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Monday, April 21, 2008

New rules help balance books on transactions between agencies

Federal agencies can’t account for $58 billion of what they bought from each other in 2007. That may be alarming, but it beats the figure of two years prior when agencies were $91 billion out of balance.

The improvement reflects the impact of new accounting rules put in place in 2005.

“The business rules were the first attempt we had at trying to standardize, and we’re starting to see some progress,” said Robert Reid, deputy assistant Treasury secretary for accounting policy, during an April 17 panel discussion.

Agencies buying goods and services from each other have long struggled to square their balance sheets.

Governmentwide rules requiring standard accounting procedures for intragovernmental agreements have helped ensure agencies are able to reconcile their books more often, said Reid and a panel of government financial management leaders assembled by the National Academy of Public Administration.

“If you get it right from the start, there is a lot less of a chance that it will be unreconciled on the back end,” said John Cox, chief financial officer for the Housing and Urban Development Department. Cox and Reid have been among the leaders of a group working to solve the government’s intragovernmental transaction problems.

Keeping agencies’ books in balance is important because when they don’t accurately account for the money passed between them neither agency knows how much it has at its disposal to achieve the mission, said Danny Werfel, the Office of Management and Budget’s acting controller.

OMB and the Treasury Department created a watch list of high-dollar-value transactions that are the most out of balance. Agencies having transactions on the list, which OMB started in 2006 and which is not public, meet with OMB and Treasury to discuss the causes of the imbalance and take corrective action, Werfel said.

The corrective actions taken as a result of the watch list have knocked $10 billion off the government’s unresolved intragovernmental accounts, Werfel said.

Despite these improvements, intragovernmental transactions remain a material weakness on the government’s books, preventing the government’s consolidated financial audit from getting a clean rating, Werfel said.

The next step toward achieving that goal is standing up an intragovernmental dispute resolution committee to handle unsettled claims between agencies that can’t be resolved in another setting, Werfel said. Chief financial officers would moderate for the parties in dispute to work out agreements to settle the accounts, he said. Werfel hopes to have the council set up by the end of September, which is the end of fiscal 2008.

The final step is much further down the road — an information technology system that would permit agencies to make intragovernmental transactions automatically within the standard business processes.

“We won’t solve this problem unless we ultimately use technology,” Cox said.
Agencies need to find a Web-based tool to bridge the differences for their more than 250 financial management systems, Cox said.

-Elise Castelli, FederalTimes

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