OMB: Agencies improve finance reporting

More agencies are producing reliable financial information with fewer major accounting problems than last year, the Office of Management and Budget said today in an initial assessment of fiscal 2007 year-end financial statements.

Of 24 major agencies, 19 received a clean opinion for their fiscal 2007 report, one more than last year, said Danny Werfel, OMB’s acting controller. Agencies must file their Performance and Accountability reports and financial statements by Nov. 15.

Five more agencies joined the ranks of those having not only a clean audit, meaning the agency’s data is valid and trustworthy, but also no major weaknesses. They were the Energy, Interior and Justice departments; the Small Business Administration; and the U.S. Agency for International Development. A total of 13 agencies have accomplished this since 2001, he said.

Agencies reduced the overall number of major weaknesses by two to 39, a 35 percent decrease since 2001. Agencies have continued to fix flaws even as accounting standards organizations have lowered the threshold for what constitutes a material weakness, Werfel said.

“While auditing standards are getting tougher, federal agencies are more than keeping pace by continuing to decrease the number of material findings,” Werfel said at a briefing with reporters to announce the findings.

The administration is holding agencies accountable for their financial management with a lot of transparency to make government more effective, said Clay Johnson, OMB deputy director for management.

“We think we’re making good progress,” he said.

For the third consecutive year, all agencies met the accelerated deadline to submit their financial audits 45 days after the end of the fiscal year, Sept. 30. The federal government has a quicker turnaround for its annual report than the private sector. Corporate filers have 60 days to do so. It used to take agencies five months, but OMB accelerated the process in 2001.
“When you have a short turnaround to take all the transactions you participated in and all the money that’s moved in and out of the agency in the year and put it in a set of financial statements that’s going to pass scrutiny, answer all the questions and tie up loose ends within 45 days, it drives you to be very diligent with your finances and your accounting every day of the fiscal year rather than thinking you’ll have time at the end of the year to do that,” Werfel said.

The Defense Department continues to be unable to provide auditors with reliable financial data. Auditors could not provide any opinion about DOD’s finances. It will take five to 10 years for DOD to achieve a clean audit, Johnson said. DOD has submitted to Congress an action plan that details milestones.

“DOD is changing its financial management practices so they will have good stewardship of the money that they spend, what they own and what they are buying,” Werfel said. “It will take several years to do it. There’s no specific time frame, but they are going about it in a very business-like fashion.”

Agencies also reduced improper payments even in existing programs under scrutiny, and added 13 more programs to be evaluated for risk of error rates for incorrect benefits and grants, he said. Agencies now report improper-payment measurements for 86 percent of all high-risk outlays, up from 81 percent last year. The error rate for the first programs to be measured for errors in 2004 has declined to 3.1 percent from 3.9 percent, a $7.9 billion reduction in improper payments. The 13 programs added this year, including the Medicaid Fee-for-Service program, pushed the error rate up to 3.5 percent with $54.9 billion in outlays under scrutiny for errors, he said.

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