Still, not all agencies are getting clean audits. What do you have to do to improve accuracy?
That’s something we work on every day. The CFO Act of 1990 was passed when I was assistant secretary for management at the Treasury Department, and I remember that 5 agencies volunteered to see if they could get a clean audit. Of those, only 1 — the General Services Administration — was successful. By 1996 there were 6 agencies that got clean audits. Last year we had 19. So the trend is moving in the right direction. But fundamentally, we have to continue to improve our internal-controls efforts. We’ve reduced material weaknesses over the past six years by 58 percent. But we still have a ways to go.
You’ve tightened the government’s internal-control regulations (Circular A123). What did you learn from Sarbanes-Oxley?
Sarbanes-Oxley required the corporate world to put in some measures in a very short time frame, which has pluses and minuses. And in response, we learned to take what I call a reasoned and seasoned approach to 123. Reasoned, because we already have a number of requirements in place that mirror pieces of Section 404, and we wanted people to coalesce or use those requirements in a reasonable way to develop their own internal-controls effort. From the seasoned approach, we decided not to do all this in one year. And when you realize we have four departments — Defense, Health and Human Services, Treasury, and the Social Security Administration — that individually are larger than either Exxon or Wal-Mart, it’s [easy to understand] why this is at least a three-year plan.
What makes you comfortable with the integrity of your controls?
We’ve got a lot of other people looking at us, including the American taxpayer. Internal controls are reviewed as part of our performance and accountability reports. Congress reviews and scrutinizes each of those reports. In addition, each department and agency has its own audit and its own inspector general, who comes up with a top 10 list [of management challenges] in every department every year. And I can assure you, if they’re attesting to something that’s not accurate, there may be more scrutiny than what one audit on internal controls could uncover.
When will we see a governmentwide consolidated financial statement?
I don’t have a crystal ball, but in 1990, if we had not put out a goal of having a CFO and eventually having a clean audit in every department, we wouldn’t now be able to aim for a governmentwide audit.
Finally, why have you stuck with it for so long?
Some people say I’ve got a hole in my head. But what keeps me coming back is the value I see for the American people in having committed managers who want to do the right thing. The magnitude of the decisions made in government daily, the complexity of the issues, and all the outside forces that come into play are unsurpassed by anything in the corporate world.