"Reinventing government" report mandates credible accounting standards for federal agencies, better tax administration.

The report issued by Vice-President Al Gore's National Performance Review panel offers a series of initiatives for "reinventing government" at the federal level, including proposals to implement fully the 1990 Chief Financial Officers Act and to establish "credible" accounting standards for government aganeies--moves strongly backed by the American Institute of CPAs. The report also includes recommendations to reduce costs and improve the efficiency of the Internal Revenue Service's tax administration.

The panel's 172-page report, From Red Tape to Results: Creating a Government That Works Better & Costs Less, aims to make the federal bureaucracy more efficient and to generate savings of $108 billion over the next five years by improving federal financial management, streamlining executive branch agencies and cutting down on redundant and counterproductive regulations. (To order copies of the report, call the Executive Office of the President, Publications Services, at [phone].)

CFOs for federal agencies.

Among its specific recommendations, the report calls for putting the 1990 Chief Financial Officers Act on the fast track. An AICPA task force played a key role in developing and passing the legislation, which requires the appointment of CFOs at 23 major federal agencies. But to date, the law largely has been ignored.

The report promises "the executive branch will create a coherent financial management system, clarify responsibilities and raise the standards for financial officers." It includes a timetable for appointing the CFOs, who then will form an intergovernmental CFO Council.

According to Joseph Moraglio, AICPA vice-president--federal government, Washington has been "way behind the times" in this area. "We're in favor of the whole concept of reinventing government," Moraglio said, especially "putting in highly qualified financial managers who are not caught up in red tape and bureaucratic requirements, but who are able to function as good CFOs and do what's needed."

Moraglio also praised the idea of a CFO Council, which would allow agency CFOs to share ideas and develop uniform procedures, and called on the administration to appoint a new head for the Office of Federal Financial Management. The position has been vacant since the departure of Bush-appointee Ed Mazur.

Moraglio said most of these changes could be enacted quickly without congressional action.

Credible accounting standards. According to the National Performance Review report, "If a publicly traded corporation kept its books the way the federal government does, the Securities and Exchange Commission would close it down immediately." The report cites conflicting accounting procedures and finds current budget and accounting practices actively prevent managers from cutting waste and increasing productivity.

The report also notes scant progress has been made by the Federal Accounting Standards Advisory Board (FASAB), which was created in 1990 to develop accounting standards for the Treasury Department, the Office of Management and Budget and the General Accounting Office.

To speed things along, the report mandates that FASAB be given an 18-month deadline to release new standards. If it fails, it will be replaced by a board with greater powers.

"I don't necessarily agree that if they can't finish in 18 months they should be thrown out and we should start all over," Moraglio said, "but if you take it as an encouragement to get standards issued sooner, that's fine."

Other accounting and reporting recommendations in thB plan call on the government to

* Issue an annual "report card" on the government's financial condition that will supplement more detailed audited financial statements, scheduled to be prepared starting in 1997.

* Fully integrate budget, financial and program information among all federal agencies by September 1996.

* "Franchise" certain internal accounting and administrative services by encouraging agencies to contract out payroll chores and bookkeeping to other agencies.

Tax penalties as revenue raisers. However, at least one of the panel's proposals regarding the tax system is raising somB eyebrows. According to the report, over the 1994-99 period $126 million in additional receipts could be raised by adjusting monetary penalties--including tax penalties--to the inflation index. A catch-up adjustment would be made, followed by additional inflation adjustments every four years.

But according to Harvey L. Coustan, a partner of Ernst & Young in Chicago and chairman of the AICPA tax executive committee, "Penalties are meant not to raise revenue but, rather, to encourage compliance."

If tax penalties are used so openly to raise revenue, said Coustan, the basic motivation for having penalties in the tax code will become obscure, "and that's just inappropriate." He cautioned that no such change should be considered without significant input from the AICPA and the American Bar Association tax section.

Privatizing collection. Another tax administration initiative, however, won Coustan's support: permitting federal agencies to employ private collection agencies to collect debt.

Other tax-related proposals in the report also were hailed by tax practioners, including recommendations to

* Vigorously support IRS efforts under the Compliance 2000 initiative to improve voluntary compliance and to collect taxes already owed to the federal government. According to the report, a 1% increase in voluntary compliance with tax laws would provide $7 billion more in government revenue each year.

* Expand pilot projects across the country that allow IRS employees to improve productivity by changing work processes on their own. Front-line workers would receive more authority to resolve issues one-on-one with individual taxpayers, and competition would be fostered among tax return centers to improve customer service levels. Centers that performed better would receive higher budgets and work loads, and their employees would be given more promotion opportunities.

* Endorse the tax system's modernization initiative, a program to ease burdens taxpayer encounter due to manual return processing and inaccessible information, and provide a level of service comparable to that of private-sector financial institutions.

* Urge Congress to pass legislation allowing taxpayers to pay their tax bills using credit cards.

* Simplify wage reporting by employers.

* Foster federal-state cooperative information-reporting initiatives by the IRS.

* Improve federal agencies' compliance with employment tax reporting requirements.

* Repeal Internal Revenue Code section 5010, which provides a tax credit for wine content and for distilled spirits' flavor content. Such a repeal would save approximately $500 million over five years.

* Amend or repeal section 5121, which requires special occupational taxes on alcohol retailers.