Financial systems still troubled

2001 Financial Report of the U.S. Government

For the fifth consecutive year, the federal government was unable to present auditable financial books, the General Accounting Office has found.

GAO said the Defense Department's pervasive financial management problems were the single largest obstacle to a clean audit opinion. But problems with other agencies' financial systems also are critical, 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 said 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."

The financial report for fiscal 2001, published by the Treasury Department, acknowledged 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, the same number as last year, but up significantly from the six agencies in fiscal 1996 that attained that level.

The departments of Justice and Transportation moved from qualified 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 warned that many agencies have been able to obtain unqualified audit opinions only by 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," GAO said.

Walker noted that even though they have unqualified opinions on their financial statements, "many agencies do not have timely, accurate and useful financial information...with which to make informed decisions and to ensure accountability."

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

The audit report praised the DOD's broad effort to clean its financial house. The department is close to making a contract award for its financial management system architecture, which will act as a roadmap for fixing its financial systems.