Rep. Todd Platts | Systems requirements law key to improved management

Agencies fall short in compying with FFMIA

On March 15, I chaired an oversight hearing on implementation of the Office of Management and Budget’s Financial Management Line of Business initiative. The general consensus from that hearing was that the ideal of a governmentwide shared-services model is a worthy goal.

The concept is not new; cross-servicing has been employed with great success on a smaller scale for years. However, the path to achieving success on a grander scale—as envisioned by the FM LOB—is long, and it was clear from testimony at the hearing that successful implementation will depend on steps taken along the way.

One of those important steps is compliance with the Federal Financial Management Improvement Act, the 1996 law that requires agencies to implement and maintain systems that meet federal financial-management requirements and accounting standards.

Why is this important? In the most basic sense, every Line of Business initiative—not just the FM LOB—comes down to a cost analysis. The most effective tool for this type of analysis is accurate cost accounting, which is derived from timely, accurate data and the appropriate use of technology.

Effective cost accounting was one of many goals that FFMIA sought to achieve.

Ten years later, however, only nine of the 24 largest departments say they comply with FFMIA—and auditors from only six of those nine agree on that point.

While the vast majority of agencies earn clean opinions on their financial statements, FFMIA compliance may be a better indicator of the actual state of federal financial management.

As far back as 2003, the Government Accountability Office cautioned about an “expectation gap,” given the increase in clean opinions and the relative lack of success in achieving compliance with FFMIA. An agency can pass a financial audit with so-called “heroic efforts” at the end of the fiscal year. FFMIA compliance, however, results from disciplined processes such as the use of the U.S. Standard General Ledger for all accounting transactions.

Disciplined processes are critical to the success of the FM LOB. In its most recent report on Financial Management Systems (GCN.com, Quickfind 563), GAO states that “adopting standardized processes is a fundamental step needed for all financial systems implementations, but especially for making the financial management line of business initiative successful.” FFMIA compliance is the first step toward standardized processes.

Joseph Kull, a principal at PricewaterhouseCoopers LLP with 32 years of experience in federal financial management, testified in March that “core systems are only as good as the data flowing into them from the feeder subsystems. Agencies need to be sure that the feeder and subsystem business processes and controls are working effectively before moving to a shared-services environment.”

It stands to reason that an agency in compliance with FFMIA, which prescribes numerous controls over systems and information, would be in a good position to make effective use of a shared-services center.

It also stands to reason that any shared-services center should be FFMIA compliant—yet, at this time, only one meets that standard: Treasury Department’s Bureau of the Public Debt.

Another of the witnesses at our hearing, Clifton Williams of Grant Thornton LLP, compiles an annual survey of federal chief financial officers. I posed a question to Williams about whether a shared-services center should be compliant with FFMIA. His answer: “The survey would say yes. All the respondents of the survey feel that way very much.”

Effective oversight by Congress and OMB is the only way to encourage FFMIA compliance, and I applaud OMB making this part of its criteria for financial performance as part of the President’s Management Agenda.

Rep. Todd Platts (R-Pa.) is the chairman of the Government Reform Subcommittee on Government Management, Finance and Accountability.

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