Homeland Security takes steps to fix financial problems

By the end of the month, financial managers at the Department of Homeland Security agencies will finalize plans for resolving seven major accounting problems identified by auditors, the department's chief financial officer said last week.

In the past year, Homeland Security addressed nine inherited financial weaknesses, leaving seven areas for further attention. Agency officials will have to notify the chief financial officer by March 31 on how they intend to fix these remaining issues. Department officials then will hold quarterly meetings with agency managers to track progress at resolving the weaknesses, CFO Andrew Maner said at a congressional hearing.

Problems still on the table include an inability to keep accurate inventories of Coast Guard property and equipment, a lack of standard financial reporting procedures across the department, insufficient records of pension benefits owed certain Secret Service employees and retirees, and an inability to verify that records of money transferred to the department are accurate and complete.

The Coast Guard's inventories came under particular scrutiny during last year's audit, because that agency is larger than others in Homeland Security, according to a report by Clark Kent Ervin, DHS' inspector general. The Coast Guard is in the process of switching to another accounting system, making its financial reporting process particularly complex, Ervin noted.

Homeland Security officials already have started addressing some of the other problems identified by auditors, Maner said. For instance, the CFO's office is writing standard operating procedures for financial reporting and expects to complete them this spring. The procedures will draw from procedures in place at agencies within Homeland Security, he said.

Law requires the 23 agencies covered by the 1990 Chief Financial Officers Act to produce accurate, timely financial information that managers can use in making budget and policy decisions. General Accounting Office officials have repeatedly urged federal agencies to focus on addressing financial management weaknesses rather than simply striving for clean audit opinions. Though 20 of 23 CFO Act agencies received clean audit opinions in fiscal 2003, all but three either reported financial management weaknesses or failed to comply with a financial management law.

Homeland Security is not one of the 23 CFO Act agencies, but is voluntarily complying with some of the act's requirements. The department submitted fiscal 2003 financial statements to the Office of Management and Budget by mid-February 2004, roughly two weeks after the Feb. 1 deadline for CFO Act agencies.

Treasury Department officials and Ervin praised Homeland Security for submitting the materials promptly and earning a "qualified" opinion-the level just below a clean opinion-on two segments of the audit. In its first year, Homeland Security also started the process of consolidating 19 disparate accounting offices, Maner said.