August 7, 2007Federal agencies have made incremental progress in improving their financial management systems, but most remain unable to routinely produce reliable, timely and useful financial information needed for day-to-day management, according to a new report by congressional auditors.
The Government Accountability Office found that 17 agencies failed to comply with at least one aspect of the 1996 Federal Financial Management Improvement Act. The law requires that the 24 agencies covered by the 1990 Chief Financial Officers Act implement and maintain financial management systems that comply with federal guidelines, applicable accounting standards and the U.S. Government Standard General Ledger.
"Addressing the problems with agencies' financial management systems remains a significant challenge to improved financial management in the federal government," the report (GAO-07-914) stated. "This problem is particularly severe at the Department of Defense. Many agencies are still a long way from accomplishing the goals of the CFO Act of 1990 and FFMIA."
Auditors identified six major recurring problems: financial management systems that are not integrated, inadequate reconciliation procedures, inaccurate and untimely recording of data, noncompliance with the general ledger, failure to adhere to federal accounting standards and poor security of information systems.
The deficiencies cited by auditors were nearly identical to those found in a similar report last year. That report found that 18 agencies were out of compliance with financial laws.
The new report said that the State Department's financial and accounting systems are inadequate, "preventing the department from routinely issuing timely financial statements and increasing the risk of materially misstating financial information." Meanwhile, auditors found that nearly all the information systems at the Nuclear Regulatory Commission lacked certification and accreditation, making them vulnerable to inadvertent or deliberate misuse.
Five of the 17 agencies that auditors said failed to conform to the law disputed the findings, claiming their systems were "substantially compliant" with requirements. The remaining 12 agencies have submitted remediation plans to correct the problems.
Auditors found that six agencies fulfilled the law's requirements. A seventh -- the U.S. Agency for International Development -- provided "positive assurance" (an opinion based on the nature and extent of the audit work performed) that its systems were operating within the boundaries of the law.
Nonetheless, GAO remained skeptical, arguing that the reporting guidelines set by the Office of Management and Budget are unnecessarily vague and can be interpreted incorrectly. GAO would prefer that all agencies submit a statement of positive assurance, but OMB said the President's Management Agenda already includes sufficient tools to help agencies identify and correct FFMIA shortcomings.
"As a result, we believe that requiring a statement of positive assurance would be costly and would not provide additional information that would be of benefit to the federal agency, OMB, or the taxpayer," OMB Controller Linda Combs wrote in a response to the report.
Rather than offering any new recommendations, GAO will host a forum later this year on the impediments federal managers face in bringing their agencies into compliance with the requirements of the law. Chief financial officers, members of the inspectors general community, top OMB officials, congressional staffers and financial management experts from the private sector are expected to attend.
August 7, 2007