Audited financial statements in the federal government: Intentions, outcomes and on-going challenges for management and policy-making

The Chief Financial Officers Act of 1990 (and the subsequent Government Management Reform Act of 1994) mandated federal agencies to prepare corporate-style annual financial statements and subject them to independent audit. Over a decade later, it is reasonable to ask what the consequences of CFO Act financial statements have been. Accrual accounting produces auditable financial statements that establish accountability, contribute to the credibility of financial information, and identify long-term financial issues; but financial statements are not linked to the processes for resource-allocation decisions, nor do they produce information needed by managers. Some of these shortcomings are explained by contextual and sectoral differences