Agencies continue to make strides in financial management

All major agencies met financial reporting deadlines for the third year in a row, completing the audit process within 45 days of Sept. 30, the end of fiscal year, the Office of Management and Budget reported Monday. The audit results show continued improvement in financial management and accounting, OMB officials said.

The deadline for submitting complete financial reports was shortened to 45 days from 150 days in 2001. Clay Johnson, deputy director for management at OMB, said Monday that revising the deadline forced agencies to improve their financial management year-round.

In addition, agencies are gradually improving their overall financial management. Nineteen of the 24 major federal agencies received clean audits for fiscal year 2007, one more than last year. And the number of governmentwide material weaknesses dropped to 39 from 41 last year, for a 35 percent decrease in material weaknesses since 2001.

Material weaknesses are management or accounting deficiencies deemed by auditors to be significant enough to note in the final report. Danny Werfel, acting controller for OMB's Office of Federal Financial Management, said the decline in material weaknesses was particularly noteworthy in light of recent changes to government audit guidelines.

Thirteen agencies received clean audits with no material weaknesses noted. Five of them -- the Justice, Interior, and Energy departments, the Small Business Administration and the U.S. Agency for International Development -- did not meet that mark last year.

Werfel said agencies also are working hard to report on and eliminate improper payments, which can mean anything from an incorrect amount or recipient to a payment for an unallowable service to insufficient documentation to prove a payment was proper. This year, 13 more programs took part in improper payment reporting; almost 86 percent of high-risk programs reported on improper payments this year, up from 81 percent last year. Werfel said publication of improper payments not only identifies problem areas but motivates agencies to address themquickly.

The government's largest spender by far, the Defense Department, continued to come up short in the area of financial management. Johnson said the department did not receive a clean audit, and likely won't for years to come, because it has chosen to make thorough reform a higher priority than a clean audit.

-Elizabeth Newell, GovExec.com

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