Watchdog boosts government’s financial grade to a C-

The government has failed its fourth consecutive annual audit, but agencies are making some progress in getting their finances in order, according to a watchdog's annual financial report card.

Rep. Stephen Horn, R-Calif., issued grades on Friday to each of the government's 24 largest agencies, which were required to submit audited financial statements to Congress last month. Overall, the government received a C- for its fiscal 2000 audit, a slight improvement over its fiscal 1999 grade of D+.

At a hearing before Horn's House Government Reform Subcommittee on Government Efficiency, Comptroller General David Walker testified that the government's overall financial statements for fiscal 2000 were too unreliable to receive a clean bill of health.

Walker said longstanding financial management problems at the departments of Defense and Agriculture, coupled with computer security weaknesses at many agencies, contributed to the government's failure to receive an unqualified opinion. An unqualified audit opinion means financial information is reliable.

For the first time, all agencies this year met the March 1 deadline for submitting their audits, and 18 of the 24 largest agencies received clean opinions on their financial statements. Despite the progress, Walker said most agencies that received unqualified opinions did so only through "heroic efforts." He said such efforts are meaningless if they fail to address underlying financial management weaknesses.

"In such a case, an unqualified opinion would become an accomplishment without much substance," said Walker. "We need a substantive victory, not a superficial one."

Three agencies received A's, including the Small Business Administration, which had earned a D+ for its fiscal 1999 audit. The Office of Personnel Management also showed progress, receiving a B- for its fiscal 2000 financial statement after flunking its 1999 audit.

Defense, Agriculture, and the Agency for International Development all failed Horn's report card for the fourth consecutive year.

Walker and Horn urged the Office of Management and Budget to emphasize management and accountability, and take the lead in helping agencies focus on strategic planning, financial management, information technology and human capital.

OMB Director Mitchell Daniels acknowledged that most past administrations neglected OMB's management responsibilities, and attributed that attitude to a chaotic and never-ending budget process that has spun out-of-control.

"I think management gets crowded out of the agenda because the budget devours so much of everyone's time. President Bush wants a more orderly budget process, and if that happens, I think it would have a major impact on freeing up our time to work on management issues," said Daniels.

Rep. Horn's Financial Management Status Report