Government still can't reconcile books

Fiscal 2001 audit

For the fifth consecutive year, the federal government was unable to present auditable financial books — in part because of antiquated financial management systems, the General Accounting Office has found.

GAO officials said that the Defense Department's pervasive financial management problems were the single largest obstacle to an "unqualified," or clean, audit opinion. But problems with agency financial systems also played a role, said David Walker, the government's comptroller general.

"Federal agencies have started to make progress in their efforts to modernize their financial management systems," Walker wrote in his audit report, released March 29. "However, the need for timely, accurate and useful financial and performance management information is greater than ever, given the increasing demands of the federal budget."

GAO's audit is published as part of the government's fiscal 2001 financial report, issued by the Treasury Department.

Producing auditable financial statements is important, the report noted, so that "sound financial information" is available for Congress to use in exercising its oversight responsibilities, for agency managers to use to maintain operational accountability and for Treasury to use in preparing government financial statements as required by law.

The financial report acknowledged that the government has pervasive problems with financial systems.

"The federal government faces agency-specific and governmentwide challenges in modernizing its financial management systems," the financial report said. "Many financial management systems need upgrading or replacing before they can provide information to support efforts to achieve the president's goal of a citizen-centered, results-oriented and market-based government."

GAO found that 18 of the 24 agencies identified by the Chief Financial Officers Act were able to attain unqualified audit opinions on their financial statements, meaning that the agencies' books could be reconciled. That total was the same number as last year, but up significantly from fiscal 1996 when only six agencies attained clean audits.

The departments of Justice and Transportation moved from "qualified" — or questionable — to clean opinions. And the Federal Aviation Administration, which had been on GAO's high-risk list, has cured many of its financial management weaknesses, the report said.

However, GAO officials warned that many agencies have been able to obtain unqualified audit opinions only after making Herculean efforts. Those efforts necessitate "significant resources... extensive ad hoc procedures and... billions of dollars in adjustments to derive financial statements months after the end of a fiscal year," according to the GAO report.

All 24 agencies, however, were able to meet the Feb. 27 deadline for submitting their financial statements to the Office of Management and Budget.

"We are not satisfied with the publication of this report six months after the end of the fiscal year," said OMB Controller Mark Everson.

Therefore, fiscal 2002 financial data is due Feb. 1, 2003, and agencies will have only 45 days after the Sept. 30 close of fiscal 2003 to file financial statements.

OMB officials hope the timetable will spur agencies to regularly maintain good financial records, rather than trying to gather all the data in anticipation of the close of the year. That data can then be used for daily management decisions, officials have said.

Regardless, auditable books are not expected for at least several years, largely because of DOD's financial problems. GAO officials said that DOD's financial woes continue to be the most significant impediment to the federal government's overall ability to have auditable books.

DOD officials said last month that they had abandoned efforts to obtain a clean opinion and were instead focusing on fixing core financial management problems.

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Progress on audited financial statements

These agencies received clean audits from the General Accounting Office:

The departments of Energy, Commerce, Health and Human Services, Housing and Urban Development, Interior, Labor, State, Treasury, Veterans Affairs, Justice and Transportation; the Environmental Protection Agency; the General Services Administration; the Nuclear Regulatory Commission; the National Science Foundation; the Office of Personnel Management; the Small Business Administration; and the Social Security Administration.

These agencies received "qualified" audits, meaning they passed but red flags were raised:

The Education Department and the Federal Emergency Management Agency.

These agencies were unable to be audited due to lack of data and other factors:

The departments of Agriculture and Defense, the U.S. Agency for International Development and NASA.