Senators explore federal finances at sparsely attended hearing

Lawmakers at a Thursday hearing on federal financial management engaged in thoughtful discussion with top administration and accountability officials, but poor turnout -- with only two senators present -- suggests grim prospects for advancement on long-standing issues.

Sen. Tom Carper, D-Del., chaired the hearing and traded time with freshman Sen. Claire McCaskill, D-Mo., an auditor by training who has shown a strong interest in federal accountability issues.

The senators quizzed witnesses David M. Walker, comptroller general of the Government Accountability Office, and Linda Combs, the Office of Management and Budget's controller, on a range of issues that could come before the Senate Homeland Security and Governmental Affairs subcommittee on financial management during the coming year. A subcommittee aide said Friday that attendance at the hearing was hurt by a conflicting briefing session with Defense Secretary Robert Gates.

McCaskill said she was shocked to learn, since arriving in Washington, that agencies regularly fail financial audits and are not held to account. Five major agencies representing more than $500 billion in spending -- the Defense, Energy, Homeland Security and State departments, and NASA -- received disclaimers of opinion on their fiscal 2006 audits. Defense, the highest-budgeted offender, has repeatedly backed off timelines to put its books in order.

"People think the $12 billion in cash that's missing in Iraq is a big deal, they have no idea," McCaskill said, apparently referring to Special Inspector General for Iraq Reconstruction reports that some Iraqi oil funds were not carefully tracked.

She also expressed outrage at the lack of consequences when agencies violate the Anti-Deficiency Act, which prohibits spending in excess of appropriations, saying her office had not found a single instance in which a violation has led to someone being fired or fined. "It seems to me we haven't deterred much," she said.

Walker agreed that agencies' failure to enforce the act is a problem, but laid part of the blame at lawmakers' feet. He said effective financial management must include incentives for officials to "do the right thing," transparency to verify that they do, and accountability in case they don't. "One of the reasons that DoD has had the problems it has, is that Congress hasn't held them accountable," Walker told the senators.

Carper quizzed the witnesses on agencies' restatements of their audit results, which at times have led financial statements that were widely billed as exemplary to be quietly relabeled as problematic. Walker said official guidelines have recently been changed and auditors now are instructed to clearly indicate when a restatement means the agency should not have been awarded a clean audit initially.

OMB's Combs deflected a suggestion by Carper that agencies with restatements be held accountable on the President's Management Agenda score card, which gives traffic-light-style grades for agencies' financial management achievements along with other administration priorities. "It's more important for us to encourage agencies to root out these deficiencies, rather than slapping them on the hand," she said.