Agencies face daunting financial systems problems, GAO says

Agency financial systems continue to be a hurdle to effective management because they cannot produce the information needed to make effective decisions for day-to-day operations, the Government Accountability Office stated in a new report. The financial management systems of 17 of the 24 major federal agencies last year failed to substantially comply with at least one of the three requirements under the Federal Financial Management Improvement Act. The GAO report released Aug. 7 mirrors findings from last year's audit, when 18 of the agencies did not comply. Because some of the financial management weaknesses are so difficult to resolve, Comptroller General David Walker has called a meeting for later this year of key federal financial and auditing officials and subject experts to encourage new approaches to improving financial management systems. Agencies have made progress developing plans to fix financial problems, which they summarize in their annual performance and accountability reports. The Office of Management and Budget also has advanced its Financial Management Line of Business (FMLOB) initiative to solve system implementation problems. But agencies still struggle to modernize their financial management systems because they fail to follow disciplined processes and best practices. 'Efforts to modernize financial management systems have often exceeded budgeted costs, experienced delays in delivery dates and not provided the anticipated system functionality and performance,' Walker said in the report. 'This problem is particularly serious at the Department of Defense.' Several agencies also had problems complying with the requirements for integrated financial management and accounting systems, accurate and timely recording, reconciliation procedures and information technology security, GAO said. GAO and OMB also disagree on how to rate financial management assessments when agencies appear to comply with requirements. GAO wants agency auditors to provide a positive assurance statement, which implies direct testing of requirements. OMB has been satisfied with a negative assurance statement, which means no problems rose to the attention of the auditor. OMB said that requirements of its three major initiatives ' the President's Management Agenda, FMLOB and Circular A-123 for internal controls for financial reporting ' help agencies identify and correct weaknesses to comply with the financial management improvement statute. 'We believe that requiring a statement of positive assurance would be costly and would not provide additional information that would be of benefit to the federal agency, OMB, or the taxpayer,' said Linda Combs, OMB controller, in a letter in response to the GAO report. GAO said it was concerned that some of the information provided by this approach does not come under audit scrutiny and may not be reliable.