DOT fixes finances; other agencies expected to follow

The Transportation Department will receive a clean opinion on its 1999 financial books, becoming the 12th of the 24 largest departments to get a thumbs-up from auditors on its finances. The Clinton administration predicts the list will grow in the coming months.

Last week, the Senate Governmental Affairs Committee found that 11 agencies had received clean opinions on their finances by the March 1 deadline set in law. DOT sent its audited financial statements to Congress on Monday. DOT was a few days late because the DOT Office of Inspector General, the General Accounting Office and department officials wanted to do some final checks to make sure the books were in order, a DOT official said. This is the Transportation Department's first clean opinion.

DOT's 1998 financial statement received a disclaimer of opinion from auditors, meaning auditors could not determine if the information in the statement was reliable. To improve from a disclaimer one year to a clean opinion the next required "a lot of sweating," said Peter J. Basso, DOT's assistant secretary for budget and programs and chief financial officer.

"This effort was hugely labor-intensive because we were trying to untangle property records going back 30 to 40 years," Basso explained. "That's just grunt work."

To improve property management, Basso met bi-weekly with Federal Aviation Administration officials and monthly with Coast Guard managers. Solving those agencies' property management problems was a key to DOT's clean opinion.

Sen. Fred Thompson, R-Tenn., chairman of the Governmental Affairs Committee, said he was disappointed that only half of federal agencies could get a clean opinion. But an executive branch source who asked to be identified only as a senior government official contended that there has been vast improvement in federal financial management over the past decade.

"Like the Senate Governmental Affairs Committee, we agree that improving the government's financial performance is very important," the official said. "When the [1990 Chief Financial Officers Act] passed, there was no accounting system in government, period. We had no CFOs. In the past 10 years we have made very substantial progress."

The senior official pointed out that two years ago, eight agencies had clean financial statements, followed by 12 last year. While only 12 agencies so far have received clean opinions this year, more agencies are likely to fix their books and get auditors' stamps of approval in the next few months, the official said.

Last June, the Office of Management and Budget-led Chief Financial Officers Council set a goal of getting clean opinions on 21 agencies' fiscal 1999 financial statements. Last month in President Clinton's fiscal 2001 budget, that goal was downgraded to 18 clean opinions, with at least 16 clean opinions by the March 1 deadline. OMB's Office of Federal Financial Management oversees the executive branch's financial mangement efforts.

While OMB did not meet its goal, the senior government official noted that six agencies improved their performance in the financial audit over last year.

"All across the government, people are really working on this," the official said. "People are making improvements."

While having audited annual financial statements is an important step toward sound financial management, officials say eventually the goal is to have financial information available at any time at managers' fingertips.

DOT's Basso said the department is creating an Oracle database system, called Delphi, that will make financial data much more readily available to managers. The system is scheduled for completion in 2001.

Federal Agencies' Financial Audit Results
(as of 3/6/2000)

* An unqualified opinion means the agency's financial statements were reliable. A qualified opinion means segments of the statements were not reliable. A disclaimer of opinion means the auditor could not determine if the information in the statement was reliable. Late means the agency did not turn in its financial statement on time.

** In fiscal 1998, Commerce received an unqualified opinion on its balance sheet and a disclaimer on its other financial statements.