Today the Financial Report of the United States Government is eagerly anticipated and highly valued. Required by law and the subject of annual congressional hearings, it is a major product of the Financial Management Service (Treasury) and substantial resources are directed to preparing it. This focus on the report is new although the idea of preparing governmentwide statements has been around a long time.
It all began with an article entitled "An Annual Report for the Federal Government" by Carol Loomis for Fortune Magazine in 1973. Chairman Harvey Kapnick of Arthur Andersen & Co. noticed the article and decided to prepare and publish Consolidated Financial Statements of the United States Government (CFS) as a publicity project. AA & Co. partner Chuck Bowsher (later Comptroller General of the United States) was put in charge of the project. Mr. Bowsher had been Assistant Secretary of the Navy for Financial Management before returning to AA & Co. and was aware of agency reports that could be used to prepare a CFS. On September 10, 1975, under the direction of Mr. Bowsher, AA & Co. published a CFS for fiscal years 1973 and 1974 (the fiscal years ended on June 30 at that time). Mr. Kapnick knew Treasury Secretary William Simon and convinced Secretary Simon that the Department of the Treasury should follow the lead of AA & Co. and produce a CFS.
On December 8, 1975 Secretary Simon approved a plan that called for the development and publication of a CFS on an accrual basis. That decision by Secretary Simon was carried out by Treasury's Fiscal Assistant Secretary David Mosso (now Chairman of the Federal Accounting Standards Advisory Board) using the resources of the Financial Management Service (then the Bureau of Government Financial Operations). FMS Deputy Commissioner Gerald Murphy (later Fiscal Assistant Secretary) along with Director Irvin Faunce and Assistant Director Michael Smokovich of the Government Accounting Systems Staff (both later Deputy Commissioners of FMS) were tasked with making the Treasury CFS a reality.
An Advisory Committee on Federal Consolidated Financial Statements chaired by Mr. Kapnick was established to provide expertise, counsel, and varied views necessary to develop statements that are responsive to divergent user perspectives. The committee sponsor was Fiscal Assistant Secretary David Mosso and the 15 members of the committee included Comptroller General Elmer Staats; the former Director of the Bureau of the Budget and soon to be Chairman of the President's Council of Economic Advisers Charles Schultze; the Senior Partner of Price Waterhouse & Co. John Biegler; and other prominent leaders in the academic community, the accounting profession, and the world of business. The Advisory Committee held its first meeting on May 25, 1976. Secretary Simon attended the meeting and provided a keynote address. Carol Loomis who began the process with her Fortune Magazine article and who was now a member of the Advisory Committee noted that she had initially proposed her idea for the article in 1965 but her managing editor didn't think anybody cared. The Advisory Committee met several times during 1976 and 1977. Task groups were formed to address conceptual issues and presentations were made at the Advisory Committee meetings.
While the Advisory Committee was addressing conceptual issues, a project team of six FMS employees (Chuck White, Bob Geida, Bill Patriarca, Bill McMillen, Stan Ginsberg, and Allan Lund) supervised by Assistant Director Michael Smokovich was busy determining a way to prepare a CFS even while providing extensive support to the Advisory Committee. The first step was to obtain the AA & Co. work papers for copying and this was accomplished in early 1976. The copied work papers were translated into operating procedures for the team to use to prepare a CFS. Team members were authorized unlimited paid overtime so that the goal of publishing the first prototype CFS could be accomplished by October 1976. Fiscal Assistant Secretary David Mosso indicated that the first prototype would: (1) focus on major items; (2) be limited to actual results of operations in order to minimize competition with the budget; (3) be accomplished with existing staff; and, (4) be deemed acceptable although less than perfect.
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