Hill looks at agencies' audits

Just two weeks after a scathing, first-of-its-kind audit of the government's consolidated financial statement revealed billions of dollars in discrepancies, the House last week began a series of hearings to delve into agencies' information mismanagement.

The House Government Management, Information and Technology Subcommittee started digging into the financial practices and information systems of three agencies: the Defense Department, the Internal Revenue Service and the Social Security Administration.

The subcommittee plans to call before it other agencies, including the Health Care Financing Administration and the Treasury Department, over the next couple of months to examine how they are managing financial statements, which were first required by the Government Management Reform Act of 1994. The subcommittee also plans to examine information management and financial management issues with upcoming hearings on the Clinger-Cohen Act and the Inspector General Act.

One of the first agencies called was DOD, which is at the center of the debate because it receives a large portion of the $1.7 trillion the federal government spends annually and because its accounting statement was one of the worst, according to the General Accounting Office, which conducted the audit.

Gene Dodaro, assistant comptroller general at GAO, told the subcommittee that the lack of sound accounting information at DOD was the "largest single obstacle" to issuing an unqualified opinion on the consolidated statement.

Rep. Dennis Kucinich (D-Ohio) said the poor condition of financial and logistical information in DOD systems is a potential threat to national security. "It really raises some questions about the national defense and how safe we [are]," Kucinich said. "We have a system of checks and balances. We're helping to write the checks here in Congress. The DOD doesn't know what the balance is."

David Warren, director of Defense management at GAO, confirmed for Kucinich that the CIA has been helping investigate discrepancies in information on DOD assets. Kucinich said CIA involvement implied that DOD's inability to accurately track equipment could indicate that weapons have landed in the hands of foreign groups that are "unfriendly" to the United States.

But Nelson Toye, DOD deputy chief financial officer, told the subcommittee that DOD has firm control of the location of its equipment— from machine guns to computers to missile launchers.

"Despite the impression that might have been created, the department does have control of its assets...and the department does have the information that it needs to make sound business decisions," Toye said.

Toye admitted, however, that there are problems with maintaining and sharing consistent information on DOD assets. "What it means is that there's a documentation problem," said Toye, explaining that it is similar to a car owner who knows where his car is but still cannot find his vehicle registration.

Part of the reason for the poor records in DOD's financial and accounting systems is the patchwork of electronic- and paper-based methods for tracking DOD assets, Toye said. Problems emerge when one system cannot communicate with another or when data has to be keyed in, which increases the possibility of human errors.

To track equipment better, DOD recently began a program of marking some equipment with electronically readable identification tags that when scanned can feed information into databases without need for manual data entry, said Eleanor Spector, DOD's procurement director.

DOD's testimony came one day after the subcommittee began digging into the financial management of the IRS, an agency that has received a "clean," or favorable, audit opinion from GAO and the IRS inspector general.

IRS Commissioner Charles Rossotti, however, said the opinion is not good enough. "Receiving an unqualified opinion does not resolve some of the serious technology problems related to tax systems," Rossotti said.

GAO's Dodaro said the IRS needs to continue to improve the security over its computer systems and to make sure its systems development efforts begin "to provide the type of requirements for its revenue accounting system and its accounts receivable areas that are going to be able to generate the type of timely information it needs to provide customer service and to begin collecting taxes that are owed earlier in the process."

Comments ran along a similar vein Friday when the subcommittee heard testimony on SSA's financials, which received a clean audit.

John Dyer, acting principal deputy commissioner of SSA, said the agency's ability to track much of its financial activities is due to SSA's development of the Executive and Management Information System. EMIS, which is used as a springboard for making business decisions, tracks current-year workload processing against stated goals and prior-year processing levels for many SSA workloads, such as disability claims.