Seventeen out of 20 audited federal agencies have financial systems that do not comply with regulatory requirements, according to a new General Accounting Office report.
Under the 1996 Federal Financial Management Improvement Act (FFMIA), the 24 largest federal agencies are required to meet specific financial management systems standards. But agencies have made little progress in achieving those goals since 1997, GAO said in its report, "Financial Management: Federal Financial Improvement Act Results for Fiscal Year 1998" (AIMD-00-3).
While 17 agencies said their systems don't comply substantially with FFMIA, four agencies failed even to report on their compliance status by GAO's deadline. None of the late agencies- the Departments of State and Education, the Environmental Protection Agency and the Small Business Administration- complied with FFMIA in 1997, GAO said.
Although many agencies aren't meeting the standards set out in FFMIA, the regulations are beginning to have an impact, GAO auditors concluded. "Agencies are more aware of their financial management weaknesses and have started addressing them," the report said. The Department of Energy, NASA and the National Science Foundation were the only agencies that reported compliance with all FFMIA standards.
Two agencies-the Social Security Administration and the Federal Emergency Management Agency-disagreed with GAO's assessment that they were not in compliance with FFMIA. GAO found problems with both agencies' systems, but FEMA and SSA said the weaknesses GAO discovered were not substantial enough to rule their systems noncompliant.
For the most part, the reasons agencies don't meet FFMIA standards have not changed since last year. Systems are not integrated and data is not reconciled on a regular basis. Agencies still have trouble properly accounting for their assets, estimating the costs of liabilities and determining the full extent of improper payments, GAO said.
Many federal financial management systems are outdated and in poor condition. With the Y2K computer problem consuming the majority of agencies' money, time and energy this year, little attention has been given to fixing financial systems. At least six agencies decided to stop making system changes until the Y2K problem had first been addressed, the report said.
Action plans that outline ways to bring noncompliant systems up to speed may not be effective unless they are extremely detailed, GAO said. A review of 1997's remediation plans, which specify corrective actions and target dates, showed that at least 12 of the agencies' plans wouldn't do much to solve their problems.
"The severity of problems facing agencies as they attempt to implement current and future accounting standards, resolve serious information security weaknesses, and replace or overhaul old and outdated financial systems highlights the need for detailed remediation plans," the report said. GAO has not yet reviewed remediation plans for the 1998 audits.
Time, money and continued oversight are the keys to improving federal financial management systems, the report concluded. In the meantime, the deputy director for management at the Office of Management and Budget should work with agencies on their remediation plans to make sure they are detailed, include resource requirements, and use specific time frames to resolve problems, GAO said.