GFOA (Government Financial Officers Association) publishes criteria for awards that it uses as a means of enticing government agencies and their financial officers to improve the caliber of financial reports. In the private sector, consistency and usefulness in financial statements is enforced through different accounting standards that are set by a body and to which all publicly-traded companies must adhere. There is no government equivalent with respect to financial reporting. The GFOA awards are one of the only means by which some consistency in government reporting is done. The awards approach the issue in terms of defining best practices that the government agencies can use in their financial reporting. In order to analyze according to the GFOA criteria, the budget for the U.S. Department of Agriculture will used, as this was the basis for a prior budget analysis. Background

The call for more consistency and higher quality in government budget documents arose in the 1990s. The high degree of variance in the quality of government budgets was failing to meet the needs of the relevant stakeholders. There are many different stakeholders for government budgets, both internal and external. There was no conceivable means by which consistency could be externally enforced, so the solution was created to generate some internal comparables -- best practices -- and a set of criteria against which budgets could be evaluated. This would at the very least provide governments with an understanding of the things that a budget document should contain (Lehan, 1996). By setting standards and positive examples, the GFOA sought to improve the quality of public budgets, and raise the bar for professionalism of governments both large and small (Rivenbark & Allison, 2003).

Today, budget documents have improved as a result of these efforts. In some cases, public budget documents are marketing tools, a means by which valuable information about government activity can be communicated to external stakeholders, in particular the voters (Zavattaro, 2013).

Specific Type of Budget Document

This is an operating budget. It is produced annually, which is one of the definitions of an operating budget, and is intended to show the inflows and outflows associated with the agency's operations for the coming fiscal year.

The GFOA Criteria and the 2016 Budget from the USDA

The USDA's 140-page budget document contains the many of the essential elements of the GFOA budget, but not all. One of the interesting things about the GFOA technique is that it argues that a budget should contain an explanation of the organization, its background and its missions. This creates an orientation in the agency to manage by objectives -- it needs to show stakeholders that specific monies have helped it to achieve specific objectives (Holliman & Bouchard, 2015). So the budgeting method is ultimately tied into the management style, and the degree to which an agency adheres to GFOA prescriptions may be reflect to some degree its management style.

The opening pages of the USDA's budget document highlight what the organization is, how it is structured, what its mission statement is and what its vision statement is. The document explains that there are several different missions within the USDA, and the agency is organized around these missions. Within any given mission, there might by multiple individual units or agencies working. The major missions and mandates of the USDA are farm and foreign agricultural services, rural development; food, nutrition and human services; food safety and a couple of others. The way that the USDA works is explained both in terms of its missions and in terms of these major agencies. Explaining the USDA a couple of different ways allows for better understanding by all stakeholders about the organization.

The USDA 2016 budget contains the mandatory elements such as a table of contents and page numbers. As noted, the document also contains the strategies, including non-financial goals. There is no specific section for "short-term factors" but these are discussed individually for each mission/agency in the appropriate section. Within the document there is sufficient information to understand what the major short-term issues are that the agency is dealing with. For example, on page 10 there is mention of efforts in the short run to prevent foodborne illness, which is one of the major mandates of the USDA. These efforts will affect the budgeting process, because they may represent temporary spending increases to help the agency achieve a specific budgetary goal.

The budget priorities are included in the budget document. These are outlined in terms of the missions and mandates...

Thus, new expenditures are explained in the context of the USDA's spending priorities for the coming fiscal year. There is also explanation within each relevant section as to what the priorities are for specific USDA mission categories. The information may not be particularly easy to access but it is there within this document when the full text is analyzed.
There is only a limited discussion about the trends that go into the budget. The word trends is only used a couple of times in the document, and assumptions are not always outlined either. This appears to be a weak spot for the document, in that the logic that underlies the budget numbers, and the forecasts, is not always explained within the document. Greater transparency with respect to assumptions would be valuable.

This document does not contain an organizational chart. In past years, such as 2014, an organizational chart was included in this document, so the 2016 document represents a step backwards in that respect. The sections explaining the different departments within the USDA are also thinner on detail than in the 2014 document. There is adequate description, however, of the financial structure of the organization, including a breakdown of which expenses are mandatory and which ones are discretionary, which is typically an important element of a U.S. federal budget. While there is no illustration for the relationship between different departments and funds, the relationships are described. Each department has its own dedicated section of the document that discusses the programs and finances of that department. This provides sufficient transparency.

Another element that GFOA likes to see is an explanation of the basis of budgeting. That is not present in this document. The budgets are presented, and there is ample discussion of the different strategic decisions that have led to the change in the budget line items, but there is no segregated discussion as to the methodology that was used for the preparation of the budget. It can be inferred that the budget is created using cash budgeting. There do not appear to be line items that reflect accrual accounting. The financial statements are created using modified accrual techniques, reflecting mainly cash-basis but with the ability for the organization to have depreciation and other non-cash items. However, this document does not contain audited financial statements. The 2014 document did contain those statements, and a full copy of the auditor's report, so that is something that is missing from the 2016 document that would have provided greater value and context.

There is no statement of financial policies, either in one place or scattered throughout. No definition of balanced budget is provided either. The 2016 USDA budget document does not meet in anyway the criteria set out by GFOA for a distinguished budget. The budget process is also not outlined anywhere in the document. The document therefore does not meet GFOA criteria with respect to Budget Process.

As noted, in prior years financial statements were provided with this document that outlined the financial structure but those are not provided, either at an agency level or at the aggregate level, in the 2016 document. This is again something that fails to meet the criteria for the consolidated financial structure. The three-four-year financial structures are also not provided. Two years of historical data (2014 and 2015) are provided, along with the budget for the 2016 fiscal year, but there are no budget projections beyond that. The outlays are explained, but the fund balance is not. This leaves the question of where revenues for each agency come from. There is some information about the budget authority that funds the USDA, as well as user fees, but the reader is left to piece this information together. There are no quantitative performance measures listed, but there is qualitative discussion of performance, and this is done both at the USDA level and at the individual agency level, so there is enough information for stakeholders to evaluate performance. There is a glossary, and there are a number of charts that are used to convey information, in particular pie charts and bar graphs from which trends can be extrapolated.

Arguably, the layout of this document renders it difficult to follow. The pages are formatted consistently, but the main sectors are counterintuitive. A readable structure would start at the organizational level, and then provide in individual chapters an outline of each agency. This report is structured along the lines of outlays, budget authority, etc. by agency, which makes it more difficult to get a feel for the finances and performance of each agency individually.…