Financial management earns C-minus

Financial Management Status Report

Despite improvements to federal financial management systems in recent years, government still received only a C-minus on Rep. Stephen Horn's report card for fiscal 2000.

Agencies often are able to balance their books only through heroic efforts, comptroller general David Walker said Thursday, noting that the lack of good financial management systems remains a huge problem.

"An increasing number of agencies have been able to produce clean, auditable financial statements," said Horn (R-Calif.), chairman of the House Government Reform Committee's Government Efficiency, Financial Management and Intergovernmental Relations Subcommittee.

For the first time, all 24 agencies managed to file financial statements by the March 1 deadline and a number of agencies received clean audit opinions. At the top of Horn's list, receiving A grades, were the Energy Department, NASA and the Small Business Administration.

"Most disheartening, however, is the abysmal lack of achievement by two significant government departments and one agency," Horn said. The departments of Defense and Agriculture and the Agency for International Development received failing grades.

During a subcommittee hearing Friday, Walker noted that one of the problems with government accounting is the state of agency financial management systems.

"A central challenge is the need for agencies to generate timely, accurate and useful data through the year by overhauling financial and related management information systems," Walker said. Despite laws created to encourage improved financial management systems, only five of the 24 major government agencies have systems that comply substantially with federal accounting standards.

"Significant time and wise investments are needed for agencies to address and correct longstanding financial management systems problems," Walker said.

Mitchell Daniels Jr., director of the Office of Management and Budget, said the Bush administration will make financial management a priority. Despite the success this year of having three-fourths of federal agencies passing their audits, the audits are only tools.

"Heroic efforts where people work night and day to get a clean opinion as of a certain date are meaningless exercises unless they lead to the next step — the generating of reliable financial information on a daily, weekly, monthly and quarterly basis," Daniels said.

Donald Hammond, the Treasury Department's acting undersecretary for domestic finance, said that Treasury is taking steps to improve financial management. This year, the department will implement the first phase of its multiyear overhaul of governmentwide central accounting systems and processes for reporting budget execution information.

"This initiative will improve data access, reduce redundant reporting, and eliminate time-consuming reconciliation. This is a critical first step to improving overall federal financial management," he said.

Dorobek is a freelance writer based in Arlington, Va.