Federal government fails fifth straight audit

Although 18 of the 24 agencies covered by the 1990 Chief Financial Officers Act received a clean opinion on their fiscal 2001 audits, the government received a disclaimer on its overall financial statement because of persistent financial weaknesses at the Defense Department and poor accounting of interagency transactions. Outdated information systems and bureaucratic turf battles continue to hold up financial management reforms at the Defense Department, Walker said.

"Cultural resistance to change and military service parochialism have played a significant role in impeding previous attempts to implement broad-based management reforms at the Defense Department," wrote Walker in a cover letter to the audit. Defense financial management has been on the General Accounting Office's "high-risk" list of management challenges since 1995.

Timely and accurate financial statements are a top goal of the Office of Management and Budget, which is pressing agencies to speed up their audits so the information can help inform budgeting decisions. This year, all 24 agencies met a Feb. 27 deadline for submitting their audited financial statements to OMB. The audit deadline will be Feb. 1 for fiscal 2002 and 2003 audits, and OMB will ask for fiscal 2004 financial statements by mid-November 2004--just 45 days after the close of the fiscal year.

The new audit deadlines should allow GAO to complete the governmentwide audit earlier and enable OMB and the Treasury Department to issue its governmentwide financial statement shortly after the fiscal year ends. "We are not satisfied with the publication of this report six months after the end of the fiscal year," said OMB Controller Mark Everson.

Agencies must also improve compliance with the 1996 Federal Financial Management Improvement Act to pass muster with OMB. Twenty of the 24 agencies covered by the CFO Act did not fully comply with the law in fiscal 2001, according to Walker. The act requires agencies to meet federal accounting standards and to comply with the government's standard general ledger at the level of transactions.

Everson, Walker, Treasury Secretary Paul O'Neill and Office of Personnel Management Director Kay Coles James are now meeting regularly to discuss financial management reform. OMB has also added more private sector officials to the Federal Accounting Standards Advisory Board, which sets accounting standards for the government, in a move that officials hope will lead to tougher financial standards.