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Monday, March 29, 2010

Q&A: Mark Forman and Jeff Steinhoff on the future of federal financial management

Federal financial management is poised to undergo a new wave of transformation, say former information technology and financial management federal officials. With the closing of the Financial Systems Integration Office comes an opportunity to integrate disparate systems with cloud computing, say Mark Forman and Jeff Steinhoff, both former federal officials now with consulting firm KPMG.

FierceGovernmentIT recently spoke in depth with Forman and Steinhoff; below is a full transcript of the interview.

Forman headed the office of e-government and information technology at the Office of Management and Budget from mid 2001 through mid 2003. Steinhoff ended his government career in 2008 after lastly serving as the Government Accountability Office's managing director for financial management and assurance, and assistant comptroller general for accounting and information management.

Forman is a partner at KPMG and Steinhoff is executive director of KPMG's government institute.

Despite the length of the Q&A, there's insight a plenty. However, for highlights from the conversation, read this recap.

-FierceGovernmentIT.com
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Federal Financial Management Conference: Meeting the New Challenges in Financial Management

2010 Federal Financial Management Conference held in Washington, DC on March 23, 2010.

Below are links to the speaker's presentations for your reference.

Keynote Address Sallyanne Harper.pdf

Plenary Address Richard Gregg.pdf

A New Vision for Better, Cost-Effective and Faster Financial Information Charles DeFelice.pdf

A New Vision for Better, Cost-Effective and Faster Financial Information Nancy Fleetwood.pdf

Federal Financial Reporting and its Usefulness - Closing the Gap Wendy Payne_Tom Allen_Debra Bond.pdf

Partnering to Make Federal Payments More Accurate Gary Glickman.pdf

Partnering to Make Federal Payments More Accurate Wanda Rogers.pdf

Partnering to Make Federal Payments More Accurate Patricia Reese.pdf

Hot Topic in Auditing - What Changes Affect You Mary Foelster.pdf

Hot Topic in Auditing - What Changes Affect You Robert Dacey.pdf

Hot Topics in Auditing - What Changes Affect You James Dalkin.pdf

Afternoon Session Jeffrey Zients.pdf

CxO Perspectives on Cloud Computing Terry Bowie.pdf

Meeting the Human Capital Challenges Jonathan Foley.pdf

Wednesday, March 24, 2010

Agencies count on federal financial managers

Anyone in the federal financial management community already knows that FSIO stands for the Financial Systems Integration Office, based inside the General Services Administration. FSIO supports the work of the U.S. Chief Financial Officers (CFO) Council.

Together with the JFMIP, or "The Joint Financial Management Improvement Program", they get together yearly for the annual Federal Financial Management Conference sponsored by the Department of the Treasury, the Government Accountability Office, the Office of Management and Budget, and the Office of Personnel Management.

The goal is to improve financial management policies and procedures in the federal government.

During yesterday's conference, the CFOs and top government accountants heard from the government's most senior accountant, Gene Dodaro, the Comptroller General of the United States, who talked about the challenging fiscal environment throughout government.

This community will be very important to making what will assuredly be very difficult decisions by policymakers across the government in the coming decade. These are very serious issues. We are on the cusp of some very significant challenges that will test our ability as a nation to set priorities, and our ability to be innovative and creative.

During his lunchtime keynote address, Dodaro said it will be up to federal financial managers to tackle such challenges as improper payments, which he says are conservatively valued to be worth up to $98 billion dollars per year, or closing the tax gap, which is worth approximately $290 billion per year.

Also addressing the lunchtime session at the FSIO conference was Mark Reger, the Chief Financial Officer of the Office of Personnel Management. He notes that the Obama Adminstration has set a faster pace for government, one that provides both challenges and opportunities for the federal financial management community.

"They have brought in some tremendous resources," he said. "People with some outstanding thoughts and ideas, at a time when the economy is difficult. And so it is falling on us to improve government, provide transparency, provide services, and to make sure we can be more efficient at everything we do."

The FSIO conference also took time to recognize the hard work and accomplishments of one of its own, presenting the Donald Scantlebury Award, named after a former chief accountant at the GAO, to Sheila Conley, Deputy Chief Financial Officer and Deputy Assistant Secretary with the Department of Health and Human Services. The award recognizes her work "in strengthening financial management throughout the federal government" in her career with OMB, and the State Department, as well as HHS.

-Max Cacas, FederalNewsRadio.com
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Federal financial management top of mind at recent conference

Some of the real unsung heroes of the federal government don't carry guns or march in formation.

Many of them wield spreadsheets, strive for clean audit opinions, and are the first line of defense in accounting for the spending of taxpayer dollars. Some of the top financial managers and accountants are wrapping up the one-day Joint Financial Management Improvement Program Federal Financial Management Conference at the Renaissance Hotel this afternoon.

-Max Cacas, FederalNewsRadio.com
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Monday, March 22, 2010

Recent GAO Publications

The Government Accountability Office (GAO) recently released the following publications:

Briefing on the Results of GAO's Audit of the Fiscal Years 2009 and 2008 U.S. Government's Consolidated Financial Statements.
GAO-10-502R, March 22.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-502R

U.S. Insular Areas: Opportunities Exist to Improve Interior's Grant Oversight and Reduce the Potential for Mismanagement.
GAO-10-347, March 16.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-347
Highlights - http://www.gao.gov/highlights/d10347high.pdf

Electronic Government: Implementation of the Federal Funding Accountability and Transparency Act of 2006.
GAO-10-365, March 12.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-365
Highlights - http://www.gao.gov/highlights/d10365high.pdf

Recovery Act: California's Use of Funds and Efforts to Ensure Accountability, by Linda Calbom, western regional director, before the House Committee on Oversight and Government Reform, in Los Angeles, California.
GAO-10-467T, March 5.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-467T
Highlights - http://www.gao.gov/highlights/d10467thigh.pdf

Recovery Act: Factors Affecting the Department of Energy's Program Implementation, by Patricia Dalton, managing director, natural resources and environment, before the Senate Committee on Energy and Natural Resources.
GAO-10-497T, March 4.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-497T
Highlights - http://www.gao.gov/highlights/d10497thigh.pdf

Recovery Act: One Year Later, States' and Localities' Uses of Funds and Opportunities to Strengthen Accountability.
GAO-10-437, March 3.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-437
Highlights - http://www.gao.gov/highlights/d10437high.pdf

The Federal Government's Long-Term Fiscal Outlook: January 2010 Update.
GAO-10-468SP, March 2.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-468SP

State and Local Governments' Fiscal Outlook: March 2010 Update.
GAO-10-358, March 2.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-358
Highlights - http://www.gao.gov/highlights/d10358high.pdf

Financial Audit: American Battle Monuments Commission's Financial Statements for Fiscal Years 2009 and 2008.
GAO-10-399, March 1.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-399
Highlights - http://www.gao.gov/highlights/d10399high.pdf

Status of the Small Business Administration's Implementation of Administrative Provisions in the American Recovery and Reinvestment Act.
GAO-10-298R, January 19.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-298R

"Maximizing DOD's Potential to Face New Fiscal Challenges and Strengthen Interagency Partnerships," by Gene L. Dodaro, acting comptroller general of the United States, before the National Defense University, Washington, D.C.
GAO-10-359CG, January 6, 2010.
http://www.gao.gov/cghome/d10359cg.pdf

Coast Guard: Observations on the Requested Fiscal Year 2011 Budget, Past Performance, and Current Challenges, by Stephen Caldwell, Director, Homeland Security and Justice Issues, before the Subcommittee on Coast Guard and Maritime Transportation, House Committee on Transportation and Infrastructure.
GAO-10-411T, February 25.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-411T
Highlights - http://www.gao.gov/highlights/d10411thigh.pdf

Troubled Asset Relief Program: Treasury Needs to Strengthen Its Decision-Making Process on the Term Asset-Backed Securities Loan Facility.
GAO-10-25, February 5.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-25
Highlights - http://www.gao.gov/highlights/d1025high.pdf

NASA: Key Management and Program Challenges, by Cristina Chaplain, director, acquisition and sourcing management, before the Subcommittee on Space and Aeronautics, House Committee on Science and Technology.
GAO-10-387T, February 3.
http://www.gao.gov/cgi-bin/getrpt?GAO-10-387T
Highlights - http://www.gao.gov/highlights/d10387thigh.pdf

Recent DHS IG Reports

The U.S. Department of Homeland Security Inspector General recently released the following reports:

Annual Financial Report for Fiscal Year 2009
(PDF, 290 pages - 19.98 MB), full report; page 12 corrected March 17, 2010.

Budget-in-Brief FY 2011
(PDF, 159 pages – 1.94 MB)

FY2011 Budget Fact Sheet

Congressional Budget Justification FY 2011
(PDF, 3,985 pages – 20.31 MB)

Exhibit 300: Capital Asset Plan and Business Case Summaries

OIG-10-31 - Annual Report to Congress on States' and Urban Areas' Management of Homeland Security Grant Programs Fiscal Year 2009
(PDF, 20 pages - 403 KB)

OIG-10-33 - The State of Missouri's Management of State Homeland Security Program and Urban Areas Security Initiative Grants Awarded During Fiscal Years 2005 through 2007
(PDF, 30 pages - 886 KB)

OIG-10-42 - Department of Homeland Security's Acquisition Data Management Systems
(PDF, 29 pages - 2.21 MB)

OIG-10-51 - Independent Auditors' Report on U.S.Custom and Border Protection's FY 2009 Financial Statements
(PDF, 31 pages - 693 KB)

OIG-10-35 - Federal Emergency Management Agency Working Capital Fund FY 2009 (Unclassified Version)
(PDF, 21 pages - 1.26 MB)

Friday, March 19, 2010

OMB shutting down financial systems office

The Financial Systems Integration Office is shutting down in two weeks.

The Office of Management and Budget decided FSIO met its goals of creating business process and data standards for the Financial Management Line of Business, and finished its last update of the Core Financial Systems Requirements and therefore is no longer needed.

Danny Werfel, OMB's controller, says in a memo to agency chief financial officers that OMB and the General Services Administration have agreed that FSIO will cease operations by March 31.

FSIO will issue the final set of Core Financial Systems Requirements and will publish use cases for standard business processes by March 31.

Industry sources say there were some rumors FSIO would be moving to the Treasury Department.

Werfel addressed those rumors during a recent interview with Federal News Radio, saying at the time no decision had been made.

GSA created FSIO out of the Joint Financial Management Improvement Program (JFMIP) in December 2004. Since then, it led the work to standardize the business processes around financial management so agencies could more easily migrate to FM LOB shared service providers.

FSIO will be hosting its annual federal financial management conference in Washington March 23.

-Jason Miller, FederalNewsRadio.com

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Thursday, March 18, 2010

Changes coming to federal financial management

The Financial Systems Integration Office, the federal office that manages the Financial Management Line of Business, will stop testing and certifying federal financial systems on March 31.

In a letter posted to the Office of Management and Budget website March 16, OMB controller Danny Werfel said OMB will "develop the new path for financial systems in the Federal government."

With a planned March 31 update to core financial systems requirements, "we believe that FISO has finished developing FMLoB business process and data standards as it related to its mission," Werfel wrote. "In response to these challenges, we have reassessed the need for the core financial systems testing and product certification program and will be discontinuing this function," he added.

The FMLoB has been an effort to consolidate financial systems within the government, with four federal agencies and private sector organizations acting as centralized service centers to other agencies.

For example, the Interior Department's National Business Center hosts financial systems and business operations for external executive branch organizations, and a few legislative branch organizations.

Rapid advances in technology require a rethink of how the government implements financial systems, Werfel said. "Once deployed, our financial systems are also not meeting agency programmatic needs or producing the right information to support decision making," Werfel said.

OMB will announce on Monday a plan for replacing the current shared service approach, according to a private sector executive with knowledge of government deliberations. It likely will include cloud computing, the executive said.

"If it's a government-wide enterprise shared service, which people would call a private cloud, then agencies can't customize. It's the Obama administration version of shared services," the executive said.

Financial management systems are notoriously difficult to implement in the federal government, in part because agencies greatly customize commercial systems.

"A lot of agencies don't want to change the way they do business, they'd rather change the code," the executive said.

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Wednesday, March 10, 2010

Federal financial systems overhaul takes more than guidelines

Agencies are, once again, being asked to overhaul their financial systems. The Office of Management and Budget expects to issue guidelines by the spring to help agencies with this process. Tim Young is a former deputy administrator in OMB's office of E-Government and IT. He's now a senior manager in Deloitte's Federal Government Services. And he joins us to discuss the challenges agencies might face during this process.

- Tom Temin, FederalNewsRadio.com
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Saturday, March 06, 2010

Regulations could bog down financial system modernization

The Obama administration's plan to modernize financial systems governmentwide could hit regulatory speed bumps, according to an analyst who monitors government spending.

The U.S. Government 2009 Financial Report, released on Feb. 26, said agencies must reconsider expensive, long-term investments in favor of shorter-term, more efficient information technology solutions that rely on shared services, which are centralized IT hubs that support multiple agencies. The Office of Management and Budget plans to issue guidelines on overhauling financial systems by the spring. But it will be a challenge for agencies to find tools that can meet the federal government's myriad, strict accounting rules, said Ray Bjorklund, senior vice president and chief knowledge officer at FedSources, a market research firm. In addition, long-term investments cannot be turned off overnight.

Agencies have tried to revamp outdated, disjointed financial systems before, but have encountered the same obstacles likely to stymie this effort, Bjorklund noted. The George W. Bush administration launched the Financial Management Line of Business Initiative to lower the cost and boost the performance of systems by decommissioning existing technologies and moving to shared services. The hurdle confronting that effort and the new one is the mountain of federal financial management requirements for systems, Bjorklund said.

He pointed out that the Financial Systems Integration Office has verified just seven products as compliant with core financial system requirements.

Financial management has requirements that go beyond book-keeping and trace back to the Constitution, Bjorklund explained. GAO maintains an appropriations law book surpassing 2,600 pages; the OMB Office of Federal Procurement Policy issues standards for contractor reporting; the Federal Acquisition Regulations stipulate how contracts are to be structured; and the Treasury Department maintains the U.S. Government Standard General Ledger, Governmentwide Financial Report System, Government Online Accounting Link System, and other rules. Then, each agency has a variety of contract reporting and payroll systems, in addition to complying with international banking standards for electronic funds transfers.

OMB spokesman Tom Gavin said such long-standing audit and reporting requirements are not the drivers of the escalating cost of financial systems. Rather, the barriers include the unnecessary intricacy of business processes, the use of decentralized IT for common financial management activities and a lack of robust project management.

OMB's Office of Federal Financial Management is working closely with agency chief financial officers to identify procedures for exercising better oversight of spending and easing information sharing between systems, Gavin added.

This spring, Treasury is testing a model for vendor invoices that will be made available to all federal agencies and their suppliers, department officials said on Friday. The system allows vendors to electronically submit bills to a central location for processing. At present, agencies maintain separate invoice systems, creating duplication. The new arrangement would consolidate data from all transactions into a single Web site. Agency officials would be able to view a directory of suppliers already enrolled in the system.

Standardizing the billing process is intended to cut costs by eliminating the need to re-enter data -- and improve data quality by reconciling information from multiple sources, Treasury officials said. The Federal Reserve Bank of Boston, acting as Treasury's fiscal agent, is assisting Treasury with the pilot.

Gary Therkildsen, federal fiscal policy analyst at government transparency group OMB Watch, said the administration's tactic is a reversal of other modernization approaches that have failed. For example, the IRS abandoned a plan to update its tax-filing Web site because of poor planning and the high cost of replacing existing equipment. In contrast, the White House's plan calls for inexpensive measures and new OMB guidelines.
- Aliya Sternstein, NextGov.com
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Thursday, March 04, 2010

Interview with Christine Shafik of DOE: “It is a transformational time”

Christine Shafik is director of the Office of Risk Management for the U.S. Department of Energy. In this role, she is responsible for the oversight of the department’s financial resource planning, as well as the management of the department’s Financial Management Oversight Program. She also plays a vital role in the implementation of an effective internal control program and in the management of the department’s audit resolution and follow-up activities. Finally, Shafik is responsible for providing a corporate financial review and analysis to the CFO of the department.

We had the chance to talk to her about the Recovery Act funds because the Department of Energy received around $40 billion to create more clean-energy jobs, as well as make the country less dependent on foreign oil. We learned how the Department of Energy has gone above and beyond OMB requirements, what forward-looking risk management means, and how Shafik manages an extremely large amount of information on a day-to-day basis.

Wednesday, March 03, 2010

Congress turns up heat on DoD business systems

It's been five years since Congress fired its first salvo at the Defense Department's problematic business systems. Now the Pentagon is getting ready to deal with the second shot across the bow to try to address the continued poorly performing business systems modernization programs.

Lawmakers in the fiscal 2010 Defense Authorization bill are requiring DoD's chief management officer to certify that any business system the department will spend more than $100 million over the life of the application has gone through business process reengineering and meets the business system enterprise architecture.

"Not later than one year after the date of the enactment of this Act, the appropriate chief management officer for each defense business system modernization approved by the Defense Business Systems Management Committee before the date of the enactment of this Act that will have a total cost in excess of $100 million shall review such defense business system modernization to determine whether or not appropriate business process reengineering efforts have been undertaken to ensure that the business process to be supported by such defense business system modernization will be as streamlined and efficient as practicable; and the need to tailor commercial-off-the-shelf systems to meet unique requirements or incorporate unique interfaces has been eliminated or reduced to the maximum extent practicable," Public Law 111-84 states.

If the chief management officer finds that the programs do not align with the EA or have not done business process reengineering, the CMO must require a new project plan, and they could
restructure or end the program all together.

"Congress is serious," says Beth McGrath, DoD acting deputy chief management officer.

"Someone needs to sign on a piece of paper that says 'yes system X did adequate, sufficient business changing business process engineering.' Because if we don't, we will end up with IT systems that aren't interoperable, don't have data standardization or a robust architecture behind them. We will end up with an IT system that people don't like and will not use because it doesn't deliver the outcomes they are looking for."

McGrath, who spoke at a recent lunch sponsored by the Northern Virginia chapter of AFCEA, says DoD must do business process reengineering because otherwise they are just putting money toward an IT system that doesn't meet its mission needs.

This is the latest attempt by Congress to get DoD to improve how they manage and implement their business systems. In November 2004, lawmakers passed a provision in the Defense authorization bill that said that the DoD comptroller would be fined $5,000 and face jail time of up to two-years for any program that doesn't comply with the business systems architecture. Congress tied DoD progress to the Antideficiency Act, which makes it illegal for agencies to spend money on projects outside of the purposes the funding was intended for.

McGrath says DoD's history is not good with large scale business systems. The Defense Integrated Human Management Resources System (DIMHRS) is a perfect example of DoD's shortfalls.

The Pentagon has spent more than $1 billion over the last decade and only in the last year decided not to implement a one-size fits all pay and personnel system.

McGrath says each of the services will be expected to implement the standards or core functions within their own systems.

In the 2010 DoD authorization bill, Congress required DoD to create a DIMHRS transition council to oversee the implementation of the system standards at the services.

Doug Webster, the DoD Business Transformation Agency's deputy director, says DoD does not yet know how many business systems will be affected by the new congressional mandate. BTA's mission is to oversee business transformation systems and deliver enterprisewide capabilities.

"It remains to be seen yet how it's implemented in terms of governance process through investment review board and ultimately the Defense Business Systems Management Committee," he says. "But I think the words in the law are there to make this a very rigorous process."

Webster speaking at an event sponsored by IAC yesterday, says the other thing the provision will do is force DoD to stop trying to change vendor software to meet their neeeds.

"We see folks coming for request for funding with a count of reports, interfaces and various customizations of software in the order of a 1,000 or more," he says. "That is clear evidence that there has not been a very significant degree of business process engineering. My belief is based on the statute that we will see some changes to that."

Another way the military is trying to overcome these long-standing challenges is by standardizing 15 specific business functions.

Webster said these include functions such as "procure-to-pay," "hire-to-retire" and "budget-to-report."

"We are looking at all of those, but seeking to prioritize the amount of depth we go into in those in terms of those that will provide the greatest payback in terms of investment, time in building out standards and building out content related to those processes in the business processes architecture," he says. "I think it's clear to say 'hire-to-retire' and 'procure-to-pay' are two very important ones that we will be putting near term attention to."

Webster says the end goal is improve the data interoperability and communication of these 15 functions across all of DoD.

-Jason Miller, FederalNewsRadio.com
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President Obama announced his intent to nominate James L. Taylor to be Chief Financial Officer, Department of Labor

James L. Taylor, Nominee for Chief Financial Officer, Department of Labor

James L. Taylor has nearly thirty years of federal financial management experience. He is currently the Deputy Inspector General for the Department of Homeland Security, where he assists the Inspector General in managing over 600 auditors, inspectors, and investigators. From 1999-2005, Mr. Taylor was the Deputy Chief Financial Officer for the Department of Commerce, where he successfully implemented the department’s first integrated financial management system. Prior to his position at Commerce, Mr. Taylor served as the Deputy Chief Financial Officer for the Federal Emergency Management Agency, where he helped transform FEMA’s financial operations to more effectively support the agency’s disaster response activities. Mr. Taylor has received the Donald E. Scantlebury Award for Excellence in Federal Financial Management, and the Presidential Rank Award of Distinguished Executive. He received his B.A. from Old Dominion University and an MPA from the University of Delaware, where he was a Public Service Fellow.

Monday, March 01, 2010

GAO: Federal financial picture is grim

It's an annual Washington ritual: The Treasury Department releases a year-end consolidated financial report for the federal government, followed by an audit report from the Government Accountability Office that says the numbers are so flawed as to largely render the Treasury report unreliable.

The Treasury report shows that the government's net operating cost for fiscal 2009 was about $1.3 trillion -- a $245 billion increase over 2008. In a statement accompanying the report, Treasury Secretary Timothy Geithner said the increase was due largely to rising costs for mandatory spending programs, such as unemployment insurance, Social Security, Medicaid and Medicare benefits along with economic stimulus spending. At the same time, tax revenues were down more than $400 billion due to the flagging economy. All were factors in the ballooning budget deficit, which spiked from $455 billion in 2008 to $1.4 trillion in 2009.

The only part of the government's consolidated book-keeping for which GAO was able to issue an unqualified opinion was the 2009 Statement of Social Insurance, which includes Social Security, Medicare and Railroad Retirement social insurance programs.

While the book-keeping for the Statement of Social Insurance might be reliable, it's hardly good news. The data show that the present value of projected scheduled benefits exceeds earmarked revenues for Social Security and Medicare by about $46 trillion during the next 75 years.

Without policy changes, interest payments on the country's growing debt coupled with entitlement program costs could absorb 92 cents of every dollar of federal revenue by 2019.

"Clearly, this is not sustainable," GAO reported.

"While financial management has improved significantly since the government began preparing consolidated financial statements, for the 13th year in a row now shortcomings in three areas again prevented us from expressing an opinion," said Gene L. Dodaro, acting comptroller general of the United States in a statement.

Those areas include serious financial management problems at the Defense Department, the government's inability to accurately account for and reconcile intragovernmental financial activity among agencies, and ineffective processes for creating consolidated financial statements.
Defense is the largest of four major agencies that did not receive individual clean audit opinions for the 2009 financial statement. NASA and the Homeland Security and State departments also failed to garner unqualified opinions by independent auditors.

Other major problems GAO cited include material weaknesses involving improper payments by agencies, which are estimated to be at least $98 billion, inadequate information security across government and ineffective tax collection activities.

The $98 billion estimate of improper payments in 2009 is a significant increase -- $26.2 billion -- over estimated improper payments in 2008. The increase was attributable to changes in methodologies or increased program outlays in four major areas: the Health and Human Services Department's Medicare fee-for-service program; HHS' Medicare Advantage; the Labor Department's Unemployment Insurance program; and the Transportation Department's Federal Aid Highway program.

The 2009 consolidated statement reflects the unprecedented government intervention aimed at stabilizing the economy since the start of the recession in December 2007, including investments in the Troubled Asset Relief Program, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, as well as mortgage-backed securities guaranteed by them.

"The ultimate cost of these actions and their impact on the federal government's fiscal condition will not be known for some time," the report said.

-Katherine McIntire Peters, GovExec.com
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GAO Cites Weak Financial Management in Federal Government

No big surprises here, but the Government Accountability Office has found widespread material weaknesses in internal control in the federal government’s financial management.

The GAO said it could not render an opinion on the federal government’s consolidated financial statements for 2009 (aside from the Statement of Social Insurance) because of those weaknesses and other limitations.

Acting Comptroller General Gene Dodaro underlined serious financial management problems at the Department of Defense, the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between agencies, and “the ineffective process the federal government uses to prepare the consolidated financial statements.”

On top of those problems, Dodaro cited material weaknesses involving improper payments estimated to be at least $98 billion, information security across government, and tax collection activities. He noted that four major agencies — DOD, the Department of Homeland Security, the Department of State, and NASA — did not get clean audit opinions.

Dodaro may not be a CPA — which is one factor holding up his confirmation for a more permanent slot at the helm of the GAO, along with the AICPA’s efforts to push congressional legislation requiring the Comptroller General to be a CPA — but he can still spot fishy accounting when he sees it.

However, he noted that beginning this year, new financial reporting standards would require a clearer and more comprehensive assessment of the federal government’s financial condition over the long term.

Still, the long-term trends do not look all that rosy. “Long term, the federal government faces huge structural deficits driven by rising health care costs and demographics,” Dodaro said in a press release. “Focused attention from Congress and the administration is needed to address these problems and put the government on a more sustainable path.”

The report is available on the GAO’s Web site at: http://www.gao.gov/financial/fy2009financialreport.html.

- Michael Cohn, WebCPA.com
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