Horn Flunks Financial Reports

The federal government failed in its first attempt at creating a consolidated financial statement, Rep. Stephen Horn, R-Calif., said Wednesday.

Horn, chairman of the House Government Reform and Oversight Subcommittee on Government Management, Information and Technology, gave agencies poor marks on their financial management efforts, issuing low grades to all but seven of the 24 agencies required to submit financial statements under the 1994 Government Management Reform Act. The General Accounting Office and agencies' inspectors general audited the agencies' financial statements and gave "unqualified opinions" (meaning that they judged the statements to be reliable) on eight agencies' statements.

Horn noted that this is the first year the government had to try to account for all of its assets, liabilities and costs.

"With this governmentwide audit, we know more about how much money is being wasted, where it is being wasted and what can be done about it," Horn said at a hearing Wednesday. "For the first time, a concise accounting for the myriad problems faced by the federal government is available."

Treasury and Office of Management and Budget officials acknowledged that agencies still have much work ahead of them.

"We knew from the beginning that this massive undertaking could not be completed in its first year, nor in its second year," said G. Edward DeSeve, acting deputy director for management at OMB. "But we expected to see improvements each year in the accuracy, reliability and timeliness of agency financial statements. We have seen that progress."

The federal government hopes to receive an unqualified opinion on its overall financial statements for fiscal 1999. DeSeve noted that 23 of the 24 major agencies expect to get clean opinions on their statements by fiscal 2000. Only the Defense Department will take longer.

Pentagon spokesman Ken Bacon said Tuesday that the department recognizes it needs to improve its accounting, including asset management. Sen. Fred Thompson, R-Tenn., criticized the Pentagon for losing track of several large pieces of equipment, including a missile launcher.

"We know we could do a better job of keeping track of the millions and millions of pieces of equipment we have spread all around the world," Bacon said. "I believe that many of the pieces of equipment that the auditors may have classified as being lost may actually be in transit or have arrived some place before the paperwork arrived back in the green eyeshade accountants' offices here in Washington for tracking."

GAO noted in its audit that none of the military services received a clean opinion on their financial statements. But Bacon defended DoD's efforts, saying it takes time to change the way things are done across the sprawling department.

"We are trying to find the balance of meeting these new standards as quickly and as effectively as possible without making every soldier turn in his helmet for a green eyeshade," Bacon said. "That's one of the reasons it's taking us some time, but we will do better on this next year than we've done this year, and we'll do better the year after that than we did next year."

Horn's grades for agencies, along with the status of GAO's opinion on agencies' financial statements, are listed below.

Horn's GMRA Financial Management Status Report