative directives with respect to performance reporting;
- Past implementation challenges related to linking cost, performance, and budget information;
- The need to advance the appropriate use of terminology and economic measurement approaches regarding the use of resources and incurrence of liabilities; and
- Approaches for requiring supplementary information where the benefits of providing the information will outweigh the costs of collecting and reporting such information, given the complexities of federal agencies and the different needs of stakeholders. Also, individual task force members provided additional matters for FASAB to consider in proceeding with the project.
The three FASAB Task Forces, which provided input to the project that led to this report and recommendation, and the members of each task force follow.
Statement of Net Cost Task Force
- Owen Barwell, Managing Director, Grant Thornton LLP
- Malena Brookshire, Branch Chief, Securities and Exchange Commission
- Ann Davis, Senior Staff Accountant, Department of the Treasury
- Jesse Ellman, Research Associate, Center for Strategic & International Studies
- Chuck Fox, Assistant Director, Financial Management and Assurance, Government Accountability Office
- Doug Glenn, Deputy Chief Financial Officer, Department of Interior
- Jim Herz, U.S. House of Representatives, Committee on the Budget
- Patricia Healy, Executive Consultant, CGI, and a Fellow of the National Academy of Public Administration (NAPA)
- Regina Kearney, Senior Advisor, Office of Management and Budget
- Louis King, Assistant IG for Financial and IT Audits, Department of Transportation
- Scott Mabry, Deputy Director, Department of Interior
- William Ransom, formerly Professional Staff Member, U.S. Senate Budget Committee
- Doug Webster, Principal/Founder, Cambio Consulting Group and a NAPA Fellow
Budgetary Information Task Force
- Ann Davis, Senior Staff Accountant, Department of the Treasury
- Jason Fichtner, Senior Research Fellow, Mercatus Center at George Mason University
- Christina Hsu, Assistant Commissioner for Government-Wide Accounting, Bureau of Public Debt
- Craig Jennings, Manager of Federal Spending and Contracting Policy, OMB Watch
- Regina Kearney, Senior Advisor, Office of Management and Budget (OMB)
- Kaitlin Devine, Web Developer, Sunlight Foundation
- Larry Malenich, Director, Financial Management and Assurance, Government Accountability Office
- Ed Mazur, Senior Advisor, Public Sector Services, CliftonLarsonAllen
- Shelly McAllister, Budget Methods Specialist, OMB
- Teresa Tancre, Budget Methods Specialist, OMB
- Drew Vogel, Software Developer, Sunlight Foundation
Performance Information Task Force
- Richard Beck, Director of the Office of Planning and Performance Management, Department of Interior
- Scott Bell, Senior Staff Accountant, Department of the Treasury
- Jonathan Breul, Adjunct Professor, Georgetown Public Policy Institute, and a NAPA Fellow
- Mark Bussow, Program Analyst, Performance and Personnel Management, Office of Management and Budget
- Joseph O’Neil, Assistant Director, Financial Management and Assurance, Government Accountability Office
- Joel Grover, Deputy Assistant Inspector General, Department of the Treasury
- Harry Hatry, Director of Public Management Program for the Urban Institute, and a NAPA Fellow
- Carrie Hug, Director of Accountability, Recovery Accountability and Transparency Board
- Craig Jennings, Director of the Federal Fiscal Policy Program, OMB Watch
- Regina Kearney, Senior Advisor, Office of Management and Budget
- John Mercer, President, Strategisys LLC
- Betsy Newcomer, Program Examiner, Performance and Personnel Management, Office of Management and Budget
- Paul Posner, Director of the Public Administration Program, George Mason University, and a NAPA Fellow
- Bonnie Stabile, Adjunct Professor, George Mason University
- Jeffrey Steinhoff, Executive Director, KPMG Government Institute, and Managing Director, KPMG LLP, and a NAPA Fellow
- James Taylor, Chief Financial Officer, Department of Labor
- Kristin Lantz, Program Specialist, Department of Labor
- Cynthia Simpson, Accountant, Department of Labor
Upon discussing the draft recommendations, FASAB members determined that additional information will be needed to help them determine the appropriate objective and scope for the reporting model project. In particular, members needed to know the most important items of information that task force members expect from financial statements. Accordingly, staff will follow-up with the task for members and provide results during the December 2012 meeting.
August 29-30, 2012 Board Meeting
At the August 2012 meeting, the Board received an update on the efforts of the Auditing Standards Board’s Prospective Information Task Force. The task force considered the auditor’s responsibility with respect to the statement of long-term fiscal projections and discussed the following:
- FASAB retaining the statement as required supplementary information (RSI). If retained as RSI, this approach would be consistent with Governmental Accounting Standards Board’s (GASB) approach for prospective information and would present fewer issues from an audit prospective.
- Auditors providing a bifurcated opinion. This approach would involve providing a traditional opinion on the historical financial information and for the prospective financial information the auditor would provide an attest service and review the assumptions.
- FASAB considering whether the statement has met its intended purpose. Auditors believe that there are some substantial issues in their ability to audit the statement.
Of the above, the task force believed that FASAB retaining the statement as RSI would be the most tenable. However, FASAB members had concerns about the level of audit assurance provided by RSI. Because the audit concerns affect other accounting standards-setters considering prospective financial information, FASAB plans to frame the likely issues and organize a joint-meeting with the GASB.
June 27-28, 2012 Board Meeting
During the June 2012 meeting, the Board discussed that the Auditing Standards Board (ASB) had organized a task force to consider guidance for auditors engaged in auditing prospective financial information. The ASB primarily organized the task force as a result of the Governmental Accounting Standards Board’s (GASB) Preliminary Views on major issues related to Economic Condition Reporting: Financial Projections. The document discusses requiring states and local governments to prepare 5-year projections as required supplementary information (RSI) and this view raised some concerns within the audit community. Consequently, the task force would address those concerns and any concerns that have developed with respect to the following federal requirements for prospective financial information:
- Statement of Federal Financial Accounting Standards (SFFAS) 17, Accounting for Social Insurance, requires prospective measures for presentation in the Statement of Social Insurance; and
- SFFAS 36, Comprehensive Long-Term Fiscal Projections for the U.S. Government, requires long-term fiscal projections be presented as required supplemental information (RSI) in the consolidated financial report of the U.S. for fiscal years 2010, 2011, and 2012, after which time the fiscal projections will become a basic financial statement.
Also, members discussed challenges associated with achieving the effective date for presenting the long-term fiscal projections as a basic financial statement.
The Board decided to await feedback from the ASB regarding: a) the type of assurance that could be provided on the prospective information being required of the federal government and certain federal agencies; and 2) what additional guidance may be needed. Also, a proposal to defer the effective date for presenting long-term fiscal projections as a basic financial statement would need to be presented to the Board not later than the December 2012 meeting.
April 25-26, 2012 Board Meeting
During the April 2012 FASAB meeting, staff proposed segmenting the reporting model project into three separate projects – improving the statement of net cost, performance reporting, and budgetary reporting. Conducting the three projects would not mean that the Board has concluded the reporting model project because the Board may choose to conduct other projects to enhance the model in the future. The Board discussed the proposed projects and agreed to move forward with each of them. Each of the projects engages a task force and, after discussing issues with the task forces, staff will provide the Board with more in-depth plans for continuing the projects and the expected outcomes. This information will be provided during the October 2012 meeting.
February 22-23, 2012 Board Meeting
During the February 23, 2012 meeting, the Board deliberated the next steps for the project and considered the results of roundtable discussions with the preparer and auditor communities and interviews with internal and external users. Staff conducted the discussions to identify changes the participants believed are needed in light of the current environment and they provided a broad range of ideas, including the following examples:
- Restructure the financial statements and develop a statement of spending
- Require that less time be spent on asset valuation
- Develop a presentation that shows costs and value delivered
- Develop a presentation with drilldown capability and improve user interactivity
- Provide more useful information in the statement of net cost and provide additional cost accounting guidance
- Improve performance reporting
In addition, staff observed that internal users require a broad range of data such as cost, budget, and performance data and they appear to prefer flexible end reporting. They use executive dashboards that allow users to customize their own reports and that provide summarized standard reports with drill-down capability. The dashboards use data from various systems including performance monitoring and financial systems.
Also, external users noted that sovereign debt is no longer considered risk-free and they wanted to know about a country’s non-debt liabilities and fiscal risks. They also noted that the balance sheet is useful for monitoring capital needs and other countries are reporting on service performance and financial performance.
Consequently, the Board determined that the reporting model project should be segmented into multiple projects and, while members discussed initiating several possible projects, the Board primarily focused on performance reporting, the statement of net cost, and budgetary information. The Board believed that the next set of projects should be well-defined and offer FASAB the opportunity to play a direct role in resolving issues through accounting standards. After discussing the priority of the next projects during its strategic planning session, the Board determined that the issues needed to be more developed so that they could better assess the success of the projects upon completion. Staff will develop the issues for the Board to consider during the April 2012 meeting.
December 19-20, 2011 Board Meeting
The reporting model project was not discussed during the December 2011 Board meeting. Staff is conducting roundtable discussions with Chief Financial Officers to determine their views on the changes needed in light of the current environment. Also, staff is interviewing agency managers and financial experts in the international arena to determine their information needs.
October 26-27, 2011 Board Meeting
During the October 2011 Board meeting, FASAB discussed the report, The Chief Financial Officers Act of 1990 – 20 Years Later: Report to the Congress and the Comptroller General (CFO Act Report). Attending the meeting to discuss the CFO Act Report were:
- Danny Werfel, Controller, Office of Federal Financial Management, Office of Management and Budget
- James L. Taylor, Chief Financial Officer, Department of Labor
- Jon T. Rymer, Inspector General, Federal Deposit Insurance Corporation
The CFO Act Report identified the lessons learned since the CFO Act of 1990 was enacted and offered the following recommendations:
- The Congress should consider enhancing the role of the CFO by standardizing the CFO’s portfolio to include leadership responsibility for budget formulation and execution, planning and performance, risk management and internal controls, financial systems, and accounting. To provide continuity during the often lengthy period between appointments of agency CFOs, the Congress should also consider providing Deputy CFOs with the same breadth of responsibilities as their respective CFOs.
- The Congress should consider directing OMB, GAO, and the Federal Accounting Standards Advisory Board (FASAB), in consultation with CIGIE, to evolve the financial reporting model by examining the entire process with an eye toward how to further improve and streamline current reporting requirements and to better meet the needs of all stakeholders.
Also, FASAB discussed a project plan for reviewing the reporting model of component level entities. The Board determined that staff should begin by conducting discussions with CFOs and representatives from various groups to help the Board better determine what information is of value to users.
August 24-25, 2011 Board Meeting
The Board discussed a project plan to review the reporting model for component entities. Board members discussed the focus of the project and the need to ensure that the project includes input from managers and citizens. Staff will enhance the plan to address the Board’s comments.
June 22-23, 2011 Board Meeting
The financial reporting model was not discussed during the July 6, 2011, FASAB meeting.
April 27-28, 2011 Board Meeting
During the April 2011 meeting, the FASAB discussed a staff proposal to develop a new basic financial statement that would articulate (link) information in the existing financial statements. The Board had initiated work to develop this statement as part of its Social Insurance project and staff suggested continuing this work while concurrently enhancing the conceptual framework. The conceptual framework segment would address voids and concerns that Board members raised during their deliberations on social insurance and other topics.
Upon discussing the proposal, the Board determined that adding a new basic financial statement to articulate existing information would not be beneficial to readers. The reporting model already includes a number of financial statements, including the new statement on sustainability (Long-Term Fiscal Projections for the U.S. Government) which is being widely used to inform fiscal discussions. Instead, the focus should be on better presenting or communicating the existing information.
Also, the Board believed that it would be premature to revisit the conceptual framework at this time. The Board acknowledged that the financial reporting community has a number of initiatives ongoing that may inform an analysis of the conceptual guidance.
February 23-24, 2011 Board Meeting
During the February 2011 meeting, FASAB reviewed the Reporting Model Task Force recommendations and will consider them during their technical agenda setting discussions.
December 16-17, 2010 Board Meeting
FASAB’s Financial Reporting Model Task Force (task force) issued its report on enhancing the financial statements, terminology, and methods used to communicate basic federal financial information (the federal reporting model). The report includes illustrations of an enhanced reporting model and can be downloaded from the “Reports and Documents” section of the FASAB website at /reports.html.
The task force membership consisted of well-respected leaders with established backgrounds in federal financial reporting. They focused on the Financial Report of the U.S. Government (CFR) because the public would likely start with the CFR to learn about the fiscal health of the federal government. The task force also reviewed FASAB’s user needs study and considered the questions, suggested lines of inquiry, and ideas of FASAB members. Consequently, they believed that to best meet FASAB’s objectives and the public’s needs for transparency and accountability, the federal government should adopt an electronic, Web-based method of communicating information about the financial condition and performance of the federal government. The task force noted that this method would enable the federal government to meet more user needs more quickly and at a lower cost than the paper-based method currently used. The task force envisioned that the electronic, Web-based method would involve a central Web site for financial and performance information with multimedia presentations to help educate users about the significance of the information. In addition, the site should include: the ability for users to “drill-down” to the appropriate level of detailed material; machine-readable data to enable users to conduct searches and download data for analysis; and the ability to report cost and accomplishments in a variety of ways based on user preferences. The task force also recommended reporting additional financial and non-financial measures and changes in the presentation of information in existing reports to assist users in understanding the financial condition and performance of the federal government.
The task force believed that the success of the electronic, Web-based method of reporting and its other recommendations requires adequate public awareness of federal financial reporting. Thus, the task force recommended establishing a federal financial information Web site and taking steps to raise public awareness of its availability.
During its December 2010 meeting, FASAB discussed the task force report and the role of the Board with respect to the recommendations. As a result of the discussions, the Board determined that an analysis of the recommendations would be needed to help them plan the next steps for the overall project. Staff will prepare the analysis and include a discussion of existing FASAB standards that are relevant to the task force recommendations. The Board will decide on next steps at the February 2011 meeting.
October 27-28, 2010 Board Meeting
The Financial Reporting Model Task Force (task force) presented nine preliminary draft recommendations intended to increase users’ understanding, access, and use of financial information while avoiding costly requirements that do not add value. The task force considered user needs data, the Consolidated Financial Report of the U.S. Government (CFR), and issues raised by FASAB members, and discussed a wide-range of issues and possible recommendations. Members of the task force include:
- Jonathan D. Breul, Executive Director, IBM Center for The Business of Government, Partner, IBM’s Global Business Services
- Patricia E. Healy, Executive Consultant, CGI
- Marvin Phaup, Director, Federal Budget Reform Initiative, Pew Charitable Trusts
- Al Runnels, Deputy Chief Financial Officer, Department of the Treasury
- Jeffrey C. Steinhoff, Executive Director, KPMG Government Institute, and Managing Director, KPMG LLP
- Michael J. Hettinger, Executive Director of Practice Planning and Marketing, Global Public Sector, Grant Thornton LLP
- John H. Hummel, Partner and Federal Segment Leader, KPMG LLP
- Edward J. Mazur, Senior Advisor—Public Sector Services, Clifton Gunderson LLP
- Sheila Weinberg, founder and CEO, the Institute for Truth in Accounting
The presentation discussed the following preliminary draft recommendations:
- Adopt an Electronic, Web-Based Reporting Method. The method would provide a central location for information and have drill-down capability. The task force provided an illustration of an electronic, web-based reporting method for the federal government.
- Present a Functional Statement of Net Cost in the CFR. The task force presentation included an illustrative statement.
- Provide a Presentation of Net Cost by Budget Function and Department. The task force provided an illustrative presentation.
- Consider the Statement of Spending being Developed by the Chief Financial Officer’s (CFO) Council
- Change the Balance Sheet Display to Emphasize Net Position
- Add Note to the Balance Sheet that explains the Connection between Net Position and Fiscal Gap.
- Move the Information in the Statement of Changes in Cash Balance from Unified Budget and Other Activities to either a Note or Required Supplementary Information (RSI), depending upon its Relative Importance to Understanding Financial Position.
- Change the Labels on the Reconciliation of Net Operating Cost and Unified Budget Deficit to those illustrated in Standard 24, Selected Standards for the Consolidated Financial Report of the U.S. Government
- Consider Intergovernmental Financial Dependency Reporting in RSI
The FASAB was particularly interested in the preliminary draft recommendation to adopt an electronic, web-based reporting method. Features of this method included: a central website for federal financial information which permits users to select the appropriate level of technical information. Also, the website would be searchable, possess drill-down capability, present machine-readable data, permit data to be downloaded in different formats, use multimedia for explanations of statements, and present some information using graphical and other user-friendly displays. FASAB members discussed the benefits and need to implement this recommendation soon. In addition, FASAB members noted that some initiatives along the lines of web-based reporting have been started. The task force plans to finalize the report for the December 2010 Board meeting.
Also, during the October 2010 meeting, the FASAB discussed a staff proposal to review disclosures. The proposed objective of the project was to refine existing disclosure requirements by determining whether certain required information is no longer relevant or useful; could be streamlined; or improved, as well as whether additional information is needed. The scope of the project was intended to be comprehensive and would involve panels reviewing each disclosure or a cluster of disclosures. Approximately 18 review panels would be conducted and the panels would consist of preparers, auditors, and analysts. Following the panel discussions, interviews with users would be conducted to provide input about: a) specific items of information they find most valuable or useful and why; and b) their understanding of and interest in specific illustrative disclosures.
FASAB members considered the benefits of the approach and the resources that would be required, and determined that the major issues need to be determined so that resources can be focused and the project streamlined. For the December 2010 meeting, staff plans to provide a proposal for refocusing the objectives and scope of the project.
August 25-26, 2010 Board Meeting
At the August 2010 meeting, the Board discussed the progress of the federal reporting model task force. The task force is developing a report to the FASAB. The report would not be the final product of the project, but it would convey recommendations that relate to the reporting model broadly rather than narrowly focusing on the aspects governed by accounting standards issued by the FASAB. Recognizing that the benefit to be obtained from federal financial reports is affected not only by the content of the reports but also by outreach to users and potential users, cultural factors, and delivery mechanisms (e.g., electronic innovations), the task force believed the broad view would be most helpful to FASAB, its sponsors and the larger federal financial management community. The task force plans to meet on September 21, 2010, to finalize the report.
In addition, in response to concerns that disclosures had become too detailed, the Board believed it would be beneficial to begin a project to reconsider disclosures. The Board discussed different research approaches for conducting the project and believed that interviewing experts would be beneficial. Staff plans to develop an approach to discuss at the October 2010 meeting.
June 23-24, 2010 Board Meeting
During the June 2010 meeting, FASAB staff discussed the status of the reporting model project and reminded members that a task force was organized to provide suggestions for the Board’s consideration. The task force met in May 2010 and decided to begin their efforts by focusing on the summary level information of the consolidated financial report (CFR), i.e. the Citizen’s Guide and MD&A sections and organize a subgroup to consider the government-wide financial statements.
FASAB staff has begun considering enhancements to the summary level information by conducting interviews with state and local government planners and analysts who referenced the CFR in the media. Also, staff organized a group of individuals to read and comment on what information they found useful; what additional information would be interesting or useful; and what questions or comments they have about the information.
April 28-29, 2010 Board Meeting
At the April 29, 2010 meeting, the FASAB discussed the staff user needs studies. Staff conducted a series of user studies involving citizens, executives and managers, and the Congress. Upon completion of the studies, staff developed a user needs inventory for use in determining improvements in existing federal financial reports. The financial reporting objectives are broad enough to encompass the user needs identified and the following are some of the highlights of the user needs studies:
- Citizens and some executives and managers noted difficulty in understanding information in financial reports. They believed that the documents are intended for accountants or economists rather than citizens and managers. In some instances, executives and managers develop their own data and reports.
- Congress seeks timely, easy to understand information to address particular issues.
- Citizens were not aware that the federal government and agencies prepared audited financial statements and some executives and managers had not seen their agency’s financial statements.
- Some executives and managers noted that they need training in financial management.
- Congress seeks financial information about specific issues of the day and uses many sources to obtain the information it needs such as obtaining the information directly from agencies and utilizing legislative support organizations, i.e., the Government Accountability Office, Congressional Budget Office, and Congressional Research Service.
- Congress also routinely seeks information about the budgetary effect of legislative proposals on the budget and the cumulative effects of legislation.
- Executives and managers use multiple systems, cuff systems, or systems other than financial systems to get financial information, including basic budgetary information.
- Both cash and accrual basis accounting appears to be needed to provide the information users need.
- Executives and managers need information at least monthly, but timelier, if possible. However, some did not believe that timelier information was possible.
The FASAB also discussed the FASAB reporting model task force scope and structure, and the Board’s views or issues that they would like the reporting model task force to consider during the project.
February 24-25, 2010 Board Meeting
During the February 2010 meeting, the FASAB discussed staff’s survey of the financial reporting practices and experiences of other countries. Staff received survey responses from 10 Organization for Economic Co-operation Development (OECD) member countries (Australia, Austria, Canada, France, Italy, New Zealand, Norway, Portugal, Sweden, and United Kingdom). The following is a brief overview of the survey results:
- All of the respondents indicated that they make their government-wide financial report available on the internet.
- Most of the respondents indicated that departmental financial statements are prepared and audited.
- Many of the countries indicated similar financial statement users as the U.S. For example, all the respondents noted that legislative bodies (parliament) and citizens or the public were considered users. In addition to parliament, some countries noted other internal users such as those within ministries or departments.
- Financial statements were used for various purposes, including budget decisions, demonstrating stewardship over assets or asset management, monitoring efficiency, and accountability and decision-making in general.
- Most of the survey respondents use accrual accounting and some countries consider private sector accounting standards in preparing their financial reports.
- Respondents generally used the same basis for budgeting and accounting and some countries indicated that they currently use or are moving to accrual budgeting and accounting.
Also, during March 2010, staff plans to interview executives and managers to learn about their financial information needs. Kelly, Anderson and Associates will be assisting FASAB staff in conducting the interviews.
December 16-17, 2009 Board Meeting
At the December 17, 2009 meeting, the FASAB discussed the financial management aspects of other countries and decided to survey the reporting models of several countries. Upon completing the survey, the Board may invite officials from a particular country or countries to attend a FASAB meeting and conduct more in-depth research. Also, members discussed concerns regarding the existing financial reporting model, the need for managerial cost accounting information, and the scope of generally accepted accounting principles (GAAP).
October 21-22, 2009 Board Meeting
At the October 2009 meeting, the FASAB discussed the diverse needs of potential users and the challenges involved in meeting those needs. For example, some potential users seek transaction level data such as where federal funds are going, while others seek information that requires accumulating various types of data, such as intergenerational equity. FASAB members discussed the high level of interest in data being presented on the recovery.gov website and they discussed the accounting systems matters that the Office of Management and Budget observed while constructing the site. In addition, members noted the need for managerial accounting information to assist in managing agencies and the need to determine the displays that would capture the data that potential users are seeking.
The FASAB discussed the importance of understanding the needs of potential users and agreed that staff should continue with the user needs study. Also, staff will consider approaches for incorporating ideas for a reporting model. Some members suggested considering the models of other countries or state governments and inviting representatives from other countries or from state governments to attend a FASAB meeting.
August 26-27, 2009 Board Meeting
FASAB staff conducted focus group discussions with citizens in Boston and Dallas and is developing a national survey of citizens. Also, staff is continuing interviews and literature research to determine user needs for financial information regarding the federal government.
June 17-18, 2009 Board Meeting
Although the Reporting Model project was not an agenda topic for the June 2009 meeting, staff briefed the Board on the project’s progress. Staff is continuing to study federal financial report user needs and since the April 2009 Board meeting, staff has focused on surveying congressional staff and developing plans for surveying citizens.
April 22-23, 2009 Board Meeting
Staff is continuing a study of user “needs.” During the April 2009 Board meeting, the FASAB discussed the possibility of convening a roundtable discussion on the federal reporting model. The roundtable discussion would permit Board members to engage in a dialogue with potential users and experts with views on the information that should be provided in federal financial reports. However, the Board believed that in-depth discussions would be needed to answer questions such as what data elements of financial statements are used and what information users are seeking and why. Consequently, the Board decided that continuing staff focus groups and structured interviews would provide a more suitable format than a roundtable meeting.
Financial Reporting Model
February 25-26, 2009 Board Meeting
Staff is continuing a series of focus group discussions regarding the information needs of federal financial report users. After several years of substantial progress in financial reporting, the Board believed that it was time to revisit user information needs and decided to engage the community through a series of focus group discussions. The discussions would ultimately help the Board better understand what information should be presented in federal financial reports today. Discussions have been conducted with deputy chief financial officers, auditors, and other experts in federal financial reporting and more discussions are planned throughout March and April 2009.
December 17-18, 2008 Board Meeting
Staff is planning to conduct a series of focus group discussions and interviews regarding the federal financial reporting model. The focus groups and interviews will involve financial report preparers, citizen intermediaries, congressional staff, program managers, executives, auditors, and experts in federal financial reporting. The discussion topics will include issues such as: (1) what information participants believe users expect from the federal government to assist them in assessing its accountability and in making decisions with respect to the federal government; and (2) possible improvements to the existing federal financial reporting model. Staff conducted a field test focus group in December 2008. Actual discussions are scheduled to begin in February 2009.
October 22-23, 2008 Board Meeting
The Board completed the communication methods segment and unanimously adopted Statement of Federal Financial Accounting Concepts (SFFAC) 6, Distinguishing Basic Information, Required Supplementary Information, and Other Accompanying Information. In this statement, the FASAB has amended SFFAC 2, Entity and Display, to provide guidance for use by the Board in determining whether information should be basic information, required supplementary information, or other accompanying information. The Statement was forwarded to the Principals the for their 90-day review period on November 4, 2008. Absent an objection from OMB or GAO, the document will be issued on February 3, 2009.
Regarding the next segment, the Reporting Model, staff plans to conduct a study of user “needs.” Staff will conduct multiple focus group discussions with each group of users identified in SFFAC 1, Objectives of Federal Financial Reporting, and will conduct a discussion with financial report preparers. Also, staff will keep the Board informed as progress is made in conducting the study.
August 20-21, 2008 Board Meeting
At the August 2008 meeting, the FASAB discussed comments received in response to the exposure draft (ED) Distinguishing Basic Information, Required Supplementary Information, and Other Accompanying Information. The ED proposed amendments to SFFAC 2, Entity and Display, that provide concepts for guiding the Board in distinguishing basic information, required supplementary information, and other accompanying information. While respondents generally agreed with the proposed conceptual guidance, some indicated a need to clarify some of the factors for distinguishing basic information and RSI.
During the meeting, the FASAB discussed the staff’s recommendations for a final draft concepts statement in light of the responses to the ED. The Board discussed language to clarify some of the factors and provided comments to staff. Staff will incorporate the Board’s comments and present a ballot draft concepts statement at the October 2008 meeting.
June 18-19, 2008 Board Meeting
During the June 19, 2008 meeting, the Board approved a plan for expanding the reporting model project. Staff developed the plan as a result of members’ technical agenda discussions regarding the appropriate model for agency level reporting. The plan calls for conducting the project in four phases: 1) determine user needs within certain cost/benefit constraints; 2) determine the inventory of user needs and how they relate to the reporting objective; 3) determine methods for meeting user needs; and 4) determine presentation. In addition, while the plan involves both agency level and government-wide reporting, it does not advocate for a particular model. Members believed that potential users as well as current users should be surveyed. Also, some members discussed the need to consider internal users, such as managers, while others noted that addressing both internal and external users would be challenging. Staff will consider member’s comments in initiating Phase I of the plan, determining user needs.
April 16-17, 2008 Board Meeting
Members discussed a plan for developing concepts that describe the reporting model and how it relates to the reporting objectives. Concepts would provide a framework for guiding the Board in determining the financial statements necessary to achieve the broad reporting objectives. Knowledge of these concepts should help preparers, auditors, and users to understand the purposes of each statement and the information that they are designed to provide. Also, enhancing readers’ understanding may assist them in selecting and evaluating the information they need for assessing accountability and decision-making.
The project plan involved reviewing the existing financial statements and determining how well the statements help achieve the reporting objectives and reviewing the objectives for areas that are not being addressed. The project would begin by reviewing the statement of net costs because of its contribution to helping readers assess operating performance.
Members expressed concern about focusing on “what is” or the existing model and noted the need to ensure that the reporting objectives are adequately addressed and to provide financial statements that are useful to readers. Members discussed a possible financial statement that could help better address the budgetary integrity objective and provide more useful information. The statement would integrate budgetary and accrual basis information.
Members also discussed the present relationship between the balance sheet and the statement of net costs and other factors. Members questioned whether a relationship should exist between the statements and wanted to consider non-articulation as an alternative during the project. In addition, members believed that the project should involve comparisons with other reporting models.
Staff plans to proceed with the project by reviewing the statement of net costs and the balance sheet and will consider issues such as how well the reporting objectives are being achieved, whether the statements should articulate, and how the model compares with other reporting models.
February 13-14, 2008 Board Meeting
At the February 14, 2008 meeting, members discussed revisions to the pre-ballot draft concepts statement, Distinguishing Basic Information, Required Supplementary Information, and Other Accompanying Information. The Statement is the product of the first phase of the Financial Reporting Model project and it proposes amendments to SFFAC 2, Entity and Display. As the Financial Reporting Model project progresses to later phases, additional amendments to SFFAC 2 may be presented.
Members discussed the structure of generally accepted accounting principles (GAAP) which includes basic information and required supplementary information (RSI). However, other accompanying information (OAI) is not required by a body that establishes GAAP. Members also discussed RSI and OAI and the role of the Office of Management and Budget (OMB). The OMB has the legal authority to define form and content and prescribe the auditing procedures that auditors should apply. Auditors must apply the OMB audit requirements in addition to the American Institute of Certified Public Accountants’ (AICPA) auditing standards. The Statement allows for the OMB’s role.
Members are currently voting on ballot draft statement that incorporated their comments at the February meeting. An exposure draft will be issued before the end of March.
December 4-5, 2007 Board Meeting
At the December 2007 meeting, the Board discussed a proposed concepts statement that would amend SFFAC 2, Entity and Display. During the Board’s September 2007 meeting, members agreed that there are a number of factors to consider when determining how to communicate required information and those factors are presented in the basis for conclusions section of SFFAS 25, Reclassification of Stewardship Responsibilities and Eliminating the Current Services Assessment (Figure 2). Members relied on the factors when developing the standard and found them helpful for distinguishing basic information from required supplemental information (RSI). The Board then agreed that a concepts statement on communication methods should include the SFFAS 25 factors.
Rather than developing a concepts statement on communications methods that would include the factors for distinguishing basic and RSI, staff proposed a concepts statement that would amend SFFAC 2. The existing FASAB conceptual framework currently includes some guidance for communication methods. For example, SFFAC 2 discusses types of financial statements, management’s discussion and analysis (MD&A), and RSI, and SFFAC 3, Management’s Discussion and Analysis further discusses the MD&A. Amending SFFAC 2 to include the factors for distinguishing basic and RSI would help reduce the likelihood of repeating existing concepts in a new standard.
The Board agreed with the staff proposal to amend SFFAC 2 and provided comments on the content of the proposed statement. Staff plans to prepare a ballot draft for the February 2008 Board meeting.
In addition, staff noted that discussing required information categories raises another matter for the Board’s consideration. Staff noted that the Required Supplementary Stewardship Information (RSSI) category remains a part of the federal financial reporting model. The Board has reclassified all RSSI items except Stewardship Investments. Stewardship Investments include investments in non-federal physical property, research and development, and human capital. Members noted that the information is currently being treated as RSI; however, when the Board originally created the category, the Board expected that the auditor would report on this information in a manner similar to basic information. Also, some members expressed concern whether the information should continue to be required. The Board agreed to consider a project on the RSSI category during its February 2008 technical agenda setting discussions.
September 19-20, 2007 Board Meeting
At the September 19, 2007 meeting, members discussed a proposed concepts statement that would provide guidance for choosing the appropriate level of assurance on information to be required by standards. This approach for the concepts statement was highlighted during the Board’s July 2007 meeting, when members discussed the Management’s Discussion and Analysis (MD&A). While members agreed that the MD&A was an important component of the financial report, they deliberated on whether the MD&A should be considered basic information subjected to audit or required supplemental information (RSI) which is not audited. The proposed concepts statement would provide criteria to assist the Board in choosing the appropriate assurance level in instances such as the MD&A.
Members discussed that the Board primarily focuses on determining what information should be reported and the means for reporting the required information. In determining the means for reporting required information, the Board considers various factors. One factor is assurance. The Board may discuss assurance and designate information as basic or RSI to help ensure that the information receives the intended level of audit scrutiny. Factors such as reliability and precision are also evaluated in determining the means for reporting required information. These and other factors were previously developed in the basis for conclusions of SFFAS 25, Reclassification of Stewardship Responsibilities and Eliminating the Current Services Assessment. The discussion in SFFAS 25 focused on distinguishing between basic and RSI. In addition, members noted that, at times, the Board may encourage the reporting of information. Information that the Board encourages may be considered other accompanying information (OAI). These notions were incorporated into a framework that staff could use in developing the concepts statement. The concepts statement will include the various factors that the Board considers in determining the means for reporting required information and the notion of encouraging information using OAI.
July 25-26, 2007
At the July 26, 2007, FASAB meeting, staff provided the Board with an overview of the project and stated that staff planned to develop concepts that would:
- Establish criteria for determining when financial statements, disclosures, management’s discussion and analysis (MD&A), required supplementary information (RSI) other than MD&A, and other accompanying information (OAI) should be used in meeting the reporting objectives (communication methods); and
- Describe the financial statements used to present the elements critical to meeting financial reporting objectives and explain what constitutes a full set of financial statements (overview of basic financial statements).
Regarding the first objective, communication methods, staff prepared a proposed concepts statement for the Board’s review. Staff prepared the proposed concepts statement using the outline presented to the Board during the November 2006 meeting. The proposal described each communication method and established a hierarchy for choosing among them. Concerning the second objective, overview of basic financial statements, staff recommended that: (1) SFFAC 2 be amended as needed rather than being superseded and (2) amendments related to ongoing standards projects be accomplished as those standards are developed.
The Board agreed with the staff’s plans and provided comments on the proposed communications methods concepts statement. Some expressed concern about the added value of the proposed concepts and how the document should depict the unique role of the MD&A in federal financial reporting. The MD&A is an important communication method and, in some cases, the only method that users will read. However, currently, the MD&A is not audited. Instead, it is treated as RSI for audit purposes. Staff will revise the proposed concepts statement based on the Board’s comments.
May 23-24, 2007
The Financial Report Project was not an agenda item at the May 2007 meeting. Staff continues to research topics initially presented during the November 2006 board meeting and will draft proposals for consideration by the Board. Staff will present an update at the July 2007 Board meeting.
March 21-22, 2007
During the March 2007 FASAB meeting, the Board discussed whether performance information was an integral part of financial reporting and general purpose federal financial reports (GPFFR). In reviewing the scope of the existing GPFFR, staff noted that the report includes non-financial performance information such as performance goals and levels of achievement. However, some standards-setters focus on financial information and do not necessarily consider non-financial performance as integral to financial reporting and constituents have raised concerns regarding the voluminous size and understandability of agency Performance and Accountability Reports (PAR). In earlier statements, such as Statement of Federal Financial Accounting Concepts 3, Management’s Discussion and Analysis, the Board stated that performance information was an integral part of the GPFFR, and staff asked whether the Board believed that performance information is an integral part of financial reporting and of GPFFRs, currently. In addition, because the area of performance reporting is still evolving and more time may be needed to allow on-going programs to accomplish their intended goals, staff suggested that the Board continue to monitor the progress in performance reporting rather than exploring the topic at this time.
While Board members agreed that the term “integral” does not indicate the audit status or the scope of audit work that should be conducted regarding performance information, members discussed agencies’ concerns about audits of performance information. The Board agreed that performance information was integral to financial reporting and the GPFFR, but this does not preclude pursuing alternative formats. In addition, the Board members determined that staff should participate in work groups engaged in reviewing PAR formats and developing strategic directions for a financial reporting model. This will permit the Board to continue monitoring the progress in performance reporting rather than exploring the topic at this time.
Staff also noted that the existing GPFFR includes financial statements, disclosures, management’s discussion and analysis, required supplementary information, and other accompanying information. FASAB literature discusses these components and the financial reporting community is familiar with them. Staff suggested that the Board limit the GPFFR components to the existing ones, rather than exploring other possibilities. Board members acknowledged that the components indicate audit status categories and agreed to limit the GPFFR components to those currently discussed in FASAB literature.
January 17-18, 2007
Staff presented the Board with an update on the status of the financial reporting model project. Staff incorporated the Board’s previous comments on an outline of a proposed concept statement regarding key components of the federal financial report. One key change to the outline was the addition of a discussion on management’s responsibility for financial reporting. The Board discussed the notion of adding management’s responsibility for financial reporting to the proposed concepts statement and determined that management’s responsibility for financial reporting, along with the notion of fair presentation, should be discussed in possibly another vehicle rather than the proposed concepts statement on key components of the financial report. However, additional research is needed to determine the appropriate means of articulation.
In addition, at the November 2006 meeting, Board members believed that the Board could begin to consider how to report performance information and staff could address the issue as part of the project. Accordingly, staff discussed plans for how to proceed with the project. The staff plans included two types of outreach activities – roundtable meetings to discuss agency Performance and Accountability Report (PAR) issues and an educational session on cost accounting. Constituents had recently raised concerns that PARs have grown too voluminous and that agencies are not developing cost information to integrate with performance reporting, such as reporting the cost of specific programs and the amount spent on achieving results. Staff proposed the outreach efforts as a way to inform constituents on existing FASAB guidance and to gather information on whether additional FASAB guidance is needed.
The Board noted that the financial reporting project involved many broad subjects which required analysis. Consequently, members believed that the project needed further development before proceeding with outreach activities, and staff should proceed with the project by reviewing the concepts supporting the existing general purpose federal financial report (GPFFR). Also, in the meantime, staff plans to serve as an observer on existing work-groups focusing on streamlining the PAR and integrating financial and performance information and inform the Board of areas where FASAB could provide a comparative advantage.
September 27-28, 2006
Staff is developing an outline for a new Concepts Statement that will address the key components of Federal financial report. The Board will review the outline at the November 2006 Board meeting.