Lawmakers seek earlier financial audits, fewer improper payments

Lawmakers and high-ranking federal executives said that agencies need to start preparing audits earlier and beef up efforts to stop improper payments during a hearing Wednesday of the House Government Reform Subcommittee on Government Efficiency and Financial Management.

Rep. Todd Platts, R-Pa., said he was concerned by the large number of agencies that restated financial statements this year, and that the GAO has yet to offer a clean opinion on governmentwide financial statements. Eleven agencies restated their fiscal 2003 financial statements in 2004, up from four the previous year.

Comptroller General David M. Walker said the Office of Management and Budget should consider whether or not an agency restated its financial statements when considering the agency's score for financial performance. "That means they didn't deserve a clean opinion," he said of restatements.

While the OMB does not explicitly cite restatements as a reason for giving an agency a low financial performance score, all agencies that restated their financial statements received red, the lowest rating, except one. The National Science Foundation received a green score, the highest, for financial performance.

Walker, who often has spoken publicly about the need to rein in government debt, said that controlling spending depends on sound financial management. He also said that agencies need to start their audits earlier in order to meet the OMB's new Nov. 15 deadline.

Platts also noted the problem of improper payments, which grew to $45 billion in fiscal 2004 from $36 billion in fiscal 2003.

Donald Hammond, fiscal assistant secretary at the Treasury Department, said two proposals in the president's budget would help collect payments that were made in error. The first would allow the government to collect debt beyond the current 10-year limit. Treasury estimates the elimination of this limit would allow $11 million to be collected in the first year.

The second proposal would allow Treasury to compare information from federal tax refunds to state unemployment compensation payments and deduct overpayments from tax refunds. That money would then be placed in states' unemployment insurance trust funds. Treasury estimates $281 million would be collected in the first year.

Rep. John J. Duncan Jr., R-Tenn., suggested that the subcommittee consider proposing legislation that requires people or companies who receive improper payments from the government to pay interest on it.

Walker pointed out that recipients of such funds are currently under no legal obligation to notify the government of the mistake.

Jack Martin, chief financial officer of the Education Department, noted his department's progress with the new Nov. 15 due date. "The accelerated reporting requirement has driven process and control improvements that have laid the foundation for management reports," he said.

He pointed out the monthly report called "Fast Facts," which allows managers to access financial and performance data throughout the year. He suggested that in order to meet the deadline, financial managers need to work with inspector generals, program directors and auditors early, and be prepared to work 16 hours a day if necessary.

"If we have to work weekends to meet the commitment, that's what we're going to do," he said.

He also suggested that agencies be less dependent on outside contractors to perform financial management work. He said that a few years ago he compared the resumes of in-house employees with contractors working on financial management issues, and found them to be comparable, if not slightly better.

He said he wanted to wean the department from using outside contractors "so we're not dependent on those people."

Next week, the subcommittee will hold a hearing on internal controls and OMB's new guidance on them. Platts said he wants to look into the benefit of requiring an audit on agencies' internal controls with the cost.

Agencies with large expenditures such as Defense and Medicare probably warrant internal control audits because of their large expenditures, he said. Last year, Platts wrote legislation requiring Homeland Security to audit its internal controls.