Financial management woes plague agencies

Two agencies may be on the road toward finally having workable financial management systems, but the Pentagon has a long — and expensive — way to go before it can balance its books, officials said at congressional hearings last week.

The Defense and Agriculture departments and the U.S. Agency for International Development received failing grades in Rep. Stephen Horn's February report card on the status of agency financial management.

"The failures of a few agencies continue to tarnish the overall record of the executive branch," said Horn (R-Calif.), chairman of the House Government Reform Committee's Government Efficiency, Financial Management and Intergovernmental Relations Subcommittee. The panel held hearings May 8 on financial management problems at the three agencies.

Although financial management is often treated as a bookkeeping exercise, experts say agencies need complete and timely financial data to make good management decisions and prevent fraud, waste and abuse.

Both USAID and Agriculture are implementing new financial management systems that might give them auditable books within a few years, officials said.

After years of problems with its New Management System, USAID in December began using a new system, known as Phoenix, at its Washington, D.C., headquarters. It is not yet in use at the agency's 70 overseas posts.

Meanwhile, the USDA is in the final stages of replacing its Central Accounting System, although officials acknowledged that CAS problems will still hinder the fiscal 2001 audit results.

"This system is so inherently flawed that it cooks its own books," said Agriculture Inspector General Roger Viadero.

The agency is replacing CAS with the Foundation Financial Information System, which will address many of the long-standing problems identified by Viadero's office, said Patricia Healy, the USDA's acting chief financial officer.

The problems at DOD, however, are more entrenched, and because of the agency's size, fixes are critical to the government's overall effort to balance its books. "DOD's financial man-age-ment deficiencies, taken together, continue to represent the single largest obstacle to achieving an unqualified opinion on the U.S. government's consolidated financial statements," said Gregory Kutz, the General Accounting Office's director for DOD, State Department and NASA financial management, in a statement prepared for the hearing.

"The level of frustration is high," said Robert Lieberman, DOD's deputy IG. He said the Pentagon would have to spend at least $32 billion to have financial systems that are compliant with accounting standards. The actual cost could be considerably higher, he said.

Financial management reform is a top priority for Defense Secretary Donald Rumsfeld, said Lawrence Lanzillotta, DOD's principal deputy and deputy undersecretary for management reform.

"We have world-class armed forces," he said. "We intend to achieve world-class financial management."

About the Author

Christopher J. Dorobek is the co-anchor of Federal News Radio’s afternoon drive program, The Daily Debrief with Chris Dorobek and Amy Morris, and the founder, publisher and editor of the, a leading blog for the Federal IT community.

Dorobek joined Federal News Radio in 2008 with 16 years of experience covering government issues with an emphasis on government information technology. Prior to joining Federal News Radio, Dorobek was editor-in-chief of Federal Computer Week, the leading news magazine for government IT decision-makers and the flagship of the 1105 Government Information Group portfolio of publications. As editor-in-chief, Dorobek served as a member of the senior leadership team at 1105 Government Information Group, providing daily editorial direction and management for FCW magazine,, Government Health IT and its other editorial products.

Dorobek joined FCW in 2001 as a senior reporter and assumed increasing responsibilities, becoming managing editor and executive editor before being named editor-in-chief in 2006. Prior to joining FCW, Dorobek was a technology reporter at, one of the first online community centers for current and former government employees. He also spent five years at Government Computer News, another leading industry publication, covering a variety of federal IT-related issues.

Dorobek is a frequent speaker on issues involving the government IT industry, and has appeared as a frequent contributor to NewsChannel 8’s Federal News Today program. He began his career as a reporter at the Foster’s Daily Democrat, a daily newspaper in Dover, N.H. He is a graduate of the University of Southern California. He lives in Washington, DC.


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