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Monday, November 29, 2010

DOL Loses Clean Audit Opinion Due to New Core Financial Management System Implementation

The DOL 2010 Annual Financial Statements contain the following excerpt within the "Message from the Chief Financial Officer" (page 31).

"The U.S. Department of Labor implemented a new core financial management system this year to increase productivity and reduce costs when processing financial transactions and preparing financial reports....

As a consequence of converting to the New Core Financial Management System, the auditors were unable to complete a full examination of the Department’s FY 2010 financial statements. Difficulties with the timely
migration of data from the legacy system delayed the new system’s audit readiness, imposing limitations on the auditors’ scope of work which caused the Inspector General to withhold an opinion on the Department’s FY 2010 financial statements.

A clean audit opinion provides independent confirmation that the Department’s financial statements are presented fairly and in conformity with generally accepted accounting principles. Accurate and timely financial information improves the DOL’s accountability to Americans and allows the department to make informed operational, budget, and policy decisions. DOL is committed to regaining the unqualified (clean) audit opinion it held for the previous 13 years."

Further detail is provided in the Independent Auditor's Report (pp. 32 - 64).

Page 33:

"Our consideration of internal control over financial reporting resulted in identifying certain deficiencies that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies, as defined in the Internal Control over Financial Reporting section of this report, as follows:

Material Weaknesses

1. Lack of Sufficient Controls over Financial Reporting

2. Lack of Sufficient Controls over Budgetary Accounting

3. Improvements Needed in the Preparation and Review of Journal Entries

4. Lack of Adequate Controls over Access to Key Financial and Support Systems"
Page 34:
"In January 2010, DOL implemented a new financial accounting and reporting system. As a result of the implementation, DOL encountered a significant number of data migration, posting, reconciliation, and reporting issues that hindered its ability to assure the accuracy and completeness of consolidated financial statement balances and to provide data necessary for audit testing.

Specifically, DOL was unable to provide sufficient evidential matter that supports certain balance sheet accounts including fund balance with Treasury, intra-governmental accounts receivable, accounts receivable, other-advances, intra-governmental accounts payable, accounts payable, accrued benefits, and the components of net position, as reported in the accompanying DOL consolidated balance sheet as of September 30, 2010. Certain of these issues also impact the statement of social insurance as of September 30, 2010."

Carter: Incremental development and prototypes for business systems

The Defense Department says it's taking a more incremental development approach to business information technology systems and will require prototypes, starting immediately.

In a Nov. 15 memo, Pentagon acquisition czar Ashton Carter says the department should allow no more than three-and-a-half years of measured time to elapse between the moment when the milestone decision authority approves a business system modernization worth more than $1 million to when the system achieves initial operational capability. If a larger business system effort has been broken down into discrete increments, then the timeline for IOC applies to those increments, says Carter--whose official title is undersecretary of defense for acquisition, technology and logistics.

According to the memo, that means 12 months for assigning a program manager, developing a project plan and getting the investment review board to sign off on the business case. The clock starts ticking again after contract award (the memo doesn't appear to budget time for the procurement process) for a 12 month phase during which the program must produce a prototype. Thereafter, project officials have 18 months to complete engineering development and reach initial operational capability. The timeline, along with all the attendant decision points, is known as the Business Capability Lifecycle.

Overall, no more than five years should pass from when money is first obligated to when an increment of a major automated information system is complete or, should the program not be a MAIS, it achieves initial operational capability, Carter states.

-David Perera, FierceGovernmentIT.com

Wednesday, November 24, 2010

Auditors find financial system material weakness in DHS

Homeland Security Department components continue to struggle with cybersecurity controls over their financial systems, according to annual independent auditor examination of DHS financial statements.
The audit (.pdf)--an "other accompanying information" attachment to the department's fiscal 2010 financial report (.pdf)--finds that problems with information technology controls and system functionality collectively add up to a material weakness.

DHS has "systematic challenges" in complying with security policies and requires a stable and centralized financial system to fully address its problems, the audit states.

Coincidentally, DHS is pressing forward with an enterprise resource planning system meant to be just that, awarding on Nov. 19 a $450 million contract to Arlington, Va.-based CACI International to implement the system.

-David Perera, FierceGovernmentIT.com

U.S. Department of Homeland Security Publishes FY 2010 Performance and Accountability Reports

The Department of Homeland Security's Performance and Accountability Reports provide information that enables the President, Congress and the public to assess the effectiveness of the Department's mission performance and stewardship of resources. In participation with the Office of Management and Budget (OMB) alternative approaches to Performance and Accountability Reporting, the Department publishes the reports listed here rather than the consolidated Performance and Accountability Report published in previous years.

Fiscal Year 2010 Releases

Annual Financial Report for Fiscal Year 2010
(PDF, 316 pages - 10.78 MB), full report; also available by section:

Monday, November 22, 2010

DHS Awards Transformation and Systems Consolidation (TASC) Contract

DHS hires CACI to integrate back-office systems
-Jason Miller, FederalNewsRadio.com

The Homeland Security Department awarded CACI a contract to integrate several back office management systems.

Larry Orluskie, DHS director of communications for the Under Secretary for Management, confirmed that CACI will be the prime contract under the department's Transformation and Systems Consolidation (TASC) program.

TASC could be worth $450 million over a five-year base period and five one-year options.

Sources say it had been on hold until the Office of Management and Budget finished its review of all agency systems.

OMB deputy director for management Jeff Zients announced Friday that of the 20 systems reviewed by the administration, OMB found 10 were on track, five had to be significantly reduced, three had to be accelerated and two were terminated.

Under TASC, CACI will provide an integrated financial management, asset management and acquisition management system. The vendor also will provide program management, change management and integration services to implement and sustain the new system.

"TASC will provide a proven solution that integrates financial, acquisition, and asset management businesses processes, procedures and reporting capabilities," Orluskie said in an e-mail statement.

"The TASC solution will first be delivered to FEMA. Pending successful migration and approval from our Financial Services Advisory Board, the solution will then be delivered to additional components with an identified critical business need," according to Orluskie's e-mail.

Washington Technology first reported the award.

This will be DHS' second time trying to integrate its disparate financial and procurement systems. DHS tried to integrate up to eight different financial management systems in September 2004 when it awarded a $229 million contract to BearingPoint. But after about $52 million and 18 months, DHS canceled the contract.

And TASC hasn't gone smoothly either. DHS first issued the request for proposals in 2008. Savantage Solutions protested the RFP in February 2009.

DHS is placing a lot of expectation behind TASC despite its long history of challenges.

Janie Holl Lute, DHS deputy secretary, said in a recent hearing that DHS established an executive steering committee to make sure TASC meets its goals. Lute added that the program will focus on 18-24 month deployment schedule and a plan to minimize cost and risk.

PUBLISHER'S NOTE: TeraThink Corporation is a protege firm under CACI's mentorship within the Department of Homeland Security and is a prominent member of the CACI TASC team.

OMB cuts back financial management programs

The Office of Management and Budget canceled two federal financial management programs and significantly reduced the scope of five others following a broad review that was launched over the summer.

According to Jeffrey Zients, federal chief performance officer, the OMB canceled systems under development for the Department of Veterans Affairs and the Small Business Administration, saving more than $500 million.

Three financial management programs at the Department of Health and Human Services as well as one at the Department of Homeland Security and one at the Justice Department will proceed with a narrowed scope. The government said the changes will save $680 million.

This summer, the OMB halted new spending on selected federal agencies' financial management systems, requiring reviews before the projects could continue. The agency cited the typical sluggishness and high cost of the projects.

With the review now complete, Zients said about half of the 20 identified programs are on track.

Besides the two cancellations and five scaled-down projects, the OMB has accelerated the most useful parts of the programs of the Department of Housing and Urban Development and the Environmental Protection Agency, according to Zients.

Additionally, the OMB said it has made another $200 million in budget reductions in various agencies.

-Marjorie Censer, WashingtonPost.com

Agencies turn to technology for help reducing payment errors

In the past few years, 14,000 felons, both fugitive and jailed, raked in $230 million in federal benefits they were not entitled to receive. Twenty thousand dead Americans earned $180 million. In 2009 alone, the federal government made $110 billion in improper payments--that's nearly double the amount taxpayers will end up shelling out for the massive financial bailout, according to the latest estimates from the Congressional Budget Office.

The Office of Management and Budget breaks down the numbers like this: One-third of improper payments can be explained by poor documentation that makes it impossible to verify whether they were accurate, and another third result from failure to confirm individuals are eligible to receive the payments in the first place. The rest boil down to simple program errors, or people duping the system.

In July, President Obama signed the 2010 Improper Payments Elimination and Recovery Act, saying it would reduce waste and fraud by $50 billion by 2012. The law requires agencies to conduct recovery audits for programs that spend $1 million or more annually, review programs susceptible to significant payment errors every three years, and plan corrective actions for preventing future waste.

The White House also launched PaymentAccuracy.gov, a public website to track progress in reducing improper payments, and established the Do Not Pay List for agencies to verify individuals' or contractors' eligibility before making payments. Agencies were instructed to establish prepayment controls that systematically confirm eligibility of payment beneficiaries with existing databases, including the Social Security Administration's Death Master File and the General Services Administration's Excluded Parties List System that tracks companies barred from receiving federal contracts. At the same time, OMB is leading an initiative to integrate relevant databases into a central portal agencies can check prior to making payments.

Technology, Werfel agrees, plays a critical role in enabling access and integration of data, "so agencies can make smart, informed judgments before payment are made." But no single technology solution will address all risk of fraud or waste in federal programs. Agencies will have to customize data mining and analytics software to extract patterns from information and to flag anomalies, he says.

The Health and Human Services Department, whose Medicare program accounted for $24.1 billion in improper payments in 2009, according to a June report from the Government Accountability Office, plans to install data analysis tools to root out fraudulent payments in that program, as well as Medicaid and children's health insurance programs. Under a rule introduced in September, the Centers for Medicare and Medicaid Services will deploy computer applications that alert administrators to suspicious activities in the systems that process requests, including unusual patterns in billing and applying for services.

The agency will buy more sophisticated analytical tools to screen applications to enroll in the program and to identify patterns in phone calls to the toll-free Medicare hot line from beneficiaries who flag possible problems in the program. CMS also is seeking public comment on the rule's proposal to collect fingerprints from health care providers and suppliers, which would be checked against law enforcement databases.

Technology solutions depend largely on individual programs, all of which face different challenges in closing loopholes or addressing flaws in their systems. For the Agriculture Department that means finding a way to prevent school employees from ringing up the cost of meals incorrectly, which led to $1.6 billion in improper payments through the School Lunch Program in 2009, INPUT reported. That objective is distinct from HHS identifying individuals attempting to defraud the health insurance system, or the IRS flagging errors taxpayers make in filing their own returns.

Though automated processes can go a long way in identifying anomalies in financial systems, the human element is crucial to targeting the right data and taking steps to address problems once they're identified.

-Jill R. Aitoro, NextGov.com

Wednesday, November 17, 2010

Audio: Danny Werfel and Ken Baer on federal improper payments

The Office of Management and Budget held a press call Nov. 16 to announce that the governmentwide improper payment rate decreased during the last fiscal year to 5.49 percent, down from the 5.65 agencies reported the year before.

That decrease amounts to a $3.8 billion reduction in improper payments, according to OMB officials. However, even as the rate declined somewhat, the absolute number grew by $15 billion to $125 billion during fiscal 2010. An improper payment occurs when a recipient receives either too much or too little of an intended federal payment, or when the recipient misuses the funds, or even when there's a lack of sufficient documentation to prove that a payment was proper.

During the call, OMB Controller Danny Werfel also announced the release of new guidance (.pdf) requiring agencies to submit a payment recapture audit plan.

-David Perera, FierceGovernmentIT.com

For more:
- download the new OMB improper payment guidance (.pdf)

- read a Nov. 16 post on the OMB blog about improper payments

- read Sen. Collins statement

Tuesday, November 16, 2010

NASA Financials Get Clean Bill of Health

WASHINGTON, Nov. 16, 2010 /PRNewswire-USNewswire/ -- The National Aeronautics and Space Administration received a much-improved financial statement audit opinion for the 2010 fiscal year.

"I am pleased to receive this qualified audit opinion that reflects the fact NASA is fairly stating our financial position to our stakeholders," NASA Chief Financial Officer Elizabeth Robinson said. "We are working hard to provide useful, accurate information about our financial results, and this audit opinion is an important achievement in that effort."

It marked the first time since the 2002 fiscal year that independent auditors issued a qualified opinion, with no material weaknesses, rather than a disclaimer of opinion on NASA's financial statements. The agency's independent auditors also reported that, in their opinion, NASA's fiscal 2010 financial statements fairly represent the financial position of the agency as of Sept. 30, 2010, and its budgetary resources for the year that ended. This significant achievement is clear evidence of NASA's progress in financial management during the past decade.

As a result of successful efforts to fully integrate the financial accounting system, the auditors concluded for the first time since the 2000 fiscal year that NASA is now substantially compliant with federal financial management systems requirements of the Federal Financial Management Improvement Act.

AGA Awarded Contract by the U.S. Department of Veterans Affairs to Deliver CGFM Courses to Government Financial Management Staff

ALEXANDRIA, Va.--(BUSINESS WIRE)--Recently, the Association of Government Accountants (AGA) delivered eight sets of Certified Government Financial Manager (CGFM) courses to the U.S. Department of Veterans Affairs’ (VA) employees, as part of the contract awarded to AGA by the VA. The contract spans five years with a potential of 68 sets of CGFM courses to be delivered during this period.

Each set consists of three CGFM courses:

Course 1: Governmental Environment

This course looks at the organization and structure of government, public accountability, ethics in government, the governmental financing process and other legal and environmental aspects of government.

Course 2: Governmental Accounting, Financial Reporting and Budgeting

This course looks at the general principles of governmental financial accounting and performance reporting, and budgeting, as well as the unique aspects of both federal and state and local financial accounting and reporting.

Course 3: Governmental Financial Management and Control

This course looks at internal and management control, auditing, performance measurement and reporting, financial and managerial analysis and techniques, concepts and controls.

The CGFM courses provide a foundation in all areas of government financial management and deal with all levels of government -- federal, state and local. These courses have been designed as high-quality continuing professional education (CPE) for individuals new to the government financial management arena or individual looking to expand their knowledge of this field. These courses also help candidates prepare for the three CGFM Examinations.

About AGA: The Association of Government Accountants is a 15,000-member professional association that serves government accountability professionals by providing quality education, fostering professional development and certification, and campaigning in the public interest to for higher standards of government accountability and transparency. www.agacgfm.org


Monday, November 15, 2010

Today's GAO Publications

The Government Accountability Office (GAO) today released the following reports and correspondence:

The Federal Government's Long-Term Fiscal Outlook: Fall 2010 Update.
GAO-11-201SP, November 15.
Highlights - http://www.gao.gov/highlights/d11201sphigh.pdf
Podcast - http://www.gao.gov/podcast/watchdog_episode_37.html

Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) Fiscal Years 2010 and 2009 Financial Statements.
GAO-11-174, November 15.
Highlights - http://www.gao.gov/highlights/d11174high.pdf

Financial Audit: Federal Housing Finance Agency's Fiscal Years 2010 and 2009 Financial Statements.
GAO-11-151, November 15.
Highlights - http://www.gao.gov/highlights/d11151high.pdf

U.S. Government Accountability Office: Performance and Accountability Report, Fiscal Year 2010.
GAO-11-2SP, November 15.

Friday, November 12, 2010

GAO chastises IRS over financial system cybersecurity

Persistent, serious deficiencies in the Internal Revenue Service's controls over information security remain uncorrected from the last fiscal year, says the Government Accountability Office.

The GAO, in an annual audit of IRS financial statements and internal controls, chastises the tax agency for not adhering to the least privilege principal of network access and leaving uncorrected an access control weakness in the Redesign Revenue Accounting Control System that compromised the IRS's ability to segregate duties. The RRACS weakness "jeopardized the integrity of the application's data," the GAO audit states.

None of the information security holes undermined the validity of IRS financial statements, but GAO auditors say that manual compensation for information security vulnerabilities is disappearing as an option for the IRS.

As automation takes over the agency--as it's meant to do, under a multi-billion modernization effort--manual options will simply not be possible, the GAO says.

Failing to resolve those deficiencies "could have serious adverse implications for our ability to determine whether IRS's financial statements are fairly stated in the future," auditors warn.

-David Perera, FierceGovernmentIT.com

- download the report, GAO-11-142 (.pdf)

Postal Service posts $8.5 billion loss

The cash-strapped U.S. Postal Service delivered more bad news Friday, announcing it lost $8.5 billion in the fiscal year that ended in September. Without congressional action to change its obligations, officials said, the Postal Service likely will go broke at the end of fiscal 2011.

Letter carriers delivered 6 billion fewer pieces of mail in fiscal 2010, with a significant drop in first-class mail deliveries, officials said. Financial losses also came from about $5.4 billion in obligations to pre-fund future retiree health benefits and about $2.5 billion paid to the federal government's workers' compensation insurance fund.

Outgoing Postmaster General John E. Potter said last month that he anticipated at least $6 billion in annual losses, but cautioned the number would likely go higher once the mail service tallied its workers' compensation contributions. All federal agencies and the Postal Service, a quasi-federal outfit, have workers' compensation obligations to help fund four major disability compensation programs.

The Postal Service also announced Friday that it plans to deplete its $15 billion line of credit with the U.S. Treasury by borrowing the remaining $3.5 billion available to it. Though the Postal Service does not use taxpayer funding, it has tapped the credit line since the early 1990s. Depleting it means the Postal Service likely will go broke at the end of fiscal 2011 unless Congress takes action, officials said.

-Ed O'Keefe, WashingtonPost.com

Monday, November 08, 2010

DoD IG blasts Army LMP

The Defense Department inspector general is calling into question an Army Materiel Command implementation of a $1.1 billion enterprise resource planning effort known as the Logistics Modernization Program.
LMP is an installation of SAP software by Computer Sciences Corp, which began work in December 1999. The inspector general says, in a report dated Nov. 2, that the system doesn't record financial data at the transaction level, meaning that the Army Working Capital Fund cannot receive an unqualified audit opinion.

Defense Department accounting is notoriously messy, with auditors unable to reconcile DoD or military service financial statements. The department says it can have clean books by 2017, provided that auditing guidelines are modified.

Because the service will have to spend additional money on top of the $1.1 billion it already spent on LMP through fiscal 2009 to capture transactional data, report author Mary Ugone, deputy inspector general for auditing, recommended that the Army suspend further deployment of LMP. It's a recommendation that the Pentagon comptroller and the deputy chief management officer disagreed with and CSC announced on Nov. 3 the third and final phase of LMP implementation.

Ugone also recommended that the Pentagon conduct an analysis of alternatives to determine whether it might be more cost-effective to cancel LMP and look at alternative solutions in order "to obtain DoD compliance with the U.S. Government Standards General Ledger requirements." That's also a recommendation that the comptroller and deputy chief management officer disagreed with.

However, Pentagon officials did say they will ponder the future direction of LMP and issue an acquisition decision memorandum. A September meeting of the DoD investment review board also required the Army to come up with an overall Army ERP strategy by this December, the report states.

LMP will be subject to a review by the Office of Management and Budget as part of an evaluation of federal financial management system projects, the report adds.

-David Perera, FierceGovernmentIT.com

- download the report, D-2011-015 (.pdf)

Single-audit database would increase efficiency

States, nonprofits and other groups that annually expend $500,000 or more in federal awards are required to obtain an annual audit under the 1996 Single Audit Act Amendments and Office of Management and Budget Circular A-133. Requiring a single audit of an organization is intended to be a cost-effective measure, in place of requiring multiple audits of individual programs.

An interactive database would allow OMB to begin analyzing single audit reports instead of just collecting them. A recent research project sponsored by PricewaterhouseCoopers under the Association of Government Accountants' Corporate Partner Research Series was able to exploit existing technologies to transform single audit reports from PDF files to digital text and then to digitally link the collection form and the auditor's report. Once converted, the reports became searchable with intelligent and intuitive software that could articulate findings for a program across entities, across all programs within an entity, and between entities.

This is a great opportunity to turn this investment of 15 years and almost 500,000 reports into something useful. Going back just three years would create data trends sufficient to permit analysis that might help identify in advance high-risk recipients, or better yet, high-risk applicants.

Think of the possibilities. Details of audit findings could be examined: for a program across entities, to identify common issues with a program and type of entity; across all programs within an entity to identify common issues with an individual entity; and between entities to identify common issues occurring at a state level.

Another purpose for an interactive single-audit database would be to track corrective action plans to identify recurring or uncorrected problems, and to obtain metrics for how well the recipient is performing and how well the single audit is working.

-Joeseph Kull, FederalTimes.com

Saturday, November 06, 2010


WASHINGTON – The Department of Justice announced that another of its components, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), implemented the Unified Financial Management System (UFMS), a core centralized accounting system that improves internal controls and standardizes data.

ATF is the second department law enforcement organization to convert to UFMS as the financial system of record. The Drug Enforcement Administration (DEA) implemented UFMS in January 2009, following a pilot deployment to the Justice Management Division’s (JMD) Asset Forfeiture Management Staff. UFMS now serves more than 2,500 Department of Justice users worldwide.

The ATF implementation was completed on schedule and on budget, employing a two-phased approach to minimize risk and capitalize on lessons learned from earlier implementations. More than 95 percent of ATF’s requirements were met by the standard processes, interfaces and reports already designed and available in the department’s foundation build of UFMS. As a result, the initial design and development was done on time, and deployed to many users.

The department shares the Office of Management and Budget (OMB)’s goal to reduce the risks and costs of implementing federal financial management systems. The most critical department business need for core accounting functionality is delivered by UFMS, implemented in phases across components with defined milestones, the department said.

The implementation of UFMS, based on CGI Federal’s Momentum 6.3, is a collaborative effort by JMD and ATF with the systems integrator, IBM.

For more information on the department’s UFMS program, visit: www.justice.gov/jmd/ufms/overview.htm

Tuesday, November 02, 2010

Today's GAO Publication

The Government Accountability Office (GAO) today released the following report:

Reissued Product
1. Recovery Act: Department of Justice Could Better Assess Justice Assistance Grant Program Impact. GAO-11-87, October 15.


Highlights - http://www.gao.gov/highlights/d1187high.pdf

Monday, November 01, 2010

Cashing out: 3SB financial management companies drawdown

JOINT BASE BALAD, Iraq— As phase two of the reduction of forces in Iraq begins, units are continually finding ways to do more with less. The same holds true for financial management companies across Iraq.

The 82nd Financial Management Company, 3rd Special Troops Battalion, 3rd Sustainment Brigade, 103rd Sustainment Command (Expeditionary), handed off operations Oct. 8 to the 15th FM Co., 3rd STB, 3rd Sustainment Bde., 103rd ESC, leaving the 15th FM Co. as the lone financial management company in Iraq.

In February of this year, there were 15 finance detachments spread throughout Iraq. After the initial reduction of U.S. Forces Sept. 1, that number was reduced to eight, which left room to reduce the number of U.S. Forces even further by doing away with one of the finance headquarters.

The entire process of transfer took approximately two weeks, administratively speaking, said Heckel. That doesn’t include the time it took to move approximately $16 million dollars and Iraqi dinar from the 82nd FM Co.’s vault at JBB to the 15th FM Co.’s vault at Victory Base Complex, Iraq, which was completed Oct. 15.

For the 15th FM Co., this is the culmination of a mission that started 11 months ago, said Maj. Jason Shick, commander of the 15th FM Co., and Bremen, Ohio, native.