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GAO: Weaknesses in federal financial management
Wednesday - 12/29/2010, 10:07am EST
Federal News Radio
For the 14th straight year, the Government Accountability Office announced that it could not issue an opinion on the federal government's consolidated financial statements.
In its report, the GAO highlights three main obstacles:
- Serious financial management problems at the Defense Department.
- An inability to effectively report inter-agency expenses.
- An overall ineffective process for preparing financial statements.
Bob Dacey, chief accountant at GAO, told the Federal Drive that 20 of the 24 agencies of the CFO Act had "clean opinions" on their financial statements. However, in addition to DoD, Labor, Department of Homeland Security and NASA did not have clean opinions, Dacey said.
Dacey said weaknesses in DoD's financial management have been "pervasive and longstanding." Improvements are focused on two areas: budget information and mission-critical assets, he said.
The defense authorization bill includes implementation of the Defense Financial Improvement and Audit Readiness or FIRE Plan, which mandates DoD financial statements be audi-ready by the end of fiscal year 2017.
One problem persistent since consolidated audits started in 1997 is the lack of a standardized process across agencies for identifying interagency transactions, Dacey said.
"If two agencies who transact with each other don't record the same transaction in the same year at the same amount, it's going to result in errors on the financial statement," he said.
The Treasury Department and the Office of Management and Budget have issued guidance to improve the interagency transaction record-keeping. Agencies now must classify intergovernmental actions in categories and submit quarterly reports for some of those categories, Dacey said. More recently, Treasury and OMB required that agencies state reasons for "material differences" on financial reports and have established a dispute resolution process, he said.
Transactions between agencies and the Treasury general fund have the most differences because Treasury does not report all of its general fund accounts. Treasury is now in the process of reporting all of those accounts, Dacey said.
"The keys to success in many of these areas is the continued commitment by Treasury and OMB, as well as the commitment by the agencies," Dacey said. "In many cases, the intergovernment transactions are going to take the agencies' time and effort to resolve those differences in the future."