OMB’s latest DATA Act guidance highlights PII, financial assistance

Personally identifiable information and data “validity” are the focus of the Office of Management and Budget’s latest DATA Act guidance.

In a Nov. 6 memo to agencies, OMB delves into detail for reporting certain types of federal financial assistance and awards under the Digital Accountability and Transparency Act.

The guidance does not change or affect any existing policy, OMB clarifies, but does “further [specify] (1) responsibilities for reporting financial information for awards involving Intragovernmental Transfers (IGTs), (2) guidance for reporting financial assistance award records containing personally identifiable information (PII), and (3) guidance for agencies to provide the Senior Accountable Official (SAO) assurance over quarterly submissions to USASpending.gov,” the memo states.

According to the latest guidance, two types of intragovernmental transfers are included under DATA Act reporting: allocation transfers and buy/sell transactions.

OMB directs agencies that starting with their first DATA Act reporting on allocation transfers, the agency will “submit and assure the appropriations information, program activity and object class, and award financial information for allocation transfers for display on USASpending.gov.”

As for buy/sell transactions, both the awarding and funding agencies must submit information for spending reports.

Under the new guidance, if a Federal Award Identification Number (FAIN) is included in details for a single award, the agency should report that award to USASpending “as a single, discrete record.”

If single award-level reporting isn’t possible, agencies can report aggregated awards at a county or state level.

As of the Nov. 6 guidance, however, the DAIMS [DATA Act Information Model Schema] only offers guidance for aggregate county level.

OMB directs agencies to continue the county-level reporting practice until that schema is modified.

The guidance is the latest in a  series of OPM memos and updates for agencies, as they prepare for the May 2017 implementation of the DATA Act.

Officials with OMB and Treasury — the two agencies spearheading the DATA Act’s implementation — stand by the progress toward full adoption, while GAO auditors have repeatedly warned that the federal spending standardization could fall behind if agencies don’t get in line with the legislation’s requirements.

In early August, a GAO report warned that Treasury’s 4-month delay for releasing its schema version 1.0, triggered the delay of industry software patches while companies waited for a “stable version of the schema.”

That assessment came on the heels of another GAO report that said the full rollout of the DATA Act is at risk if OMB and Treasury don’t take steps to improve the review of agency plans and monitoring of progress updates.

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Watchdog: Government Still Has Big Financial Management Problems

The usefulness of the government’s consolidated financial statements, though improved in recent years, remains hampered by “material weaknesses,” primarily at the departments of Defense and Health and Human Services, that prevent auditors from rendering an audit opinion, the Government Accountability Office reported.

In its mandatory audit of the government’s fiscal 2013 and fiscal 2012 consolidated financial statements released Thursday, the congressional watchdog pointed to three issues affecting the government’s estimate of its assets, liabilities and costs that urgently need improvement. They include “serious financial management problems” at the Defense Department; a governmentwide inability to adequately account for and reconcile intragovernmental activity and balances between federal entities; and an “ineffective process” for preparing the consolidated financial statements.

GAO noted that the Pentagon accounts for about 33 percent of the government’s total assets and about 16 percent of fiscal 2013 spending, but the agency has been given a “disclaimer of opinion” on its consolidated financial statements. Similarly, uncertainties in the growth rate of Medicare and Social Security, which account for 68.8 percent of the value of future expenditures in excess of future revenue, are responsible for HHS’ disclaimer of opinion.

Further crimping the government’s broader ability to get a grip on finances is an inability to determine the full extent of improper payments and actions to prevent them; unresolved information security control deficiencies; and effective management of tax collection activities, GAO said.

-Charles S. Clark, GovExec.com
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Department of Defense to Use Invoice Processing Platform (IPP) for Intra-governmental Buy/Sell Transactions

In 2012, Treasury launched a proof-of-concept pilot using IPP to help federal agencies manage intra-governmental buy/sell transactions. Several agencies participated in the pilot, including the Department of Defense (DoD), who found that IPP helped increase visibility into intra-governmental buy/sell transactions, as well as helped with difficult, labor-intensive reconciliation and elimination efforts.

On August 5, 2013, the Under Secretary of Defense (Comptroller) issued a memo that it is partnering with the U.S. Department of the Treasury to implement the Invoice Processing Platform as DoD’s core system to manage all inter- and intra-governmental transactions and documentation. According to the memo, this partnership will strengthen management and accountability for nearly $273 billion in intra-governmental business.

The phased implementation will initially include only DoD-to-DoD transactions. At a later date, transactions between DoD and its civilian trading partners will be included. Excluded from this effort are commercial transactions (which will continue to be managed using DoD’s Wide Area Workflow) and DoD's interfund transactions.

The buy/sell process between government agencies has been fraught with challenges. A 2013 GAO audit of the U.S. Government's Fiscal Years 2012 and 2011 Consolidated Financial Statements (report GAO-13-271R) found a $20.2 billion difference in intra-governmental buy/sell activity and balances. It also revealed that the reconciliation process for buy/sell transactions was difficult and labor intensive.

IPP supports more efficient intra-governmental buy/sell transactions between federal agencies by helping ensure consistent communication between trading partners and providing visibility into each stage of the transaction.

To view the DoD memorandum regarding the implementation of IPP for intra-governmental buy/sell reimbursable transactions, please visit:http://www.ipp.gov/downloads/DoD_Memo.pdf

For more information on the DoD IPP intra-governmental buy/sell implementation, contact the DoD Business Integration Office (BIO)

at (703) 697-1096.

For more information on IPP’s intra-governmental capabilities, contact Michael Bolin at michael.bolin@fms.treas.gov.

For more information about the features and benefits of IPP’s intra-governmental module, visit: http://www.ipp.gov/about-ipp/intra-governmental.

- Federal Reserve Bank of Boston / Treasury FMS
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IRS program, interagency contracting finally removed from High-Risk list

Interagency contracting and the IRS Business Systems Modernization program are no longer considered high risk initiatives by the Government Accountability Office.

GAO removed these two programs from its biennial High Risk Listreleased today.

The multi-billion dollar IRS program made it off the list after 18 years of constant challenges around technology and financial management controls, and other management weaknesses.

The GAO put the management of interagency contracting on watch in 2005 because of unclear lines of accountability between customer and assisting agencies, and improper use of these contracts, which included buying out-of-scope work and limited or non-competitive procurements.

GAO said both the IRS and the Office of Federal Procurement Policy have improved the weaknesses so the programs now are considered to be on a strong path toward success.

-Jason Miller, FederalNewsRadio.com
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GAO Cannot Audit Federal Government, Cites Department Of Defense Problems

WASHINGTON -- The Government Accountability Office said Thursday that it could not complete an audit of the federal government, pointing to serious problems with the Department of Defense.

Along with the Pentagon, the GAO cited the Department of Homeland Security as having problems so significant that it was impossible for investigators to audit it. The DHS got a qualified audit for fiscal year 2012, and is seeking an unqualified audit for 2013.

The report released by the GAO on Friday indicates serious accounting problems at two of the largest government agencies: the Pentagon and the Department of Homeland Security. The Department of Defense has a net cost of $799.1 billion to the federal budget, while the Department of Homeland Security has a net cost of $48.7 billion.

"The U.S. Government Accountability Office (GAO) cannot render an opinion on the 2012 consolidated financial statements of the federal government because of widespread material internal control weaknesses, significant uncertainties, and other limitations," the agency said. "As was the case in 2011, the main obstacles to a GAO opinion on the accrual-based consolidated financial statements were: Serious financial management problems at the Department of Defense (DOD) that made its financial statements unauditable. The federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies. The federal government’s ineffective process for preparing the consolidated financial statements."

In the report, the GAO also said that the federal government could not reconcile transfers between federal agencies and had an ineffective process for preparing financial statements.

The report lists the Department of Defense as having the third-largest cost to the federal government, at 21 percent. That value is slightly behind the costs of the Department of Health and Human Services and the Social Security Administration, which both have high costs because they run the large social insurance programs Medicare and Social Security.

- Luke Johnson, Ryan Grim, HuffingtonPost.com
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GAO: Fiscal Year 2011 U.S. Government Financial Statements

The Federal Government Faces Continuing Financial Management and Long-Term Fiscal Challenges, by Comptroller General Gene L. Dodaro, before the House Committee on Oversight And Government Reform: Government Organization, Efficiency And Financial Management Subcommittee.
GAO-12-444T, March 1.

http://www.gao.gov/products/GAO-12-444T
Highlights - http://www.gao.gov/assets/590/589003.pdf


READ MORE and Download the Report Here...

Federal financial report is in, but GAO offers no opinion

The federal government's consolidated financial report for 2011 is out and the picture isn't pretty. The Government Accountability Office found once again that it can't render an opinion on that statement. That's despite the fact that several departments received their own clean financial statements.

In Fiscal Year 2011, 20 of the 24 individual CFO Act agencies received unqualified opinion on all of their financial statements, Dacey said. One agency received an unqualified opinion on all of its statements with the exception of its statements on social insurance and changes of social insurance. Another agency received a qualified opinion.


The three main obstacles to GAO giving an opinion on the accrual based financial statements:


1.Serious financial problems at the Department of Defense have prevented its statements from being auditable.

2.The federal government has been unable to adequately account for and reconcile intergovernmental activity and balances between agencies.

3.The federal government has an ineffective process for preparing consolidated financial statements.

-Michael O'Connell, FederalNewsRadio.com
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New governmentwide financial systems on tap

By the summer, agency chief financial officers will begin figuring out how to move to new governmentwide systems to process intergovernmental transactions and vendor invoices.


Danny Werfel, the Office of Management and Budget's controller, said the Treasury Department is in the middle of testing and analyzing existing systems to see which could be expanded.

Werfel said by May or June Treasury and OMB should come to a final decision about which systems to use and begin to figure out how agencies should migrate to these common systems.


OMB and Treasury has been working on these common systems since last winter.

It's also how the Obama administration has modified the Financial Management Line of Business initiative started under the Bush administration. The FM LOB tried to standardize business processes and terminology, and get agencies to shut down their systems and move to shared service providers. OMB announced in March it was closing the Financial Systems Integration Office (FSIO), which led much of the business process standardization work. Instead of FSIO, OMB set up the Office of Financial Innovation and Transformation (OFIT) within Treasury to lead these intergovernmental transactions and vendor invoicing pilots.

Werfel said the governmentwide systems are among the CFO community's top priorities in 2011.

One of the top goals is to further reduce improper payments. Werfel said agencies made significant progress in 2010, reducing the governmentwide improper payment rate to 5.49 percent, from 5.65 percent in 2009.

Werfel said this means that agencies prevented an additional $3.8 billion in improper payments from being made in 2010.

Along with improper payments, Werfel and other agency CFOs detailed priorities and plans at a recent CFO Council meeting. The 47-page PowerPoint presentation goes through everything from improper payments to technology innovation to open government and transparency to decision support and workforce challenges.


Werfel said federal financial management is getting better each year despite the Defense Department's inability to get audited.

The Government Accountability Office issued its annual report last month finding for a 14th straight year that auditors could not issue an opinion.

Still, Werfel said the total number of clean opinions is up to 20, including NASA, which moved from a disclaimed opinion to a qualified opinion.

OMB also is working closely with DoD on its financial books.


Werfel said the Pentagon is focused on different key areas to help it become auditable. He said DoD is starting with activities that are most closely related to their operational and mission success, which includes things like how money flows through the agency, managing execution and cash flows.

-Jason Miller, FederalNewsRadio.com
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GAO: U.S. Government’s 2008 Financial Report Demonstrates Significant Problems

WASHINGTON (December 15, 2008) - For the 12th year in a row, the U.S. Government Accountability Office (GAO) was prevented from expressing an opinion on the consolidated financial statements of the U.S. government—other than the Statement of Social Insurance—because of numerous material internal control weaknesses and other limitations.

"While significant progress has been made in improving financial management since the federal government began preparing consolidated financial statements 12 years ago, three major impediments have continued to prevent us from rendering an opinion on the accrual basis consolidated financial statements over this period of time," said Gene L Dodaro, Acting Comptroller General of the United States and head of the GAO. "Those include 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 federal agencies, and the federal government’s ineffective process for preparing the consolidated financial statements." Dodaro also noted three additional material weaknesses related to improper payments, information security, and tax collection activities. Dodaro added that at least three major agencies did not get clean opinions – the Department of Defense, the Department of Homeland Security, and the National Aeronautics and Space Administration (NASA).

"The need for reliable, high-quality financial information has never been greater," Dodaro said, pointing out that much work remains to be done on improving the state of federal financial management. "Continued improvement needs to be a top priority of the new administration and Congress to help provide the financial accountability the public deserves and the information decision makers need to help evaluate government programs and manage the government in a cost-effective manner".

The fiscal year 2008 Financial Report of the United States Government, which includes financial information from the 24 major federal departments and agencies and GAO’s audit report, is being released today by the Treasury Department. Dodaro noted that the report would not be possible without the commitment and professionalism of Inspectors General throughout the federal government who are responsible for annually auditing the financial statements of individual federal agencies. The report is also available on GAO’s web site at

www.gao.gov/financial/fy2008financialreport.html.

FSIO Quarterly Newsletter - Summer/Fall 2008

FSIO recently posted its latest Quarterly Newsletter online.

This issue includes:

• An interview with Owen Barewell, FSIO Transformation Team Chairman and DOE DCFO
• SSP Spotlight on GSA's Federal Integrated Solutions Center (FISC)
• FMLOB Procure-to-pay standardization
• Reimbursables Standard Business Process plans

Intra-Governmental Transactions Management for Federal Agencies

Potomac Forum Intra-Governmental Transaction Management Workshop
November 12, 2008 – Willard InterContinental Hotel

Workshop Description
This half day program will equip you with the knowledge you need to bring more efficiency and accountability to managing interagency transactions. During the session, you will hear from top financial management experts from the government and the private sector, who will review best practices, strategies and technologies they are using to enhance IGT management, as well as share lessons learned and give practical tips on deploying IGT management solutions.

What You Will Learn

• Best practices in IGT management employed by federal agencies
• Practical solutions and tips on implementing IGT solutions
• Strategies and technological tools that can make IGT management at your agency easier and more effective

Why You Should Attend
The difficulty associated with accounting for buy-sell activity among agencies stifles the financial performance of federal agencies and is a major reason that the federal government is unable to deliver a government-wide consolidated financial statement.

Introducing enhanced tools and processes into IGT management can make a difference to your agency's financial performance while saving the time and resources currently spent on reconciling interagency transactions.

Who should attend

• Mid- to senior-level federal financial managers
• Managers involved in intra-governmental transactions management

Format

• Presentations by financial management experts.
• Panel discussion featuring case studies by financial management practitioners from federal agencies and the private sector.
• Interactive roundtable discussions during the event, concluding with an open Q&A session.

Registration
Email Mary@potomacforum.org to be placed on email list for more details

Additional details and agenda can be found at the Potomac Forum website.

Treasury makes progress on financial reporting

"The Treasury Department is making progress in modernizing its accounting and financial reporting systems so agency data will be more accurate and consistent, Ken Carfine, Treasury’s fiscal assistant secretary, said today.

The department is reducing the number of older systems and developing new ones for its Financial Management Service (FMS) to help agencies track payment transactions, he said.

The changes are designed to fix weaknesses in how Treasury and other major agencies report their financial activities and reconcile their transactions with one another, Carfine said at FMS’ annual Government Financial Management Conference.

Because of those weaknesses, the Government Accountability Office has been unable to give an audit opinion about the federal government’s consolidated financial statement for the past 11 years. GAO officials have said the weaknesses make the data unreliable."

-Mary Mosquera, FCW.com

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Commentary: Tackling interagency transactions can enhance transparency

The challenge of reconciling interagency transactions has preoccupied government managers for several decades. John Cox, chief financial officer for the Housing and Urban Development Department, recently identified it as a “$100 billion problem” — the difficulty of accounting for sales activity among agencies has clearly stifled financial performance in addition to being a primary barrier to delivering a governmentwide consolidated financial statement.

Until now, discussion has focused mainly on manual research and reconciliation of the interagency out-of-balance problem, which clearly remains the most urgent priority for most federal CFOs to reconcile.

At the same time, does the implementation of an intergovernmental transactions (IGT) management solution offer us a chance to look beyond this immediate need alone? IGT management is bound to be an integral part of the financial management structure at any agency, and the way it’s integrated, deployed and utilized will affect transparency and accountability overall.

Such a strategic view of interagency financial transactions can enable federal managers to address a broad range of priorities as well as anticipate the needs of their agencies for years to come. With access to modern tools, managers can deploy a commercial IGT reconciliation system in a way that will not only resolve interagency imbalances but also provide expanded benefits that can include intradepartmental transparency, more sophisticated internal controls or grant management capabilities.

-Eva Robinson and Doug Davidson, FederalTimes.com

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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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OMB Federal Financial Management Report 2008

The Office of Federal Financial Management within the Office of Management and Budget has developed a "Framework for Improving Financial Performance" to provide direction and clarity on how the President’s improvement goals for financial management will be met. This "Framework" is the subject of this Federal Financial Management Report 2008 ("the Report") and also fulfills the Office of Federal Financial Management’s requirement, under section 301(a) of the Chief Financial Officers Act of 1990 (CFO Act) (Pub. L. No. 101-576) (codified at 31 U.S.C. 3512(a)), for providing Congress and the financial management community with a Government-wide "Five-Year" financial management plan and status report.

Download the Report

FederalNewsRadio - Ask the CFO - Kathleen Turco (GSA)

General Services Administration

Kathleen Turco - Chief Financial Officer

GSA offers bundled buying power to federal agencies and it is the job of the CFO to appropriately manage and report on the money trail. To make sure the job gets done, Turco says GSA has started issuing monthly financial reports on revenue and expenses. She says that is also part of the GSA response to its 2005 audit, when it lost its clean opinion. Two years -- and two clean opinions -- later, Turco says GSA is on the right track and that agencies should have confidence in turning to GSA. However, she still sees some remaining challenges, including GSA's business feeder systems.

Listen Here

GAO: Some Progress on U.S. Government's Financial Statements But Significant Problems Remain

Serious Material Weaknesses Affecting Financial Systems, Fundamental Recordkeeping, and Financial Reporting

WASHINGTON (December 17, 2007) - For the 11th year in a row, the U.S. Government Accountability Office (GAO) was prevented from expressing an opinion on the consolidated financial statements of the U.S. government--other than the Statement of Social Insurance--because of serious material weaknesses affecting financial systems, fundamental recordkeeping, and financial reporting.

David M. Walker, the Comptroller General of the United States and head of GAO, did note some progress in this year's audit. This year GAO expressed an unqualified opinion on the fiscal year 2007 Statement of Social Insurance, which includes the Social Security, Medicare, Railroad Retirement, and Black Lung programs. This is significant because the statement covers some of the largest numbers in the federal government--tens of trillions of present-value dollars associated with future social insurance expenditures.

Overall, however, Walker was not satisfied. In a speech today at the National Press Club, he said, "If the federal government was a private corporation and the same report came out this morning, our stock would be dropping and there would be talk about whether the company's management and directors needed a major shake-up." Walker urged greater transparency and accountability over the federal government's operations, financial condition, and fiscal outlook.

Despite improvements in financial management since the U.S. government began preparing consolidated financial statements more than a decade ago, three major impediments prevent the U.S. government from obtaining a clean opinion: (1) serious financial management problems at the Department of Defense, (2) the federal government's inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government's ineffective process for preparing the consolidated financial statements.

"Until the problems outlined in our audit report are adequately addressed, they will continue to have adverse implications for the federal government and American taxpayers," Walker said in a letter to the President and Congress.

"The federal government's fiscal exposures totaled approximately $53 trillion as of September 30, 2007, up more than $2 trillion from September 30, 2006, and an increase of more than $32 trillion from about $20 trillion as of September 30, 2000," Walker said. "This translates into a current burden of about $175,000 per American or approximately $455,000 per American household."

The fiscal year 2007 Financial Report of the United States Government, which includes financial information from the 24 major federal departments and agencies and GAO's audit report, is being released today by the Treasury Department. It is also available on GAO's web site at http://www.gao.gov/financial.html

For more information, contact GAO's Office of Public Affairs at (202) 512-4800.

Delayed Conversation

The feds don’t spend much time hashing out mutual problems with states and localities. It’s time they started.

What do you call it when eight federal officials and eight state and local leaders convene voluntarily to discuss intergovernmental fiscal affairs? Well, if you’ve watched the downward trajectory that has characterized intergovernmentalism in Washington over the past decade or so, you might call it a minor miracle.

But last month, that’s just what happened. A 16-member panel whose leaders included Danny Werfel, acting director of the U.S. Office of Management and Budget, and Martin Benison, the Massachusetts state controller, sat down to develop plans for a new standing group that will focus on how the three levels of government might work more rationally through the broad range of intergovernmental fiscal issues that leave state and local officials alternatively exasperated, confused and, on some days, entertaining notions of open rebellion.

The effort, which is being called the “Partnership for Intergovernmental Management and Accountability,” is being jointly sponsored by the Association of Government Accountants and the Chief Financial Officers Council, a group made up of the top fiscal officials from the 24 largest federal agencies.

The partnership has a wide range of issues and activities it might tackle, from serving as a forum for sharing best practices in fiscal management to working through proposed rules and regulations for specific federal grants and transfer programs.

The partnership emerged out of what might seem an unlikely issue: the Bush administration’s concern about “improper payments” that the feds might have made to states and localities. Relmond Van Daniker, the executive director of the Association of Government Accountants, didn’t think the prospect of federal liens against states and localities due to perceived overpayments was a very practical investment of federal time or energy. “That just wasn’t going to work,” says Van Daniker. “What we really need is to get states, locals and feds talking to one another again.”

The partnership does have one important thing going for it: Those who are represented by AGA and the CFO Council clearly are getting tired of all the confusion and conflict when it comes to intergovernmental fiscal affairs. This potentially powerful source of grassroots and high-level discontent just might hold the new partnership together.

-Jonathan Walters, Governing.com
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Commentary: Fixing a $100B problem

How do we attempt to reduce the $100 billion interagency out-of-balance problem?

It may appear to be an arcane federal government accounting topic, but it is a problem that we can and must solve.

To that end, Ken Carfine, fiscal assistant secretary of the Treasury Department, and I are working as co-leads on the Central Reporting Team working group under the Chief Financial Officers Council.

All federal agencies trade with one another. We each keep track of what we procure. Virtually all of the 24 Chief Financial Officers Act agencies get an individual clean audit opinion. But we frankly don’t do a good job of reconciling what we spend with one another. Many of us spend an enormous amount of time and effort trying to get our intergovernmental transactions to balance. It is a struggle for agencies to even locate the right people to respond to requests for help in resolving these issues at other agencies.

There are three primary types of interagency activity. The first, including fiduciary balances, is created when one agency manages funds or borrowings on behalf of another. The second happens when agencies are required to transfer funds between them by agreement or statute. The third major category is created when agencies buy and sell goods and services with each other.

So how do we try to solve this material issue? First, we create awareness and thus accountability for fixing the problem. We have added a watch list for agencies that have either large or chronic out-of-balance issues with their trading partners. The Office of Management and Budget will soon require corrective action plans from those agencies. Regular reporting will occur at the CFO Council meetings. The Treasury Department, working with various agencies, has already reduced fiduciary differences by several billion dollars.

Second, we are addressing the root causes that create the out-of-balance situations. These can arise due to timing differences, different accounting treatment of the same item, lack of notification and communication. We are working to improve the detailed level of reporting to provide a better starting point for reconciliation. Agency use and enforcement of the Intergovernmental Business Rules issued in October 2006 will serve as good business protocols for trading partners.

Third, we will address business process changes that need to occur in order to reduce the problems. This may require improvements to the existing technology to process the workflow. Notice I did not say we have to build a new multihundred million-dollar system to tackle this problem. We realize the current information technology budget realities and the fact that many agencies have legacy systems that will live for a long time to come. We are closely monitoring a pilot project at one of the largest federal agencies to see what application, if any, it can have on the larger universe of agencies. Using Web-based technologies, combined with improved and automated business processes, will greatly reduce the out-of-balance items in the first place and the workload required in the event an out-of-balance occurs.

Our goal is to have an initial set of recommendations to the CFO Council by next spring. These improvements should dovetail with other council efforts to standardize governmentwide accounting practices and modernize systems.

-John Cox, CFO, HUD, Published on FederalTimes.com

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Internal checkbooks out of balance

Once again, OMB and CFO Council prod agencies to improve financial accuracy

Agencies are still having trouble balancing their internal checkbooks for interagency transactions. Although they’ve made some progress, agencies still often can’t figure out who gets the debit and who gets the credit when it comes to accounting for funds they exchange for services.

The discrepancies in those balances prevent agencies from giving auditors reliable financial data, and as a result, the federal government annually fails to provide reliably accurate data in its consolidated financial statement.

The Government Accountability Office has not assessed the governmentwide consolidated financial statement for 10 years in large part because agencies cannot match the way they account for intragovernmental activity, GAO Comptroller General David Walker said in the financial statement report from December 2006.

“The Chief Financial Officers Council is aggressively working toward resolving the imbalance in order to restore the public’s trust in our ability to properly account, report and reconcile intragovernmental activity,” said John Cox, the Housing and Urban Development Department’s CFO and leader of the CFO Council’s Central Reporting Transformation Team.

Agencies need to resolve those differences to unlock financial performance, said Danny Werfel, deputy controller at the Office of Management and Budget. He has been tapped to be acting controller when Controller Linda Combs leaves government Aug. 10.

OMB has initiated a number of actions to break down those difficult transactions to develop a consistent governmentwide approach to handling them, Werfel said.

The intragovernmental imbalances undermine agencies’ ability to know how much money they are spending and with whom they are doing business, Cox said.

To identify and resolve differences in how agencies account for transactions, OMB and the CFO Council are setting up the Intragovernmental Dispute Resolution Committee for agencies that are unable to agree on a reconciliation approach and have exhausted other alternatives. Under the plan, agencies can enlist a committee of their peers to provide an impartial assessment and determine the right approach to resolving the imbalance, Werfel said. It should be operational by Sept. 30, Cox added.

In addition, OMB and the Treasury Department have created an Intragovernmental High-Risk Watchlist. The agencies on that list will meet with OMB to explain the corrective actions they are taking to resolve any differences, Cox said.

OMB and the CFO Council based the first watch list on agency balances in the second quarter of fiscal 2007, the period from January through March. The watch list will be distributed quarterly, he said.

Beginning in 2008, OMB will add a new requirement to audit procedures for agencies that have a long history of imbalances with another agency, Cox said. Auditors will focus on internal controls and the agency’s policies and procedures for accounting, reporting and reconciling the imbalances.

Cox’s workgroup at the CFO Council, which recently held its first meeting, will also look for ways to improve the business processes that can create or exacerbate the imbalances.


-Mary Mosquera, FCW.com

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