Many agencies unable to produce reliable financial data

Agencies need to be able to produce correct and timely financial information to make the most effective decisions about how to manage their daily operations, especially in the current difficult economic environment, the Government Accountability Office said.

To produce useful financial and performance data, agencies must comply with requirements for financial management systems and accounting standards under the Federal Financial Management Improvement Act (FFMIA) of 1996.

For fiscal 2007, 13 of 24 major agencies failed to meet requirements for their financial management systems, including their processes, procedures and internal controls, GAO said in a report released Oct. 2. The performance audit took place from December 2007 to September 2008.

Auditors reported problems, such as nonintegrated financial management systems, inadequate reconciliation procedures, lack of accurate and timely recording of data and weak security over information systems.

“Financial management systems are not providing reliable, useful and timely information to help manage agency programs more effectively,” said Kay Daly, acting director of GAO’s financial management and assurance. GAO is still concerned that the criteria for assessing substantial compliance with FFMIA are not well-defined or consistently implemented across agencies, the report said.

While the Office of Management and Budget is revising its financial management guidance, GAO re-emphasized the need for OMB to clarify what constitutes substantial compliance and to look at financial management systems’ capabilities beyond financial statement preparation, she said.

“It is important that emphasis on correcting deficiencies be sustained by the current administration as well as the new administration that will be taking office next year,” Daly said.

Agencies’ efforts to implement new systems far too often result in systems that do not meet cost, schedule and performance goals, Daly said. To avoid implementation problems, OMB continues to advance its Financial Management Line of Business to encourage use of common applications, business processes and accounting standards.

In response, OMB said despite the work that remained, agencies had made progress. The number of agencies that had not complied with FFMIA decreased to 10 from 12 last year, and the number of disagreements between auditors and agencies about compliance results had declined from five to three, said Danny Werfel, deputy controller.

“We are continuing to work aggressively to assist agencies in building a strong foundation of financial management practices through OMB’s financial management and systems oversight and under the Financial Management Line of Business initiative,” he said.

About the Author

Mary Mosquera is a reporter for Federal Computer Week.

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