oversight

Financial Management: Implementation of the Federal Financial Management Improvement Act of 1996

Published by the Government Accountability Office on 1997-10-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to Congressional Committees




October 1997
                FINANCIAL
                MANAGEMENT
                Implementation of the
                Federal Financial
                Management
                Improvement Act of
                1996




GAO/AIMD-98-1
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Comptroller General
      of the United States

      B-277956

      October 1, 1997

      The Honorable Fred Thompson
      Chairman
      The Honorable John Glenn
      Ranking Minority Member
      Committee on Governmental Affairs
      United States Senate

      The Honorable Dan Burton
      Chairman
      The Honorable Henry A. Waxman
      Ranking Minority Member
      Committee on Government Reform and Oversight
      House of Representatives

      As required by the Federal Financial Management Improvement Act
      (FFMIA) of 1996, Public Law 104-208, this letter provides a status report on
      efforts to implement the act’s requirements and on the adequacy of
      accounting standards for the federal government. The Congress enacted
      FFMIA to improve federal accounting practices and increase the
      government’s ability to provide more reliable financial information. Under
      FFMIA, beginning with the fiscal year ended September 30, 1997, auditors
      for each of the 24 major departments and agencies named in the Chief
      Financial Officers (CFO) Act of 1990 must report whether the agencies’
      financial management systems comply substantially with federal financial
      management systems requirements, applicable federal accounting
      standards, and the U. S. Government Standard General Ledger (SGL)1 at the
      transaction level.

      To aid congressional oversight and keep the Congress advised on the
      status of federal financial management, the act provides that the General
      Accounting Office (GAO) report on implementation of the act by October 1
      of 1997, and each year thereafter. Specifically, GAO’s report is to summarize
      information concerning (1) compliance with the act’s requirements,
      including whether the CFO agencies’ financial statements have been
      prepared in accordance with applicable accounting standards and (2) the
      adequacy of applicable accounting standards for the federal government.




      1
       The SGL provides a standard chart of accounts and standardized transactions that agencies are to use
      in all their financial systems.



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                   In this, our first FFMIA report, we discuss (1) the act’s requirements,
                   (2) efforts underway to implement the act, (3) challenges that agencies
                   face in achieving full compliance with those requirements, and (4) the
                   status of federal accounting standards.


                   It is too early to tell the extent to which the 24 agencies named in the CFO
Results in Brief   Act will be in compliance with FFMIA requirements for fiscal year 1997
                   because auditor reports discussing the results of the fiscal year 1997
                   financial statement audits will generally not be available until March 1,
                   1998, which is the statutory reporting deadline. The Office of Management
                   and Budget (OMB) and the CFO agencies have initiated efforts to implement
                   the act’s requirements and improve financial management systems.
                   Although auditors performing financial audits under the CFO Act are not
                   required to report on FFMIA compliance until March 1, 1998, prior audit
                   results and agency self-reporting all point to significant challenges that
                   agencies must meet in fully implementing systems requirements,
                   accounting standards, and the SGL.

                   Regarding the adequacy of accounting standards, the Federal Accounting
                   Standards Advisory Board (FASAB) has successfully developed a good
                   initial set of accounting standards. To date, FASAB has recommended, and
                   OMB and GAO have issued, two statements of accounting concepts and eight
                   statements of accounting standards tailored to the federal government’s
                   unique characteristics and special needs. OMB has integrated these
                   concepts and standards in its guidance to agencies on the form and
                   content of their financial statements.


                   The overall purpose of FFMIA is to ensure that agency financial
Background         management systems comply with federal financial management systems
                   requirements, applicable accounting standards, and the SGL in order to
                   provide uniform, reliable, and thus more useful financial information. With
                   such information, government leaders will be better positioned to help
                   invest scarce resources, reduce costs, oversee programs, and hold agency
                   managers accountable for the way they run government programs.

                   The 1990 CFO Act laid the legislative foundation for the federal government
                   to provide taxpayers, the nation’s leaders, and agency program managers
                   with reliable financial information through audited financial statements.
                   Under the CFO Act, as expanded by the Government Management Reform
                   Act of 1994, 24 major agencies, which account for 99 percent of federal



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                                       outlays, are required to annually prepare organizationwide audited
                                       financial statements beginning with those for fiscal year 1996. Table 1 lists
                                       the 24 CFO agencies and their reported fiscal year 1996 outlays.

Table 1: The 24 CFO Agencies’ Fiscal
Year 1996 Net Outlays                  Dollars in billions
                                                                                                                     Reported fiscal
                                       Agency                                                                      year 1996 outlays
                                       Department of Agriculture                                                                $ 54.3
                                       Department of Commerce                                                                         3.7
                                       Department of Defense                                                                        285.8
                                       Department of Education                                                                       29.7
                                       Department of Energy                                                                          16.2
                                       Department of Health and Human Services                                                      319.8
                                       Department of Housing and Urban Development                                                   25.5
                                       Department of the Interior                                                                     6.7
                                       Department of Justice                                                                         12.0
                                       Department of Labor                                                                           32.5
                                       Department of State                                                                            5.0
                                       Department of Transportation                                                                  38.8
                                       Department of the Treasury                                                                   364.6
                                       Department of Veterans Affairs                                                                36.9
                                       Agency for International Development                                                           5.3
                                       Environmental Protection Agency                                                                6.0
                                       Federal Emergency Management Agency                                                            3.1
                                       General Services Administration                                                                0.7
                                       National Aeronautics and Space Administration                                                 13.9
                                       National Science Foundation                                                                    3.0
                                       Nuclear Regulatory Commission                                                                  0.1
                                       Office of Personnel Management                                                                42.9
                                       Small Business Administration                                                                  0.9
                                       Social Security Administration                                                               375.2
                                       Total                                                                                  $1,682.6
                                       Source: Budget of the United States Government, Fiscal Year 1998. We did not independently
                                       verify this information.



                                       Financial audits address the reliability of information contained in
                                       financial statements, provide information on the adequacy of systems and
                                       controls used to ensure accurate financial reports and safeguard assets,
                                       and report on agencies’ compliance with laws and regulations. Building on



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                       the CFO Act audits, FFMIA requires, beginning with the fiscal year ended
                       September 30, 1997, that each of the 24 CFO agencies’ financial statement
                       auditors report on whether the agency’s financial management systems
                       substantially comply with federal financial management systems
                       requirements, applicable accounting standards, and the SGL.


Financial Management   The financial management systems policies and standards prescribed for
System Requirements    executive agencies to follow in developing, operating, evaluating, and
                       reporting on financial management systems are defined in OMB Circular
                       A-127, “Financial Management Systems,” which was revised in July 1993.
                       Circular A-127 references the series of publications entitled Federal
                       Financial Management Systems Requirements, issued by the Joint
                       Financial Management Improvement Program (JFMIP),2 as the primary
                       source of governmentwide requirements for financial management
                       systems.

                       JFMIP initially issued Core Financial System Requirements, the first
                       document in its Federal Financial Management Systems Requirements
                       series, in January 1988. An updated version reflecting changes in
                       legislation and policies was released in September 1995. This document
                       establishes the standard requirements for a core financial system to
                       support the fundamental financial functions of an agency. Framework for
                       Federal Financial Management Systems was published in January 1995
                       and describes the basic elements of a model for an integrated financial
                       management system in the federal government, how these elements
                       should relate to each other, and specific considerations in developing and
                       implementing such an integrated system. In this regard, FFMIA defines
                       financial management systems as “financial systems”3 and the financial
                       portions of “mixed systems”4 necessary to support financial management,
                       including automated and manual processes, procedures, controls, data,
                       hardware, software, and support personnel dedicated to the operation and
                       maintenance of the system.


                       2
                        JFMIP is a cooperative undertaking of OMB, the Department of the Treasury, the Office of Personnel
                       Management, and GAO working with operating agencies to improve financial management practices
                       throughout the government. The program was initiated in 1948 and was given statutory authorization
                       in the Budget and Accounting Procedures Act of 1950 (31 U.S.C. 3511 (d)).
                       3
                        A financial system includes an information system of one or more applications that is used for
                       (1) collecting, processing, or reporting data about financial events; (2) supporting financial planning or
                       budgeting; (3) accumulating and reporting cost information; or (4) supporting the preparation of
                       financial statements.
                       4
                        A mixed system is an information system that supports both financial and nonfinancial functions.



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                                       Other documents in the JFMIP series provide requirements for specific
                                       types of systems covering personnel/payroll, travel, seized/forfeited asset,
                                       direct loan, guaranteed loan, and inventory systems. Table 2 lists the
                                       publications in the Federal Financial Management System Requirements
                                       Series and their issue dates.

Table 2: Publications in the Federal
Financial Management System            Federal Financial Management System Requirements (FFMSR)
Requirements Series                    document                                                        Issue date
                                       FFMSR-0 Framework for Federal Financial Management Systems      January 1995
                                       FFMSR-1 Core Financial System Requirements                      September 1995
                                       FFMSR-2 Personnel/Payroll System Requirements                   May 1990
                                       FFMSR-3 Travel System Requirements                              January 1991
                                       FFMSR-4 Seized/Forfeited Asset System Requirements              March 1993
                                       FFMSR-5 Direct Loan System Requirements                         December 1993
                                       FFMSR-6 Guaranteed Loan System Requirements                     December 1993
                                       FFMSR-7 Inventory System Requirements                           June 1995

                                       In addition to these eight documents, JFMIP is developing additional
                                       systems requirements for managerial cost accounting. This document was
                                       issued as an exposure draft in April 1997.


Federal Accounting                     Federal accounting standards, which agency CFOs use in preparing
Standards                              financial statements and in developing financial management systems, are
                                       recommended by FASAB. In October 1990, the Secretary of the Treasury,
                                       the Director of OMB, and the Comptroller General established FASAB to
                                       recommend a set of generally accepted accounting standards for the
                                       federal government. FASAB’s mission is to recommend reporting concepts
                                       and accounting standards that provide federal agencies’ financial reports
                                       with understandable, relevant, and reliable information about the financial
                                       position, activities, and results of operations of the U.S. government and
                                       its components.

                                       FASAB recommends accounting standards after considering the financial
                                       and budgetary information needs of the Congress, executive agencies,
                                       other users of federal financial information, and comments from the
                                       public. The Secretary of the Treasury, the Director of OMB, and the
                                       Comptroller General then decide whether to adopt the recommended
                                       standards. If they do, the standards are published by OMB and GAO and
                                       become effective. As discussed further in the section “Status of Federal
                                       Accounting Standards,” this process has resulted in issuance of two



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                            statements of accounting concepts and eight statements of accounting
                            standards. GAO published these concepts and standards in FASAB Volume 1,
                            Original Statements, Statements of Federal Financial Accounting Concepts
                            and Standards, in March 1997.


The U.S. Standard General   In 1984, OMB tasked an interagency group to develop a standard general
Ledger                      ledger chart of accounts for governmentwide use. The resulting SGL was
                            established and mandated for use by the Department of the Treasury in
                            1986. Further, OMB Circular A-127, Financial Management Systems,
                            requires agencies to record financial events using the SGL at the
                            transaction level.

                            The SGL provides a uniform chart of accounts and pro forma transactions
                            used to standardize federal agencies’ financial information accumulation
                            and processing, enhance financial control, and support budget and
                            external reporting, including financial statement preparation. Use of the
                            SGL improves data stewardship throughout the government, enabling
                            consistent analysis and reporting at all levels within the agencies and at
                            the governmentwide level. It is published in the Treasury Financial
                            Manual. The Department of the Treasury’s Financial Management Service
                            is responsible for maintaining the SGL.


FFMIA Process and           As part of a CFO agency’s annual audit, the auditor is to report whether the
Reporting Requirements      agency’s financial management systems substantially comply with federal
                            financial management systems requirements, applicable accounting
                            standards, and the SGL. If the auditor determines that an agency’s financial
                            management systems do not substantially comply with these
                            requirements, the act requires that the audit report (1) identify the entity
                            or organization responsible for management and oversight of the
                            noncompliant financial management systems, (2) disclose all facts
                            pertaining to the failure to comply, including the nature and extent of the
                            noncompliance, the primary reason or cause of the noncompliance, the
                            entity or organization responsible for the noncompliance, and any relevant
                            comments from responsible officers or employees, and (3) include
                            recommended corrective actions and proposed time frames for
                            implementing such actions.

                            The act assigns to the head of an agency responsibility for determining,
                            based on a review of the auditor’s report and any other relevant
                            information, whether the agency’s financial management systems comply



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                       with the act’s requirements. This determination is to be made no later than
                       120 days after the receipt of the auditor’s report, or the last day of the
                       fiscal year following the year covered by the audit, whichever comes first.

                       If the head of an agency determines that the agency does not comply with
                       the act’s requirements, the agency head, in consultation with the Director
                       of OMB, shall establish a remediation plan that will identify, develop, and
                       implement solutions for noncompliant systems. The remediation plan is to
                       include corrective actions, time frames, and resources necessary to
                       achieve substantial compliance with the act’s requirements within 3 years
                       of the date the noncompliance determination is made. If, in consultation
                       with the Director of OMB, the agency head determines that the agency’s
                       financial management systems are so deficient that substantial compliance
                       cannot be reached within 3 years, the remediation plan must specify the
                       most feasible date by which the agency will achieve compliance and
                       designate an official responsible for effecting the necessary corrective
                       actions.

                       Under the FFMIA process, the auditor’s and the agency head’s
                       determinations of compliance may differ. In such situations, the Director
                       of OMB will review the differing determinations and report on the findings
                       to the appropriate congressional committees.

                       The act also contains additional reporting requirements. OMB is required to
                       report each year on the act’s implementation. In addition, each inspector
                       general (IG) of the 24 CFO agencies is required to report to the Congress, as
                       part of its semiannual report, instances in which an agency has not met the
                       intermediate target dates established in its remediation plan and the
                       reasons why.


                       Efforts are underway to implement FFMIA and improve the quality of
Guidance Issued for    financial management systems. OMB recently issued implementation
Assessing Compliance   guidance in a memorandum dated September 9, 1997, for agencies and
With FFMIA             auditors to use in assessing compliance with FFMIA. This is interim
                       guidance to be used in connection with audits of federal financial
Requirements           statements for fiscal year 1997.

                       OMB’s guidance emphasizes implementation of federal financial
                       management improvements by fully describing in separate sections each
                       of the requirements under the act, which are (1) federal financial
                       management systems requirements, (2) applicable federal accounting



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standards, and (3) the SGL at the transaction level. Each section begins by
identifying and discussing the executive branch policy documents that
previously established the requirement. Information is also provided on
the meaning of substantial compliance and the types of indicators that
should be used in assessing whether an agency is in substantial
compliance. For example, one indicator of substantial compliance with
financial management systems requirements would include financial
management systems that meet the requirements of OMB Circular A-127.
Likewise, an indicator of substantial compliance with financial accounting
standards would include an agency that has no material weaknesses in
internal controls that affect its ability to prepare auditable financial
statements and related disclosures in accordance with federal accounting
standards.

Information is also provided for the auditor to consider in evaluating and
reporting audit results, as well as other reporting requirements. The
guidance states that the auditor shall use professional judgment in
determining substantial compliance with FFMIA. Further, substantial
noncompliance in any one or more of the three requirements of FFMIA
would result in substantial noncompliance with FFMIA. For example, an
agency could have an unqualified5 opinion on its financial statements
indicating that the financial statements are prepared in accordance with
applicable federal accounting standards, yet have financial management
systems that are not in substantial compliance with financial management
systems requirements. This situation would preclude the agency from
being in substantial compliance with FFMIA. Finally, the guidance also
directs auditors to follow the reporting guidance, with respect to
compliance, contained in OMB Bulletin 93-06.6

We have been discussing with OMB some refinements to this bulletin, with
particular focus on four areas: (1) clarifying, based on information
provided in OMB’s implementation guidance, that the auditor should
perform tests of the reporting entity’s compliance with the requirements of
FFMIA, (2) including in the reporting entity’s management representation


5
 An unqualified or “clean” opinion on an agency’s financial statements indicates that the auditor
concludes that the principal statements and accompanying notes are free from material misstatement
and are presented fairly in conformity with established accounting principles applied on a consistent
basis.
6
 OMB Bulletin 93-06, Audit Requirements for Federal Financial Statements, establishes requirements
and guidance for auditors to follow in auditing federal financial statements. OMB Bulletin 93-06
requires an auditor’s report at the completion of an audit, comprised of at least the following three
parts: (1) a report containing an opinion on the reporting entity’s financial statements, (2) a report on
internal control structure, and (3) a report on the reporting entity’s compliance with applicable laws
and regulations.



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    letter a representation about whether the reporting entity’s financial
    management systems are in substantial compliance with FFMIA
    requirements, (3) clarifying that the auditor’s report on the reporting
    entity’s compliance with applicable laws and regulations state that the
    auditor performed sufficient compliance tests of FFMIA requirements to
    report whether the entity’s financial management systems comply
    substantially with FFMIA requirements, and (4) separately stating in the
    auditor’s report whether such tests disclosed any instances in which the
    reporting entity’s financial management systems did not comply
    substantially with FFMIA requirements.

    Finally, we have discussed with OMB the requirement in the act, that if the
    reporting entity does not comply substantially with FFMIA requirements,
    the auditor’s report needs to

•   identify the entity or organization responsible for the financial
    management systems that have been found not to comply with FFMIA
    requirements;
•   disclose all facts pertaining to the noncompliance, including
    • the nature and extent of the noncompliance, such as the areas in which
      there is substantial but not full compliance;
    • the primary reason or cause of the noncompliance;
    • the entity or organization responsible for the noncompliance; and
    • any relevant comments from reporting entity management or employee
      responsible for the noncompliance; and
•   state recommended remedial actions and the time frames to implement
    such actions.

    We are also exploring other tools to assist the CFO and IG communities in
    implementing OMB’s interim guidelines. OMB plans to review its interim
    guidelines and replace them during 1998 with revisions to appropriate OMB
    policy documents.

    Agencies are also taking steps to improve the quality of their financial
    management systems. According to the CFO Council’s and OMB’s Status
    Report on Financial Management Systems, dated June 1997, agencies are
    reporting plans to replace or upgrade operational applications within the
    next 5 years. For applications that are now under development or in the
    process of a phased implementation, reported plans are also in place to
    fully implement the SGL at the transaction level and comply with federal
    financial management system requirements. This report indicates that
    many agencies are also reporting considering greater use of commercial



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                       off-the-shelf software, cross-servicing, and outsourcing as they seek more
                       effective ways to improve their financial management systems. Successful
                       implementation of these efforts will be instrumental in achieving future
                       compliance with FFMIA requirements.


                       Agencies face significant challenges in achieving substantial compliance
Challenges in          with the act’s requirements in the near future. The majority of agencies did
Implementing the Act   not receive an unqualified opinion on their fiscal year 1996 financial
                       statements. In addition, fiscal year 1996 financial management systems
                       inventory data, self-reported by agencies and summarized in the CFO
                       Council’s and OMB’s June 1997 Status Report on Federal Financial
                       Management Systems, reveal that the majority of agencies’ financial
                       systems did not comply with federal financial management systems
                       requirements or the SGL at the transaction level prior to FFMIA’s effective
                       date.

                       An inability to prepare timely and accurate financial statements suggests
                       that agencies find it difficult to effectively implement applicable federal
                       accounting standards. A financial statement audit provides a meaningful
                       measure of compliance with applicable federal accounting standards. An
                       unqualified opinion is one of several indications that the agency’s financial
                       management systems support the preparation of accurate and reliable
                       financial statements with minimal manual intervention. However, for fiscal
                       year 1996, only 6 of the 24 CFO agencies received unqualified opinions on
                       their organizationwide financial statements. Further, according to OMB’s
                       Federal Financial Management Status Report & Five-Year Plan, only 13 CFO
                       agencies anticipate being able to obtain unqualified opinions on their fiscal
                       year 1997 financial statements.

                       Our past audit experience has indicated that numerous agencies’ financial
                       management systems do not maintain and generate original data to readily
                       prepare financial statements. Consequently, many agencies have relied on
                       ad hoc efforts and manual adjustments to prepare financial statements.
                       Such procedures can be time-consuming, produce inaccurate results, and
                       delay the issuance of audited statements. In addition, agencies’ lack of
                       reliable and consistent financial information on a regular, ongoing basis
                       undermines federal managers’ ability to effectively evaluate the cost and
                       performance of government programs and activities.

                       Also, the current status of federal financial management systems portends
                       potential problems in agencies complying fully with federal financial



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                       management systems requirements and the SGL as mandated by the act.
                       When FFMIA was enacted, federal agencies lacked many of the basic
                       systems needed to provide uniform and reliable financial information.
                       Agencies are still struggling to comply with governmentwide standards
                       and requirements, although they have recently exhibited some progress in
                       implementing and maintaining financial management systems that comply
                       with federal financial system requirements and the SGL.

                       For instance, according to the CFO Council’s and OMB’s FY 1995 Status
                       Report on Federal Financial Management Systems, issued in June 1996,
                       only 29 percent of agencies’ financial management systems were reported
                       to be in compliance with JFMIP federal financial management system
                       requirements. In addition, agencies had fully implemented the SGL in only
                       40 percent of the operational applications to which they reported it
                       applied. The fiscal year 1996 status report, issued in June 1997, showed
                       some improvement, with 36 percent of agencies’ financial management
                       systems reported as complying with federal financial management system
                       requirements and full SGL implementation reported in 45 percent of the
                       applications to which agencies reported it applied. However, these
                       statistics indicate that the majority of agencies’ financial management
                       systems still lacked compliance with financial management systems
                       requirements and full SGL implementation in fiscal year 1996.


                       Using a due process and consensus building approach, FASAB has
Status of Federal      successfully provided the federal government with an initial set of
Accounting Standards   accounting standards. To date, FASAB has recommended, and OMB and GAO
                       have issued, two statements of accounting concepts7 and eight statements
                       of accounting standards with various effective dates ranging from fiscal
                       year 1994 through fiscal year 1998. These concepts and standards, which
                       are listed in table 3, underpin OMB’s guidance to agencies on the form and
                       content of their financial statements.




                       7
                        Effective dates do not apply to Statements of Federal Financial Accounting Concepts.



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Table 3: Statements of Federal
Financial Accounting Concepts
(SFFAC) and Standards (SFFAS) and   Concepts
Their Effective Dates
                                    SFFAC No. 1 Objectives of Federal Financial Reporting
                                    SFFAC No. 2 Entity and Display

                                                                                                                   Effective for
                                    Standards                                                                        fiscal year
                                    SFFAS No. 1 Accounting for Selected Assets and Liabilities                             1994
                                    SFFAS No. 2 Accounting for Direct Loans and Loan Guarantees                            1994
                                    SFFAS No. 3 Accounting for Inventory and Related Property                              1994
                                    SFFAS No. 4 Managerial Cost Accounting Concepts and Standards                          1997a
                                    SFFAS No. 5 Accounting for Liabilities of the Federal Government                       1997
                                    SFFAS No. 6 Accounting for Property, Plant, and Equipment                              1998
                                    SFFAS No. 7 Accounting for Revenue and Other Financing Sources                         1998
                                    SFFAS No. 8 Supplementary Stewardship Reporting                                        1998
                                    a
                                     FASAB has recommended to OMB, the Department of the Treasury, and GAO that this statement
                                    be deferred until 1998.



                                    In addition to the two concepts and eight standards, FASAB is working on
                                    standards relating to management’s discussion and analysis of federal
                                    financial statements, social insurance, the cost of capital, natural
                                    resources, and computer software costs.

                                    The objectives of federal financial reporting are to provide users with
                                    information about budgetary integrity, operating performance,
                                    stewardship, and systems and controls. With these as the objectives of
                                    federal financial reporting, the federal government can better develop new
                                    reporting models that bring together program performance information
                                    with audited financial information and provide congressional and other
                                    decisionmakers with a more complete picture of the results, operational
                                    performance, and the costs of agencies’ operations.


                                    FFMIA is intended to improve federal accounting practices and increase the
                                    government’s ability to provide credible and reliable financial information.
                                    Such information is important in providing a foundation for formulating
                                    budgets, managing government program operations, and making difficult
                                    policy choices. Efforts are underway both in assisting agencies in
                                    implementing the act’s requirements and to assist auditors in measuring
                                    compliance with the act’s requirements. However, long-standing problems




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with agencies’ financial management systems suggests that agencies will
have difficulty, at least in the short term, achieving compliance with the
act’s requirements. Successful implementation of the act and resulting
financial management improvements depend on the united effort of all
organizations involved, including agency CFOs, IGs, OMB, the Department of
the Treasury, and GAO.

In performing our work, we evaluated OMB’s implementation guidance for
FFMIA. In addition, we reviewed the CFO Council’s and OMB’s June 1997 and
1996 Status Report on Federal Financial Management Systems and OMB’s
June 1997 Federal Financial Management Status Report & Five-Year Plan.
We did not verify or test the reliability of the data in these reports. Further,
we reviewed fiscal year 1996 audit results for the 24 CFO agencies and
applicable federal accounting standards. We conducted our work from
July through September 1997 at GAO headquarters in Washington, D.C. in
accordance with generally accepted government auditing standards. We
provided a draft of this report to OMB and Treasury and they generally
concurred with its contents. We have incorporated their comments as
appropriate.

We are sending copies of this letter to the Chairmen and Ranking Minority
Members of the Subcommittee on Oversight of Government Management,
Restructuring, and the District of Columbia, Senate Committee on
Governmental Affairs; the Subcommittee on Government Management,
Information, and Technology, House Committee on Government Reform
and Oversight; other interested congressional committees; the Director,
Office of Management and Budget; the Secretary of the Treasury; heads of
the 24 CFO agencies; agency CFOs and IGs; and other interested parties. We
will also make copies available to others upon request.




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This letter was prepared under the direction of Gloria L. Jarmon, Director,
Civil Audits/Health and Human Services, who may be reached at
(202) 512-4476 if you or your staffs have any questions. Major contributors
to this letter are listed in appendix I.




James F. Hinchman
Acting Comptroller General




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Page 15   GAO/AIMD-98-1 Status of FFMIA
Appendix I

Major Contributors to This Report


                       Deborah A. Taylor, Assistant Director
Accounting and         Maria Cruz, Senior Audit Manager
Information            Anastasia Kaluzienski, Audit Manager
Management Division,
Washington, D.C.




(919130)               Page 16                                 GAO/AIMD-98-1 Status of FFMIA
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