Public Financial Management in the United States

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Public Financial Management in the United States

• Opening Doors United States and Malaysia A
  Model International Partnership in Transparency
  and Citizen Access for Honest Government
  
• December 2, 2004

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Seminar Agenda

• 100 Introductions Kinney Poynter, NASACT
• 105 Budget Management and Executive Leadership
  John Radford, State Controller (OR)
  
• 120 State Controllership J. Radford
• 140 State Treasurer Roles and Responsibilities
  Vern Larson, State Treasurer (SD)
  
• 200 State Auditor Function K. Poynter
• 220 Professional Standards Richard Johnson
  (IA), Member of the Financial Accounting
  Foundation
  
• 230 Questions and Answers

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Budget Management Executive Leadership

• Strategic planning
• Performance management
• Program evaluation
• Budget development
• Economic forecast revenues
• Expenditure forecasts
• Cash balances
• Restricted
• Unrestricted
• Budget methods instructions

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Budget Management Executive Leadership

• Budget Technology Systems
• Position control system
• Budget development system
• Revenue and expenditure history projections
• What if budgets, request, governor recommended,
  and legislative budgets
  
• Presentation system narrative and statistics
• Database, control, and reporting system
• Systems Integration
• Accounting, Payroll, Personnel, Purchasing, etc.

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Budget Management Legislative Leadership

• Full time legislative fiscal office
• Strategic planning
• Performance management
• Program evaluation (may include legislative
  audit)
  
• Legislative financial history (by
  program/agency)
  
• Legislative political priorities
• Support legislative budget review and approval
  processes
  
• Legislative technologies

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Budgetary Controls

• Legislative appropriations or limitations
• Position controls on hiring
• Use of budgetary allotments
• Use of encumbrance accounting
• Other administrative cost controls
• Human Resources
• Travel
• Purchasing
• Printing

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Objectives of State Controllership

• Financial management systems
• Minimal investment maximum value
• Trusted financial information
• Compliance with national accounting standards
• Compliance with federal and state laws
• Support management decisions with sound business
  controls
  
• Balance cost, risk, and ethical values

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State ComptrollersSelection Process

• Elected by the People 14
• Appointed by Cabinet Head 16
• Appointed by the Governor 18
• Other 2

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Benefits of State Controllership

• Uniform excellence in financial management
  policies
  
• Consolidated investments in accounting and
  payroll
  
• Enhanced legal compliance and ability to deter
  fraud
  
• Improved support of elected officials
• Better administrative capacities of the state

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Controllership Technologies

• Central accounting systems
• Cash control and link to Treasury/Bank systems
• Accounts payable
• Project Grant Accounting
• Accounts Receivable
• Fixed Asset Controls
• Purchasing Encumbrance Control
• Uniform payroll system
• Data Warehouse

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Controllership Performance

• Financial data with high integrity, support
  decision making, and viewed as credible
  
• Timely external annual financial reports
  conforming to national standards
  
• Financial discipline and controls that support
  the business and protect all stakeholders
  
• Uniform access to financial data that enhances
  capacity to implement key policies
  
• Cost effective systems that protect state
  information and meet international control
  standards
  

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State TreasurersSelection Process

• Elected by the People 37
• Elected by the Legislature 4
• Appointed by the Governor 6
• Duties Held by other Officials 4
• Includes District of Columbia

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State Treasurers Responsibilities

• Cash Management 50
• Banking Services 49
• Unclaimed Property 31
• Investment of Retirement/Trust Funds 29
• Management of Compensation 29
• Bond Issuance 28
• Debt Service 27
• Arbitrage Rebate 25
• Deferred Bonded Debt 11
• Archives Disbursement of Document 6

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Treasury Management

• Major Function Areas of Treasury Management
• Cash Management
• Banking Services
• Unclaimed Property
• Investment of Retirement/Trust Funds

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Cash Management

• Maximize Investments
• Ensure bank balance is maintained near minimum
  average
  
• Monitor local accounts for balance maintenance
  and investment (Sweep Accounts)
  
• Fund Management
• Account Reconciliation (Zero Errors)
• Cash Concentration (Lower Fees)
• New Technologies
• Check 21 Eliminate float and loss exposure,
  create efficiencies and savings

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Banking Services

• Credit Card Services
• ACH/ Wire Services
• College Savings Plan (529)
• Banking Contracts
• Daily Deposits
• Public Deposits
• Collateralization (Securities, Letter of Credit,
  Surety Bonds)

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Unclaimed Property

• The Countries Premier Public Protection Program
• Collect Escheated Property Under State Unclaimed
  Property Laws
  
• Return Unclaimed Property to the Rightful Owners

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Taxes-Revenues Where Do We Get the Money?
55
16
15
11
3
Video Lottery/ Telecom Tax
One Time Receipts and Transfers From Reserves
Contractors Excise Tax, Insurance Company Tax
and Bank Franchise Tax
Sales and Use Tax
Other Continuing Receipts
South Dakota Budget 2,907,015,129
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What your tax dollar pays for
52
30
10
8
Social/Human Svcs Programs Medicaid/care State
Hospital
TANF
Protecting the Public DOC UJS HP
The rest of State Govt 13 Depts 4 Bureaus L
egislature
Governor
Education K-12 Higher Ed. Tech Schools
South Dakota Budget 2,907,015,129
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State Auditor Roles and Responsibilities

• Internal Auditing (not independent)
• Focus is on reporting internally to management
• External Auditing (independent)
• Focus is on reporting to third parties outside
  the audited entity
  
• Governments typically have internal auditors and
  an external auditor
  

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State AuditorsSelection Process

• Elected by the People 19
• Appointed by Legislature 28
• Appointed by the Governor 4
• Other 2
• Includes Guam
• Includes Puerto Rico

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Types of Engagements

• Financial Audits
• Attestation Engagements
• Performance Audits
• Nonaudit Services

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Financial Audits

• Financial
• Includes financial statement audits (GAAP and
  OCBOA)
  
• Others include
• Providing special reports for elements, accounts,
  or items of a financial statement
  
• Reviewing interim financial information
• Reporting on service organizations

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Attestation Engagements

• Attestation Engagements
• Examining, reviewing or performing agreed-upon
  procedures on a subject matter or assertion
  
• Can cover a broad range of financial and
  nonfinancial subjects including
  
• Internal control over financial reporting
• Compliance with laws and regulations
• Reliability of performance measures

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Performance Audits

• Performance Audits
• Objective, systematic examination to provide an
  independent assessment against objective
  criteria
  
• Encompass a wide variety of objectives
• Program effectiveness and results
• Economy and efficiency
• Prospective analysis

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Nonaudit Services

• Auditors may
• Perform tasks requested by management that
  directly support the entitys operations, or
  
• Provide information or data without providing
  verification, analysis, or evaluation
  
• May or may not result in the issuance of a
  report
  
• Synonymous with consulting services

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Compliance Auditing

• Important in government accounting and auditing
• Accounting
• Financial statement auditing
• Performance auditing

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Audits of Federal Grants

• Single Audits
• organization-wide basis vs. grant-by-grant basis
• Any nonfederal entity that expends 500,000 or
  more a year in federal awards
  
• Audit of the financial statements and the
  schedule of federal awards
  
• For each major program
• obtain an understanding of internal controls
  pertaining to the compliance requirements
  
• assess control risk and perform tests of controls
  (low assessed control risk)
  
• determine compliance with laws and regulations

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Distribution of Federal Grants
2003 US BUDGET - 2.1 TRILLION GRANTS- 400
BILLION
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Steep Rise in Federal Grants
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Professional Standards

• Accounting principles
• Financial Accounting Foundation
• Financial Accounting Standards Board (private
  sector)
  
• www.fasb.org
• Governmental Accounting Standards Board (public
  sector)
  
• www.gasb.org

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Professional Standards

• Auditing Standards
• For Governments and Other Non-Publicly Traded
  Entities
  
• Government Auditing Standards (the Yellow Book)
  published by the U.S. Government Accountability
  Office
  
• www.gao.gov/govaud/ybk01.htm
• Statements on Auditing Standards published by the
  American Institute of Certified Public
  Accountants
  
• www.aicpa.org
• For Publicly Traded Companies
• Public Company Accounting Oversight Board
• www.pcaobus.org

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Other Requirements

• Circulars promulgated by the U.S. Office of
  Management and Budget
  
• OMB Circular A-133
• Audits of States, Local Governments, and
  Non-Profit Organizations
  
• OMB Circular A-87
• Cost Principles for State, Local and Indian
  Tribal Governments

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Questions?