Report laments accounting systems

"Financial Management: FFMIA Implementation Critical for Federal Accountability"

Longstanding problems with federal financial systems make it difficult for agencies to produce reliable financial information and for agencies to make the proper association between projects and their results, a new report by the government's auditor says.

"The central challenge to producing reliable, useful and timely data throughout the year and at year-end is overhauling financial and related management information systems," the General Accounting Office report says.

Agencies have recognized the seriousness of their financial systems problems, the GAO report says, but many have a long way to go.

"In some cases, it could be years before corrective actions are completed," GAO said in the report, "Financial Management: FFMIA Implementation Critical for Federal Accountability."

"The size and complexity of many federal agencies and the discipline needed to overhaul or replace their financial management systems present a significant challenge," the report says.

Because of the poor condition of agency accounting systems, agencies must go through "extraordinary efforts" to produce annual financial statements, the report notes. "This is not a measure of financial management success and requires resources that could otherwise be better used to address underlying financial management systems and control problems."

Under the Federal Financial Management Improvement Act, agencies must prepare remediation plans describing actions they took or plan to take to improve systems. GAO found 16 of the 19 agencies it reviewed completed those reports in fiscal 1999 and that those reports had improved over fiscal 1998.

But 11 of the plans lacked important details describing corrective actions, and 10 plans did not disclose the type and amount of resources needed to execute the fixes, the report states.

GAO credits the Office of Management and Budget for improvements in financial systems. GAO, however, recommended that OMB hone its financial management guidance by addressing the differing interpretations of the meaning of "substantial compliance," the nature and extent of audit work necessary to assess compliance with FFMIA.

The report specifically notes that the Defense Department represents the government's most difficult challenge because at DOD, "financial management systems reform will have to be part of a broader initiative to transform its overall business processes that will take years to complete," the report notes.