Officials warn that more financial controls come with a price

Federal executives and independent analysts warned lawmakers against requiring more financial reporting without additional funding at a House Government Reform Subcommittee on Government Efficiency and Financial Management hearing on Wednesday.

They also said that the costs of internal control audits can sometimes outweigh their benefits.

"In some areas, frankly, there's too much control," said Jeffrey C. Steinhoff, managing director of the Government Accountability Office's financial management and assurance team.

When GAO looked at travel management at the Defense Department in 1995, for example, it found 1,357 pages of travel rules. Defense has since streamlined its process and eliminated requirements for small items, such as $5 cab receipts, said Steinhoff. Agencies shouldn't spend $1.01 to save $1, he added.

Rep. Todd Platts, R-Pa., committee chairman and author of legislation that requires the Homeland Security Department to audit its internal controls, has been looking closely at the differences in financial management between the private and public sectors. GAO and the Office of Management and Budget also have been focusing on internal controls and the 2002 Sarbanes-Oxley Act, which requires private sector companies to annually audit their internal controls.

Christopher B. Burnham, chief financial officer of the State Department, said he thinks State can begin auditing its internal controls in two to three years, although later he added that the agency's first priority is to build a global financial management system.

"We have to eventually get to the point where we have regular audits on internal controls," said Burnham.

The ability to audit internal controls, however, comes with a high price tag. Burnham estimated that it could cost as much as $5 million. He added that money will be difficult to find in State's current budget.

"We certainly would urge you to work with the appropriators," he said.

Otto J. Wolff, chief financial officer of the Commerce Department, said he hoped the committee would look closely at the costs before mandating internal control audits without additional funding.

The inspector general's office at the Education Department is under pressure because it has been given more responsibility while the staff has decreased, and "these unfunded mandates are killing us," said Inspector General John P. Higgins.

He added, however, that his office saves the agency more money than it costs.