Easing financial reporting

The failure of many agencies to receive a clean audit statement this month

has not — necessarily — been the lack of improvement to their financial

information systems.

One of the requirements of the commercial off-the-shelf financial software

approved for federal use is to automate the production of financial statements.

Automating this process should help agencies create annual audited financial

statements, according to government officials and analysts.

Because the software allows agencies to integrate financial management

solutions used to track accounts used for personnel, payroll, budget, expenses

and sales, "you'll be able to produce financial statements quite quickly,"

said David Kleinberg, deputy chief financial officer at the Transportation

Department.

Agencies are required by the Chief Financial Officers Act of 1990 to

produce an annual financial statement for the previous fiscal year and have

it evaluated by their inspectors general by March 1. Only 11 of 24 major

federal agencies received clean opinions from their inspectors general on

their fiscal 1999 financial statements, according to information released

this month by the Senate Governmental Affairs Committee. The Transportation

Department is expected to receive a clean audit, bringing the total number

of agencies with a complete financial statement to 12.

Congress plans to hold hearings this month to examine the financial

accounting practices at each agency as well as governmentwide issues related

to financial accountability. Agency officials say a consolidated governmentwide

financial statement due by the end of this month will be complete.

The Office of Management and Budget originally set a goal of having

21 of 24 agencies receive clean opinions about their financial statements,

according to the June 1999 Federal Financial Management Status Report and

Five-Year Plan. On Feb. 7, OMB revised its goal to 18 clean opinions.

The Federal Financial Management Improvement Act of 1996 requires each agency

to install and maintain systems that comply with federal financial management

system requirements, applicable federal accounting standards and the U.S.

Government Standards General Ledger. OMB Circular A-127 also requires each

agency to establish and maintain a single, integrated financial management

system.

Joshua Gotbaum, OMB executive associate director and controller, said

last month that agencies' priorities include continuing to upgrade financial

management systems with commercial technology, developing performance measures,

installing financial tracking systems and integrating performance and results

information.

"The next generation of financial systems that will be available to

federal agencies will solve a lot of the problems that have haunted federal

financial officials for decades," said Warren Suss, a federal market analyst.

New systems will pull together financial and administrative information

throughout the enterprise, and financial statements will be immediately

linked into the financial side of the system, according to Suss. The commercial

market is turning its attention to the federal niche, he said.

Several agencies are integrating new financial management and human

resources systems, including the departments of Veterans Affairs, Treasury,

Interior, Energy, and NASA and the General Services Administration. DOT,

which was late in having its statement evaluated by its inspector general,

will start installing the Oracle Corp. financial application suite in mid-April

and expects it to be operational departmentwide by September 2001, Kleinberg

said.

"The basic purpose for upgrading our accounting systems is for the regular

things, but it also gives you the financial statements in a nice and clean

way," he said.

Government officials acknowledged that new, integrated financial management

software systems will make producing the annual financial statements easier

but did not blame difficulty producing accurate or timely statements this

year on agencies' lack of automated financial systems.

"The IG just didn't start the audit on time," said Bert Edwards, CFO

at the State Department. "We've always had a late start. This year it's

April. The year before was August. The year before was October. I think

next year we'll be timely."

For the fiscal 2000 financial statements, the CFO Council hopes to have

clean reports from all major agencies, Edwards said.

The results of the audits carry some weight in determining the condition

of government agencies' records systems, said Patrick Smith, executive director

of GSA's Financial Management System Service Center.

Some legacy financial systems do not meet modern requirements for integrated

cost accounting systems, yet they produce clean reports every year, Smith

said.

New systems will focus on the end results and will support planning

decisions, he said. The Government Performance and Results Act requires

that type of planning.

"We should be able to tell Congress what we're spending, how we're spending

it and what we're getting for it," Smith said.