A Brief History of Federal
Financial Management
David Norquist
Tampa Bay PDI
April 3rd, 2014
10,000 BC
Early hunter gatherer societies:
• No central government
• No written language
• No accounting
2
4,000 BC
Early Accounting
Civilization starts w/
four key advances:
•
•
•
•
Shift to farming
Central government
Early writing (PP&E)
Accountants (Scribes)
1787
U.S. Constitution
Article 1, Section 9
“No money shall be drawn from the treasury,
but in consequence of appropriations made by
law; and a regular statement and account of
receipts and expenditures of all public money
shall be published from time to time.”
4
1787
U.S. Constitution
Article 1, Section 9
Budgeting Accounting
“No money shall be drawn from the treasury,
but in consequence of appropriations made by
law; and a regular statement and account of
receipts and expenditures of all public money
shall be published from time to time.”
5
1809
Purpose Statute
“Appropriations shall be applied only to the
objects for which the appropriations were
made except as otherwise provided by law.”
31 U.S.C. § 1301(a)
6
1870
Anti-Deficiency Act
“That it shall not be lawful for any department
of the government to expend in any one fiscal
year any sum in excess of appropriations
made by Congress for that fiscal year, or to
involve the government in any contract for the
future payment of money in excess of
such appropriations.”
7
1921
Budget and Accounting Act
1. Required the President to formally submit
the national budget to Congress each year
2. Created “BOB” – Bureau of the Budget
(OMB)
3. Established GAO responsible to Congress
8
1974
Names of laws get too long
Congressional Budget and Impoundment Act
1. Established Committees on the Budget
2. Established Congressional Budget Office
3. Limited executive branch “impoundments”
4. Moved Fiscal Year from 1 July to 1 Oct.
9
1982
(Shift to acronyms) FMFIA
Requires Agency heads to provide assurance:
1. Obligations are in compliance with law
2. Funds and property are safeguarded against
waste, loss or misuse.
3. Revenues/expenditures are properly reported.
From this law came OMB Circular A-123
10
1990
CFO Act
1. Shifted responsibility from GAO to OMB
2. Led to CFOs in major Federal entities.
3. Increased emphasis on internal controls
4. Required annual independent audits of
financial statements.
11
Where are we today?
Accounting:
• Annual Audited Financial Statements
• 22 Clean Audit Opinions (out of 24 CFO Act Agencies)
• Mgmt Assurance and Internal Control Assessments
• A-123 Process
Budgeting:
• Record Debt
• Sequestration
12
Gross Federal Debt
*Dollars are in millions.
13
How did we get here?
14
Budget Control Act of 2011
Act created the “Congressional Joint Select
Committee on Deficit Reduction.”
If legislation with $1.2 trillion in savings is
not passed by January 15, 2012, automatic
cuts go into effect in January 2013.
15
What does Sequester do?
Total Goal for Reduction
$1,200
Reduction for Debt Service
-$216
Reduction to Defense
$492/nine years = -$55/year
-$492
Reduction to non-Defense
Medicare (-$16 to -$22) and
Discretionary (-$39 to-$33)
-$492
Dollars are in Billions.
16
Year by Year View
2014
$552
-55
$497
2015
$556
-55
$511
2016
$577
-55
$522
Nondefense
Sequester
$506
-37
$469
$520
-37
$483
$530
-36
$494
Grand Total
$966
$994
$1,016
Defense
Sequester
Dollars are in Billions.
17
Bipartisan Budget Agreement
Raise the Sequester Caps for 2014/2015
+$63
Paid for by Cuts spread over 10 years:
Extend Direct Spending CAPS into FY2022/23
Federal Employee Retirement Changes
Military Retirement Changes
Over a dozen smaller changes
Higher Education Changes
Strategic Petroleum Reserve
New Health Benefit Option (FEHB self +1)
Higher Pension Benefit Guaranty Premiums
TSA Aviation Security Fees
Customs User Fees extended into FY2022/23
Total Reduction
-$28
-$ 6
-$ 6
-$ 9
-$ 5
-$ 3
-$ 3
-$ 8
-$12
-$ 7
-$85
Dollars are in Billions.
18
Budget Agreement by Year
Defense
Adjustment
2014
$497
+22
2015
$511
+ 9
2016
$522
+ 0
Nondefense
Adjustment
$469
+22
$483
+ 9
$494
+ 0
Grand Total
$1,012
$1,014
$1,016
Dollars are in Billions.
Totals do not match due to rounding.
19
Problem solved?
20
The Other Shoe
21
Summary
Accounting led to writing and civilization
Budgeting led to overspending and more laws
Thank you
QUESTIONS?
David.Norquist@kearneyco.com