Baby steps for government bookkeeping

The Defense Department’s lack of auditability, the Treasury Department’s inability to reconcile intragovernmental activity and an “ineffective process” for preparing financial statements are three long-standing impediments to getting the government’s books in order, the comptroller general told a House subcommittee Thursday.

Billions of dollars in improper payments, unfocused information security purchasing and inadequate tax collection activities -- along with the usual partisan disagreements on spending -- also were mentioned as major contributors to the country’s fiscal woes during a House Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management hearing.

Despite these challenges, which contributed to the government’s failure, once again, to achieve a clean opinion on its consolidated financial statements in fiscal 2011, there has been progress, Comptroller General Gene Dodaro told the subcommittee. “Against a background of fiscal pressure, [Congress and the agencies are] creating an environment for fiscal improvements,” he said.

The Internal Revenue Service has some material weaknesses in its financial management, but is “making good strides” in reducing the tax gap, Dodaro said. He praised Defense Secretary Leon Panetta for giving the military services an interim deadline for progress by 2014, which should enhance prospects for achieving the congressional mandate of auditability by 2017.

U.S. Controller Danny Werfel offered an upbeat appraisal as well. “We have also made important progress in producing timely financial statements that can pass the scrutiny of our independent auditors,” he said. “This progress reached its apex in fiscal 2011," when 23 of 24 agencies required under the 1990 Chief Financial Officers Act to obtain an audit opinion succeeded. This was “the best performance by the federal government to date,” Werfel said.

Of the 23, all but two earned a clean, or unqualified, opinion, and the number of agencies reporting auditor-identified material weaknesses in financial statements dropped from 61 a decade ago to 31, according to Werfel. All major agencies, he added, met the Office of Management and Budget’s 45-day deadline for producing a financial statement.

Richard Gregg, Treasury’s fiscal assistant secretary, pointed to progress on deficit reduction through the 2010 Affordable Care Act and the 2011 Budget Control Act. He reiterated the Obama administration’s position in favor of “tax reforms that increase revenues and that are done in a broad-based and balanced way so as not to overburden the taxpayer.”

He said his department “has improved precision in its analysis of intragovernmental differences in recent years, resulting in the identification and resolution of tens of billions of dollars in difference.”

Subcommittee Chairman Rep. Todd Platts, R-Pa., asked whether the $80 billion the government spends on information technology is a sign of waste. Both Dodaro and Werfel agreed that too many agencies purchase IT with opaque requirements, using a project scope with too many “nice to haves” in the software and too long a time line from the request for a proposal to final functionality.

Platts expressed some skepticism that the health care reform law was saving money, pointing to recent controversies over the reimbursement rate for doctors in the Medicare program.

Dodaro replied that the health care field is “inherently uncertain” -- more so if it seems like Congress might revisit the law -- but pointed to plans to reduce payments to the hospital industry and assumed productivity improvements.

Rep. Gerry Connolly, D-Va., called for “ending this mindless narrative that treats all spending as the same,” saying Congress should enact greater spending on investments in good program and contract managers who can avoid such problems as improper payments.

Platts, who is retiring from Congress, said he has long sought to raise awareness among the public on how important the government’s finances are. “When we had a hearing on use of steroids in Major League Baseball, the room was packed,” he complained, “but here, we’re talking about spending trillions of dollars and we have lots of empty seats.”