U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

33–117 PDF 2007

FINANCIAL MANAGEMENT CHALLENGES AT THE

GENERAL SERVICES ADMINISTRATION

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

FINANCE, AND ACCOUNTABILITY

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JUNE 7, 2006

Serial No. 109–212

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, FINANCE, AND ACCOUNTABILITY

TODD RUSSELL PLATTS, Pennsylvania, Chairman

VIRGINIA FOXX, North Carolina

TOM DAVIS, Virginia

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

EDOLPHUS TOWNS, New York

MAJOR R. OWENS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

EX OFFICIO

HENRY A. WAXMAN, CALIFORNIA

MIKE HETTINGER, Staff Director

TABETHA MUELLER, Professional Staff Member

ERIN PHILLIPS, Clerk

ADAM BORDES, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on June 7, 2006 ................................................................................. 1

Statement of:

Turco, Kathleen, Chief Financial Officer, General Services Administration; and Eugene L. Waszily, Jr., Assistant Inspector General for Auditing, General Services Administration ......................................................... 5

Turco, Kathleen ......................................................................................... 5

Waszily, Eugene L. .................................................................................... 28

Letters, statements, etc., submitted for the record by:

Platts, Hon. Todd Russell, a Representative in Congress from the State

of Pennsylvania, prepared statement of ...................................................... 4

Turco, Kathleen, Chief Financial Officer, General Services Administration, prepared statement of .......................................................................... 9

Waszily, Eugene L., Jr., Assistant Inspector General for Auditing, General Services Administration, prepared statement of ................................ 30

(1)

FINANCIAL MANAGEMENT CHALLENGES AT

THE GENERAL SERVICES ADMINISTRATION

WEDNESDAY, JUNE 7, 2006

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, FINANCE, AND ACCOUNTABILITY, COMMITTEE ON GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 2 p.m., in room

2154, Rayburn House Office Building, Hon. Todd Russell Platts

(chairman of the subcommittee) presiding.

Present: Representatives Platts and Towns.

Staff present: Mike Hettinger, staff director; Tabetha Mueller,

professional staff member; Dan Daly, counsel; Erin Phillips, clerk;

Gary Lawkawski, intern; Adam Bordes, minority professional staff

member; and Cecelia Morton, minority office manager.

Mr. PLATTS. A quorum being present, this hearing of the Government Reform Subcommittee on Government Management, Finance,

and Accountability will come to order.

Operations at the General Services Administration affect the entire Federal Government. GSA is the Government’s business manager.

All Federal agencies rely on GSA for support services and management guidance.

In addition to this important mission, GSA is the lead agency for

the Office of Management and Budget’s financial management line

of business, and it is one of four designated shared service providers.

In this dual role, GSA will not only bid to provide financial management services for other Federal agencies, it will set the standards for the Government-wide implementation of this critical line

of business.

For these reasons, the subcommittee was troubled when GSA

was unable to earn a clean opinion on its audited financial statements, coming on the heels of improper acquisition practices that

were uncovered 3 years ago and the prospect of declining revenues.

This hearing will provide an important discussion of what GSA

is doing to improve management functions and to restore faith in

its business practices.

This certainly is a critical time for GSA.

The agency has a significant reorganization underway, new leadership in several key positions, including a new administrator, increased internal controls requirements, and the added challenge of

managing a Government-wide initiative with broad implications.

2

As GSA rebuilds its reputation and moves forward, sound financial management must serve as its foundation.

We are pleased to have with us today Ms. Kathleen Turco, Chief

Financial Officer at GSA, and Mr. Eugene Waszily, Assistant Inspector General for Auditing. We thank both of you for being here

today and for your written testimonies which you provided in advance and for your oral testimonies you’re about to give.

Before we swear you in and also recognize our ranking member,

I want to recognize we are delighted to have the new Administrator, Lurita Doan with us.

Ms. Doan, thank you for being with us. We appreciate your commitment to financial management, as evidenced by your presence

here today, and I saw in the Federal Times interview as you highlighted the challenges going forward, financial management being

one of your priorities and returning to that track record of clean

audits that GSA has long maintained. We are grateful for your

presence today and the assistance of your colleagues here today, as

well.

Ms. DOAN. Thank you.

Mr. PLATTS. With that, I will recognize the ranking member, Mr.

Towns from New York, for the purposes of an opening statement.

Mr. TOWNS. Thank you very much, Mr. Chairman. I would like

to associate myself with your remarks welcoming the new Administrator. Delighted to have you on-board.

Also, Mr. Chairman, let me thank you for having this hearing.

Today’s hearing comes at a pivotal time for GSA, as it works to

both remedy its accounting deficiencies and restructure its acquisition programs.

The challenges ahead are formidable due to financing irregularities uncovered within GSA’s acquisition fund in 2003.

In response, some agencies have sought to keep more bulk purchasing working in-house instead of utilizing GSA’s programs.

On balance, these events have altered the business model of GSA

and have increased the financial uncertainty for its programs.

While I believe the establishment of one unified Federal acquisition service fund is a good start at reform, I am uncertain about

the outcome of these efforts due to the results of GSA’s 2005 financial statement.

Common sense dictates that restructured programs having ineffective financial management controls are unlikely to succeed.

In addition, I am dismayed with the administration’s effort to

use GSA as a financial center of excellence for other agencies.

If GSA is failing to achieve a clean annual audit, as it did in

2005, how can we expect it to meet the financial management

needs of other agencies? I do not see how.

In closing, it is my hope that our witnesses today can demonstrate the effectiveness of GSA’s reforms so it can continue as

the premiere acquisition agency for the Federal Government.

Mr. Chairman, again, let me conclude and to say to you thank

you so much for having this hearing, and I look forward to hearing

from our witnesses.

Mr. PLATTS. Thank you, Mr. Towns.

If I could ask our witnesses to swear in before their testimony,

please stand and raise your right hands.

3

[Witnesses sworn.]

Mr. PLATTS. Thank you.

You may be seated.

The clerk will note that both witnesses affirmed the oath.

Again, we appreciate your testimonies. We will ask you to keep

your opening statements to roughly 5 to 7 minutes.

If you need more time, with the smaller setting here today, we

understand that, but we are anxious to get to the kind of exchange

with Q&A, as well.

Ms. Turco, if you would like to begin.

[The prepared statement of Hon. Todd Russell Platts follows:]

4

5

STATEMENTS OF KATHLEEN TURCO, CHIEF FINANCIAL OFFICER, GENERAL SERVICES ADMINISTRATION; AND EUGENE L.

WASZILY, JR., ASSISTANT INSPECTOR GENERAL FOR AUDITING, GENERAL SERVICES ADMINISTRATION

STATEMENT OF KATHLEEN TURCO

Ms. TURCO. Thank you, Mr. Chairman, Mr. Towns, other distinguished members of the subcommittee.

I am Kathleen Turco, the Chief Financial Officer for the General

Services Administration.

In order to fully understand the disclaimer of opinion of GSA’s

fiscal year 2005 audit, some background of GSA and its business

is helpful.

GSA recorded $18 billion in revenues in 2005, paid $1.4 million

vendor invoices, and issued 475,000 billings to Federal customers.

GSA is primarily comprised of three revolving funds. A large portion of our business with our customers is for time and materials,

as opposed to fix-fee contracts. Therefore, we often are not completely certain when a project is considered financial complete, because we do not always know when a vendor has billed us for all

their costs. This is important, because I will refer to residual balances from completed projects throughout my statement.

Additionally, with time and material contracts, there is an incentive to retain funding when a project is perceived as complete, just

in case a vendor bills the GSA for final and unexpected expenses.

The disclaimer we received in 2005 from our auditors was related

to our budgetary accounts.

I want to note that our proprietary accounts—revenues, expenses, assets, liabilities, and equity—in all three GSA revolving

funds did receive clean opinions.

Only the budgetary accounts in the information technology fund

and the general supply fund received disclaimers of opinion.

So, why the disclaimer?

In August 2005, GSA auditors informed me that they would not

be able to rely on GSA’s internal controls over processing of unfilled customer orders and obligations.

Unfilled customer orders are orders for goods and services from

our customers for which the good or service has not yet been provided.

Obligations are amounts that are designated for a specific customer requirement, and maybe either delivered or undelivered.

The auditors found residual unfilled customer order and obligation balances from completed projects that were no longer valid.

They also noted issues around incorrect amounts such as $10,000

being recorded instead of $1,000, as well as an apparent lack of a

bona fide need behind some orders.

A bona fide need is a need that is current, clear, and defined

within a given fiscal year, as required for a customer to validly obligate their budget authority. If no bona fide need exists, there cannot be a valid obligation or an unfilled customer order in GSA or

its customers’ financial records.

The auditors asked us to provide detailed records. We faced a

major problem, because financial reporting for this audit was for

6

fiscal year 2005, as well as the prior year, 2004, and it was August

2005.

We simply could not conduct a complete review of GSA records

by year-end and meet the November 15th Government-wide reporting date.

To provide detailed records would have required a complete review of unfilled customer orders and obligations for 2005.

Also, we could not recreate the exact detail that went into the

2004 fiscal year financial report.

Instead, we decided to conduct a statistical sample of the fiscal

year 2005 year-end numbers and report statistically valid data by

reviewing 1,200 files and statistically calculating the unfilled customer order and obligation balances.

Unfortunately, we were not able to statistically calculate unfilled

customer orders and obligations as of September 30, 2004.

We simply could not go back in time to recreate the populations

that were needed for sampling.

Further complicating this challenge was that our financial system of record received summary information that could not be aged

to identify the oldest and most suspect balances.

The specifically statistical amounts we adjusted due to this analysis in our fiscal year 2005 year-end numbers amounted to 1 billion

of unfilled customer orders and $444 million of obligations across

our three funds.

This is significant, because GSA’s materiality level is $450 million.

We clearly exceeded the materiality level.

With the statistical sampling finished, we reported what we considered to be statistically solid fiscal year 2005 year-end numbers,

but we did not have good fiscal year 2004 ending numbers, which

should be the same as the fiscal year 2005 beginning numbers.

This led to the loss of the clean opinion.

What are we doing in 2006 to address these problems?

GSA has undertaken a substantial revision to our financial internal control program.

The factors contributing to our disclaimer are under corrective

action.

Aging reports have been put in place. Aging reports will allow us

to identify completed projects that have residual balances and

projects for which there is no longer a bona fide need.

We have developed reports that break out unfilled customer orders, obligations, accounts receivable, and accounts payable balances by business line, by program, by fiscal year, and by region.

Reports allow us to focus our reviews and clean up the oldest and,

therefore, most suspect balances.

Along with the aging reports, we are reviewing all significant

files.

For the Federal buildings fund, we are reviewing 75 percent of

all obligations, as well as 100 percent of many of the fiscal year

2004 and prior unfilled customer orders that have no financial activity in the last 12 months.

In the general supply fund, we are reviewing the files of obligations in question, and we have already completed and corrected 47

million of the estimated 58 million. For the unfilled customer orVerDate 11-MAY-2000 11:55 Mar 30, 2007 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\33117.TXT HGOVREF1 PsN: HGOVREF1
7

ders, we have corrected 26 million of the estimated 33 million problems.

The information technology fund, where we were most challenged—we have completed reviewing 95 percent of the fiscal year

2005 and prior unfilled customer orders, and we are on track to return over 600 million in invalid unfilled customer orders to our customers.

Finally, we are reviewing all obligations with our five largest

vendors that comprise the majority of the information technology

fund obligations.

In addition, we have issued three significant policies, including

a streamlined de-obligation policy, an unfilled customer order certification requirement policy, and a policy requiring certifications

for obligations.

Another problem area was inadequate reconciliation of GSA’s

business systems to our core financial system. I have mandated

and implemented monthly and semi-annual reconciliations between

all business systems and core financial systems.

The difference here led, in fiscal year 2005, to a material adjust- ment of $500 million on the books. We were able to correct this,

but clearly, we had a problem in terms of using our primary reporting system to produce timely or accurate information on a day-today basis.

We have also established an automated routine practice of compiling and comparing budgetary and proprietary accounts.

This allows us to ensure data moves in sync between our budgetary and proprietary accounts so that both contain accurate financial information and the balances are identical.

This effort has reviewed 2.5 million transactions, and it is currently 99 percent complete.

The challenges we face in cleaning up our disclaimer have driven

us to quickly implement OMB Circular A–123, management’s responsibility for internal control. I can factually report that we have

implemented the process for assessing, documenting, and reporting.

We have completed the planning process as well as evaluation

and controls, including cross-walking our key business processes to

our material financial reporting line items.

We have documented our most important key financial reporting

processes and conducted a risk assessment.

To ensure coverage of all key controls, we selected five regional

offices, a warehouse operation, and several headquarters locations

to perform testing.

We are complete in our testing. We are currently conducting followup work and evaluating the results of our testing.

We will meet the June 30, 2006, reporting deadline to provide

our statement of assurance of the effectiveness of internal controls

for financial reporting. Any problems we find, we will have the

ability to address between now and the close of the fiscal year.

The efforts I have described are an appropriate aggressive approach to cleaning up our financial house. If carried out effectively,

we should regain the clean audit opinion.

We do face a hurdle.

As I stated earlier, we calculated statistical projects of our unfilled customer order and obligations at the end of 2005.

8

Statisticians from three separate firms, including our external

auditors, all agreed on the sampling and projecting methodology,

but ultimately, our projections were estimates.

If our review efforts this year find errors materially different in

what we estimated last year, our 2005 projections may be materially misstated, which means our 2005 ending balances and, therefore, our fiscal year 2006 beginning balances would be materially

misstated.

In the event—and this is key—that we are unable to quantify the

difference between our reviews and statistical projections, a clean

opinion may not be achievable for fiscal year 2006.

Current indicators are that this is unlikely, but I would be remiss in not acknowledging this possibility.

Serving other Federal agencies is the core mission of GSA.

OMB selected GSA to serve as one of the four financial management lines of businesses.

I would like to assure the subcommittee that the disclaimer has

no impact on GSA’s ability to provide financial services to other

agencies, because the primary reason behind the loss of a clean

audit opinion was residual balances from past IT projects.

It was not from our financial system software or reporting practices.

As a shared service provider for over 30 years, we are currently

providing financial services to 47 independent agencies, boards,

and Presidential commissions, as well as a payroll service provider

to 37 agencies. We spent the last 6 months focused on establishing

our Federal integrated solutions center and developing a marketing

plan to provide financial management services and products to our

current and future Federal clients.

Our shared services are built upon a financial management enterprise architecture foundation. We are in accordance with the financial management enterprise architecture standards, and in fact,

our financial management enterprise architectural work is being

used by OMB’s Financial Systems Integration Office [FSIO], as the

foundation document for dividing common business processes and

data. Security and privacy protection of data has also been a priority. We believe our financial systems controls have been strengthened considerably over the last few years, as evidenced by our recent scorecard grade of an A-minus for Federal Information Security Act compliance in this area.

GSA is committed to getting back our clean opinion for 2006 and

doing what is best for the Federal Government and our client agencies.

I welcome your questions.

[The prepared statement of Ms. Turco follows:]

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Mr. PLATTS. Thank you, Ms. Turco.

Mr. Waszily.

STATEMENT OF EUGENE L. WASZILY

Mr. WASZILY. Good afternoon, Mr. Chairman, Mr. Towns.

Thank you for the opportunity to participate in today’s hearing

on the status of financial management services at the General

Services Administration.

Sound financial practices are the bedrock upon which all successful enterprises are built, and Federal agencies are no exception.

We appreciate the subcommittee’s interest in this important subject.

Today I would like to provide you a brief overview of my formal

written comments, and I will be addressing three particular topic

areas: one, the GSA financial system framework, the results of the

2005 financial statement audit, and a brief comment on the implementation of the revised Federal Managers Financial Integrity Act,

A–123.

Up until about 5 years ago, the core accounting system for GSA

was hosted completely on a mainframe computer system that was

actually built in the 1970’s and has been modified countless times

over the intervening years. It was determined to have become highly ineffective and very expensive to operate.

Central to the new accounting system, which is named Pegasus,

is the concept of enterprise architecture, and under this scheme, it

mandates that each financial system that feeds into the accounting

system must be compatible with the core accounting system.

During the implementation of Pegasus, the agency breached this

fundamental requirement and permitted one of the service components to develop a management information system that subsequently proved to be incompatible with the accounting system.

After about 4 years of development of that system, it was determined to be fatally flawed, and it had to be scrapped. It also caused

the CFO’s office inordinate amounts of resources to unwind the inaccurate accounting information that had been provided by this

feeder system.

If there is anything to learn from the GSA experience in this

area, it is that once the fundamental rules of development are set,

major departures cannot be permitted.

Other delays have been experienced in some of the related online systems that are part of the modernization initiative, and

while these delays are unwelcome, I think it should be viewed that

GSA has been making substantial progress in its modernization efforts and that, clearly, as I like to put it, the glass is half full and

getting fuller all the time.

Progress, particularly in the past 2 years, has been substantially

better than in the prior 2 years.

Turning to the financial statement audit of 2005, for 17 consecutive years, GSA had received unqualified or what are called clean

opinions, and while the 2005 financial statement audit again confirmed the fair presentation of GSA’s proprietary accounts, the external auditors were unable to verify some of the financial information presented in the supporting statements.

29

Signs of these problems originally occurred during audits that

my office conducted back in 2004. These were procurement audits.

Alert to the problems that we were finding with some of the underlying documentation for those procurements, the external auditors in the 2005 audit cycle expanded their review of the budgetary

accounts, finding that, for several years prior, that the Federal

Technology Service had been mis-applying and mis-counting for

obligational authorities that had been transferred to it from client

agencies.

Because of these inaccurate accounting practices, the problems

have been accruing for almost 8 years. The budgetary

misstatements were in excess of $900 million, which, again, as Ms.

Turco pointed out, materially misstated our budgetary accounts.

I can attest that GSA has gone to great lengths to clear up the

inaccuracies in its budgetary balances. I believe the stumble that

occurred in 2005 will actually benefit the agency going forward and

that this episode has forced GSA to look more closely at its business transactions and has also provided the incentives to grant the

CFO greater leverage to establish more control and oversight over

the fiscal activities of the entire agency.

Up until about 2 or 3 years ago, the CFO was viewed as a supporting role for the organization, but many of the line components

really dictated how the accounts were managed, and a lot of the

information that went to the CFO’s office was only the aggregate

information, not the detail.

So, it was very hard to assess when a problem was festering.

Under the new role, the CFO office has a much better opportunity to identify problems and head them off before they become

major issues.

I would like to stress, though, that as Ms. Turco pointed out, the

basic accounts of GSA and the stewardship of assets under its

management were never misrepresented or subject to undue risk

during this time.

On the subject of internal controls and the new A–123 requirements, I am very pleased with the enhanced version of A–123. It

is near and dear to an auditor’s heart.

I am even more pleased with the steps that Deputy Administrator Bibb and Ms. Turco have taken to place GSA in the forefront

of implementation of the new process.

GSA is faithfully following the implementation guidance provided

by OMB in following the five-step process which includes the planning of the control testing, doing various testing at the entity level,

the process level, and then down to the transaction level, assessing

across the agency the results, and then reporting on any corrective

actions that might need to be taken to improve the internal control

environment.

I believe that we are, as an agency, in the forefront of implementation of the new requirements.

That concludes my opening statement, Mr. Chairman. I would be

pleased to answer any of your questions.

[The prepared statement of Mr. Waszily follows:]

30

31

32

33

34

35

36

Mr. PLATTS. Thank you, Mr. Waszily, for your statement, and I

wanted to note we appreciate, as a fellow native Pennsylvanian,

you being here, and especially your prior service in the U.S. Army,

as well.

Our ranking member, Mr. Towns, does have another conflict here

shortly, so we are going to begin with his questions and then come

back to me.

Mr. Towns.

Mr. TOWNS. Thank you, Mr. Chairman.

I am really happy that I got a chance to hear the witnesses.

Let me begin with you, Mr. Waszily.

Are all of GSA’s services now functioning under one unified financial management system?

Are there outstanding issues between different funds and accounting programs?

Mr. WASZILY. Yes, sir, there still are problems. GSA was crafted

in 1949, and over a period of time, we have brought in a number

of different programs from other agencies—of course, the entire environment of technology many of these accounting systems for

these subordinate programs were, in essence, bolted onto the existing accounting system. So, the modernization effort that was initiated a little over 5 years ago is a long-range program, and there

still are some substantial differences between the different funds.

The nature of the business from the different funds—there will

always be some differences in how they operate, but to Ms. Turco’s

credit, we are trying to attempt to bring as much standardization

to the agency, both across the programs, as well as across the regional activities, GSA-wide.

Mr. TOWNS. Right.

On a scale, I guess, from 1 to 10, have there been significant improvements made to the accounting processes for the agency, customer orders, of course, that were identified in the 2005 audit?

How would you characterize that in terms of progress?

Mr. WASZILY. In regard to the budgetary accounts?

Mr. TOWNS. Yes.

Mr. WASZILY. Yes, sir.

I think the 2005 audit actually is trying to capture, if you will,

the sins of about 8 years of mis-application of funds by one particular activity within GSA, and it was so large that it tainted the validity of the budgetary accounts for the entire agency, because the

problems had been allowed to fester for 7 or 8 years, so that it became a huge problem that you had to bite the bullet in one particular year, and as Mr. Turco pointed out, we could clean off the bad

accounts and the invalid obligations that were sitting on the accounts, but because the accounting system at the end of the year

could not look backward and re-establish what should have been

the appropriate balances for the beginning of the year, it ends up

in an adverse opinion for that particular year. So, even though there was a $900 million misstatement in 2005,

it really is not attributable to mistakes that were made in 2005,

and in fact, the agency had put in policies for going forward to

avoid those problems in the future.

So, the 2005 transactions that were being conducted in the agency actually were operating under the proper rules. What we were

37

suffering from is trying to clean up the residual problems that had

accumulated over the previous 8 years, and as Ms. Turco pointed

out, we still have a bit of uncertainty whether or not we have them

all cleared out of the system, but I am pretty comfortable that we

have at least 80 percent, if not more, that have already been resolved, and we will be continuing to work this year to resolve the

remainder.

Mr. TOWNS. That sounds like an eight, then.

Mr. WASZILY. Maybe an A-minus.

Mr. TOWNS. Do you see any of the current accounting or management control deficiencies jeopardizing the merger of the FTS and

FSS into the Federal Acquisition Service?

Mr. WASZILY. No, sir, I do not. Again, the principle issue here

were budgetary accounts. It does not disturb the proprietary accounts, and actually, I think the merger will actually help expedite

the clean-up.

Mr. TOWNS. What effect—and this is my last one, Mr. Chairman.

What effect will declining revenue streams have on the future viability of GSA services and operations?

Mr. WASZILY. The agency, at the moment, is going through a

process to balance out its workload, the resources, and the level of

personnel engaged in the agency so that it is commensurate with

the level of business. Understandably, many of the client agencies—because as part of this clean-up, GSA, to its credit, had to

admit that we had made a serious mistake.

In many instances, we had to return money to client agencies,

and in several instances, the money that we returned to the

obligational authority, we returned to them, was no longer available for other use. So, understandably, we have a large group of

customers out there who are very unhappy. They had thought that

they had substantial amounts of contracting dollars available for

use, say, in 2005 and in 2006 and 2007, and all of the sudden, we

have turned that back to them, said the money is no longer available, and that we can only do business if you provide us new resources.

I know Mrs. Doan, one of her priorities is to mend the fences

with our client agencies. This is a Herculean challenge given that

it was the right thing for the agency to do, but you know, customers don’t like to get surprised like that, and particularly when

resources are tight and they were counting on that money, it puts

them in a very precarious situation.

So, I am confident. I have been traveling the country, talking to

procurement personnel, from the senior executives down to the

folks in the trenches, I can tell you I am very impressed with the

procurement and marketing cadre of GSA. I believe strongly they

have a good product.

I would like other agencies to focus on their missions and let

GSA do the procurement business, and I think, with time, we can

demonstrate that we can do it better, we can come up with better

solutions, and do it quicker, and let them tend to their primary

missions, and I think the agency is righting the ship now.

Mr. TOWNS. Thank you very much.

Mr. Chairman, on that note, I yield back.

Mr. PLATTS. Thank you, Mr. Towns.

38

Ms. Turco, I want to come to the point of the structure and the

history of GSA as a very decentralized environment with headquarters and in the various services and regional offices. From your

role as CFO and trying to right the ship and move forward in a

positive way, would it help you to have more central control, especially over the service CFOs?

My understanding is they answer now to the commissioner, not

to you.

Yet you are the one that has to sit here and answer the questions and take responsibility for financial management, you know,

throughout the entire entity.

Would that be of help to you? I would analogize it to NASA.

We had a similar situation with Gwen Sykes and where all the

individual NASA centers did not answer to her or the CFOs, and

so, it caused some challenges that she and the administrator rectified to give more direct oversight. Could you expand on that

issue?

Ms. TURCO. Chairman Platts, I have been at several agencies,

and I would say that, with GSA, we have an excellent financial

community, some of the best folks that I have worked with.

Both PBS and FAS have excellent comptrollers, but I would

agree with you in terms of the CFO needing direct management

control of all financial staff.

That is how the CFOs Act of 1990—it is a requirement in the

CFOs Act.

So, yes, I think it would help to alleviate some of the challenges

we go through, some of the steps, and would move our efforts to

clean up and to provide financial services across the agency to a

higher level. It also would move it faster.

Mr. PLATTS. That is certainly what we have found in working

with NASA, with their realignment, is it has benefited the overall

organization in a very positive way.

What is the relationship with you and the CFOs at the regional

offices?

I am not as certain of that.

Ms. TURCO. Technically, we just have two CFOs or comptrollers,

one for PBS and one for FAS.

There are individuals who have labeled themselves as CFOs, but

they are really doing budget work in the regions, not financial.

Mr. PLATTS. OK.

Ms. TURCO. They are not preparing financial statements and

they’re not doing that level of analysis.

Mr. PLATTS. OK.

Ms. TURCO. It is a very good group of people, and we have very

good working relationships. So, that is not an issue, and in fact,

this past year, when I have asked them to change their practices,

when I have asked them to implement the policies and to make

them a priority, they have done so.

Mr. PLATTS. As you look at the possible restructuring with the

service CFOs and how they interact with you and your authority

over them, at this point are you aware if there are any legislative

obstacles that would need to be addressed by legislative action, or

is it more internal?

Ms. TURCO. It is internal only.

39

Mr. PLATTS. OK.

Mr. Waszily, I will come back to the audit issue, and your statement. You talk about if this had been a private corporation, in essence, GSA would have gotten a clean opinion——

Mr. WASZILY. Yes, sir.

Mr. PLATTS [continuing]. And only because of the public sector

and the way we look at it and the results of the internal audits,

it raised some flags that created the additional scrutiny.

Could you first elaborate on that premise, that it would have

been a clean opinion on the private sector side, and then explain,

in best possible layman’s terms, how you would describe the budgetary resources that were the source of the disclaimer?

Mr. WASZILY. Certainly.

In the private sector, the accounting financial opinion would be

based upon a review of the books and records of the corporation to

reflect the validity of assets, liabilities, shareholder equity for the

particular corporation or entity, and there you would have the

equivalent, the income statement and the expenditures of the corporation. Commonly called, these are the propriety accounts, and

these typically would be what the fundamental financial opinion

would be in the corporate world.

In the Government, we also add this budgetary accounting, and

it has only been the past 5 or 6 years that OMB has actually required the agencies to express an opinion on the validity of their

budgetary accounts in addition to their proprietary accounts.

Now, to take it one step further, GSA is even a bit different from

the other Federal agencies. What OMB was principally interested

in in the budgetary accounts was that most agencies operate under

congressional appropriation, and the budgetary accounts basically

provide a scorecard as to the status of obligational authorities provided by the Congress.

So, OMB wanted to use this as a report card to measure the

agency’s reporting against the Presidential budget and also to provide Congress information as to the status of funds provided,

whether they were obligated or available for obligation.

GSA has very few appropriated funds. We have these three

major revolving funds.

So, in many ways, we look more like a business.

So, our use of the budgetary accounts really is more reflective of

authorities that have been granted to us by our clients. The easiest

way to put it would be it is sort of like a forecast of business that

we anticipate to be—or are in the process of developing at the moment, but we have not yet actually reached the stage where we

have prepared a contract for our client agency.

This makes it somewhat different as far as what a budgetary account is for GSA, as opposed to the other Federal agencies. The

other complication in this matter with the budgetary accounts and

why part of this went astray was that most of the agencies have

operating budgets and appropriations that are good for 1 year. Our

revolving funds generally have a life-span of 5 years, and in part,

I think some folks were a little confused in years past as to, if an

agency who has 1-year money gives a 5-year revolving fund money,

how long does that appropriation live, and frankly, there’s very litVerDate 11-MAY-2000 11:55 Mar 30, 2007 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 C:\DOCS\33117.TXT HGOVREF1 PsN: HGOVREF1
40

tle guidance regarding the viability of money when you move it

from one status to the other.

I hope I have clarified, not further confused the issue.

Mr. PLATTS. Well, that leads to the question—and Mr. Towns

and you touched on it—the impact on those agencies that you are

dealing with, your clients——

Mr. WASZILY. Right.

Mr. PLATTS [continuing]. Because of the errors over the 8 years, roughly $900 million.

When you went back to them, do I understand correctly the reason they, in essence, lost the use of those funds is because they

were back to them, and for them, they were 1-year appropriations,

and they have, in essence, lapsed, because they were not in the revolving fund?

Mr. WASZILY. Yes, that is a large portion of the funds.

Many agencies who had, let’s say, funds that they anticipated for

paying for ongoing service-type work, they had anticipated that

those funds would be available to them for maybe 2 or 3 years

going forward, and unfortunately, we had to say, well, you know,

we are very sorry, but we misinterpreted how we could use those

funds, we have to de-obligate them from our books, give them back

to you, and since they had their basis is 2003 or 2004, they were

no longer available for other obligation.

So, yes, that’s what caused the tension between GSA and its client agencies, and if I was a client, I would be very upset, too, if

I was planning—I had laid my budget out for the next 2 or 3 years,

anticipating I had certain expenses already covered, and now I

have to find other resources to cover them.

Other ones, as Ms. Turco pointed out, were caused by the technology service. Because, first of all, the Web-enabled IT, created a

great explosion for the demand for those services.

So, the technology service was growing by leaps and bounds.

They couldn’t keep up with the business.

They were bringing in hundreds of new people, many from the

private sector, who had never dealt in a government environment

before.

They were interested—terrific marketing people and terrific at

customer response.

They were interested in going out and getting even more business, so that is—as Ms. Turco pointed out, if they had given us

$100,000 for a project but it actually only cost $90,000, no one went

back to close out the account and clear that other $10,000 out.

Well, you start multiplying that by 10,000 or 15,000 accounts,

and there is a substantial amount of money that is just languishing

in accounts that should have been closed out.

So, there were really two factors: one, invalid money, and two,

the balances that should have been swept out of the accounts.

Mr. PLATTS. The issue of the revolving fund, the money going in

there—it really gets into the broader issue of the Federal Government, whether we should have more flexibility for departments and

agencies in a capital fund where they really can plan for spending

this money over 2, 3, 4 years, because of the type of capital investments they are making, which, in essence, is what the fund had

been doing for certain agencies.

41

Mr. WASZILY. That is right, and that is important to point out.

We had a few instances of situations where there were actually

out-and-out frauds taking place.

This was a relatively small thing, and it was just one or two individuals who saw an advantage in a huge system that unfortunately, took advantage of the system, but for the most part, both

the marketing folks, the procurement folks at GSA, and the agencies were really just trying to keep, get their services that they

needed to support their mission, and GSA was anxious to meet

their customers’ needs, and overall, other than these financial

issues, which we have to respect the requirements that are—and

restrictions that are put on appropriation. We have to respect

those, but their intent—they were well intended, and this was not

done maliciously, and frankly the business—it had grown from

close to $3 billion and in less than 5 years had grown closer to $9

billion, just a tremendous amount of growth, and any organization

that grows that fast has a tendency to lose control.

Mr. PLATTS. Ms. Turco, you referenced in your testimony the heroic effort, manual corrections that have taken place to go back and

really to correct the budgetary accounts and to get back to a solid

bedrock, you know, foundation and move forward on—what is your

assessment of the need for that type of manual effort in this year

and the coming years? With what you are doing now, will you get

back on track? Can you go back to that being more of an automated

process, not the manual effort?

Ms. TURCO. It has been a real effort this year, and we are doing

everything possible to make it what I’d call automatic.

The aging reports have provided substantial information, and the

aging reports go—obviously begin with 2006—they go back to 1999,

and we have been able to go in and clean out balances.

In terms of moving it forward, we feel that, beginning in fiscal

year 2007, we will be able to load in budgetary data at the beginning of the year, appropriation data at the beginning of the year,

and it will be automated in terms of the balances, in particular between the budgetary and the proprietary.

So, we have taken steps both in terms of our practices and in

terms of the system to ensure that we have ourselves in sync for

fiscal year 2007.

Mr. PLATTS. So, for 2006, you may still have more manual heroic

effort coming——

Ms. TURCO. Uh-huh.

Mr. PLATTS [continuing]. But you have a game plan to get away

from that.

Ms. TURCO. Yes.

Mr. PLATTS. That is good to hear, because that is one of our worries in our various oversight hearings with departments and agencies, large and small, that we get away from the end-of-the year

heroic manual efforts and just get that good internal controls processes in place, that it is, you know, really almost any day of the

year, you can say snap, here is where we stand on all accounts. It

sounds like that is what you are working toward.

Ms. TURCO. Yes, that is our goal.

Mr. PLATTS. I guess, Mr. Waszily, for you, you mentioned that

the intent on these errors had occurred not being malicious or deVerDate 11-MAY-2000 11:55 Mar 30, 2007 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 C:\DOCS\33117.TXT HGOVREF1 PsN: HGOVREF1
42

ceitful, but I guess, in the independent auditor report, there were

three things that were identified as possible Anti-Deficiency Act

violations.

Mr. WASZILY. Yes, sir, that is correct.

Mr. PLATTS. Could you describe those issues and where those

issues stand?

Mr. WASZILY. Yes, sir.

As I mentioned, most—the initial discoveries of the weaknesses

in the financial system came from procurement audits that we

were conducting, principally in the Federal Technology Service, and

once we started to find that there were substantial issues related

to many procurements, particularly those with the Department of

Defense, we were asked by the Senate Armed Services Committee

to conduct joint reviews with the Department of Defense IG, taking

a look at each of the client support centers in each of the GSA regions.

We have been doing a series of audits, beginning in 2003.

We have done another set in 2004.

We are just wrapping up a set for 2005, making sure that the

systems, both on the procurement and financial sides, are improving.

During the course of that work, we discovered some transactions

that were substantial in dollar value that led to possible anti-deficiency violations. The three that you refer to—the first one is a $177 million Air

Force project.

It had to do with installing vehicle access barriers at Air Force

bases around the world. Approximately 500 barrier construction

projects were going to be put in place, and then a related computerized security system was going to be tied into this process.

All of this initiative was to free up Air Force personnel, reduce

the number of security personnel, by trying to automate and protect the bases in a mechanical way rather than using human resources.

The money was funded out of 2003 operating money, and there

were several fits and starts.

I wouldn’t say this was a model procurement, by any means, but

the question came up from the DOD IG’s office as to, since we had

gotten into fiscal 2004 and several pieces had not yet been contracted for, were those 2003 funds still viable. This—as they say

if you get three attorneys in the room, you can get at least six opinions. We have had a multiplicity of legal opinions as to whether or

not the funding of this project is appropriate.

It has ultimately reached the level of the general counsel of the

Department of Defense and the general counsel of GSA, and I believe, as of last week, we have formally concluded that this was actually appropriate and that the funds are available for use and that

this will not be an anti-deficiency violation.

The second one had to do with a relocation of the Army and Materiel Command.

It was a $44 million project, and it was—a vendor was contracted

to actually relocate this entire command, acquire and then install

modular buildings that comprise 230,000 square feet of office space

at a location at Fort Belvoir in Virginia.

43

This was done through transactions that were processed both

through the general supply fund and the information technology

fund.

Neither of those funds have the authority to engage in contracts

that have to do with realty, and once you start bolting the modular

buildings to the ground, you have created realty.

So, at a minimum, on this one, we believe that there was a purpose statute violation on the part of GSA. There are other aspects

to this.

There are also provisions about the level of expenditure for military construction that can be undertaken without the approval of

the military construction committee, and that is—we are waiting

for the final report from the DOD IG, from their side of the transaction.

We are reasonably sure we are going to have something on our

side, most assuredly, a purpose statute violation in that case.

The third one was to try and get at the entire financial issue that

we were talking about this afternoon. That over a period of time,

the Federal Technology Service, beginning in about 1997 or 1998,

when it initiated getting into this service technology area, tended

to be very flexible in how they used client money.

They would—if they had an account for you, they would always

make sure that they accounted for all the funds that you had provided them, but if you had six or seven projects that were underway, they felt that it was all right to move money from one project

to the other, and they had a tendency—what they would do is use

the oldest money in the pot first and roll the money forward into

the other accounts. Then, if one overran and one underran, they

would move the money.

This is inappropriate as far as project management. It is also inappropriate from appropriations law.

Again, we also had issues of using funds and putting funds into

the information technology revolving fund that actually only had a

life of 1 year, and they were applying it and making awards maybe

2 or 3 years later. Again, these are technical anti-deficiency, inconsistent with the appropriation law.

So, what we were trying to do here—we are talking a matter of

thousands of transactions, and over the course of 8 years, probably,

I do not know, $10 or $12 billion flowed through the fund. To try

and parse out where the money actually belonged or to file an antideficiency on each and every one of these didn’t seem to be realistic.

So, we were trying to suggest, in this one, to make a recommendation, some kind of global mea culpa that we had a transgression in our accounting for funds, we have remedied the situation going forward. There were substantial numbers of disciplinary

actions that were taken as a result of these findings, and that we

are now in the process, as Ms. Turco outlined, of trying to clean

up the accounts to bring them into line and make sure they’re fairly stated currently.

So, that was the third one.

Mr. PLATTS. Thank you for the summary of each of those.

It seems that part of your effort of getting back on track and

heading forward and continuing to have the glass be more and

44

more full in a positive way and with your client agencies, as you

look to more and more of that shared service center and compete

for and gain clients, that these anti-deficiency actions, possible actions, violations in the past, and then the budgetary challenges

that directly related to how you accounted for money between other

agencies and your agency, that those will impact whether somebody wants to come to GSA, as a shared service provider, and so,

I assume that, as you delineate what exactly happened on the antideficiency violations or possible violations and the budgetary, that

is part of your message to the other agencies, to your clients, that

you have identified the wrongs of the past and you are correcting

them and making sure they don’t happen again.

Is that a fair statement?

Ms. TURCO. Yes, Chairman Platts. In fact, we have met with a

majority of our 47 financial external clients, and we have explained

the problem to them, and at this point, they are all still with us.

So, moving forward, we have actually been meeting with several

agencies who are interested in migrating to a shared service provider, and we have explained our problems, the disclaimer, and

they have not been unwilling to work with us. They are still willing

to work with us, and we are still in talks in terms of migrating

folks over.

Mr. PLATTS. I want to come back to a couple of things.

Mr. WASZILY. Mr. Chairman, Ms. Turco had touched upon it previously, and as I mentioned, most of these issues that came up as

far as the anti-deficiencies, these really came out of the program

and procurement folks in this one particular aspect of GSA, and as

she had pointed out in her testimony, up until we started with the

new modern accounting system, the CFO’s office only got to see the

aggregate detail.

So, these transgressions were really procurement-generated, and

they were being maneuvered, if you will, or manipulated at very

low levels, and it was only the aggregate data that anyone actually

saw by the time that it hit the official accounting records, and

that’s really where the problem was.

It was not a problem with the accounting system or the CFO’s

office accounting for transactions.

Mr. PLATTS. In fact, the approach of asking or requiring more detail is helping to guard against that in the future——

Mr. WASZILY. Exactly.

Mr. PLATTS [continuing]. In uncovering and guarding against.

With the financial management line of business, one of the requirements, when we have talked to OMB, is that you have a clean

audit to be a shared service center and that you were already a

shared service center before the disclaimer came out on your last

audit.

One, have you been given any feedback from OMB that you will

not remain a shared service provider if you do not return to a clean

audit?

Ms. TURCO. I have not been given that feedback. We have met

with OMB on our implementation of OMB Circular A–123, and all

the efforts we have underway to clean up our books.

We were told we were—they were keeping some internal ratings

and that we were rated green in terms of our efforts.

45

Many of my staff worked on the revision of A–123, and in particular, appendix A and all of the requirements.

So, we are working closely with OMB so they can fully understand all the efforts we have underway to correct our actions, and

as Mr. Waszily was saying, it really was not the financial system

that was the problem, per se. It was the actions by the contracting

staff.

Mr. PLATTS. From everything you have shared with us in prior

written testimony and here today, I appreciate that, and to separate the issues, it leads to one of those questions that we still have

with OMB when we had them before the committee on the broad

issue of financial management line of business, that there are a lot

of, I will say, unanswered questions or uncertainties out there if,

currently, they say you have to have a clean audit to become a

shared service, well, if that’s the case, what happens when you lose

your clean audit and do not, you know, immediately return the following year?

What is the legitimacy of that requirement if it really is more

specific to, well, why didn’t you have a clean audit, as in your case,

it is on the budgetary side, not on the proprietary accounts, and

that is something that we have not really gotten, maybe, a final answer yet from OMB, so I am not surprised that you have not gotten

any direction yourself, and if anything, it seems like they are assuming you are moving forward as a shared service provider, clean

audit or not from 2005.

With the fact that GSA has worked with OMB in, in essence,

helping to revise the criteria and the requirements to become a

shared service provider and then to compete for the work, do either

of you see a possible conflict of interest because you are a center

and you want to get the business, and yet you are responsible for

directing or devising the criteria on how to be a center, that it

could be seen as a conflict for your entity over others?

Ms. TURCO. When I began here at GSA in August 2002, I had

on my staff JFMIP, and you know, JFMIP, which has evolved

into—it is still JFMIP, but it has evolved into FSIO—they were

conducting the testing of the software. I had a problem with that,

and I went to OMB, and I said it is inappropriate for it to be under

the GSA CFO. Danny Werfel at OMB agreed with me on that, and

he and I worked together to find a new home for the FSIO office.

When all was said and done, the Office of Government-Wide Policy was able to take over the FSIO office, and we think that is very

appropriate.

Much of what they do is externally facing, and it is providing

policies and procedures Government-wide.

So, we have worked with them, as have other agencies, many of

them shared service providers, in terms of the requirements, and

the standards, etc., in terms of the FSIO documentation for financial systems, but no more or no less than the other Federal agencies.

So, we are not unduly influencing anything within the FSIO office.

Mr. PLATTS. So, you are kind of the lead, but it is a partnership

in the final development.

46

Ms. TURCO. The actual partnership, though, is between OGP, Office of Government-Wide Policy, which is within GSA, and OMB.

So, we do—and I purposely keep myself separate from that.

My staff has provided input.

Like I said, our financial management enterprise architecture is

being used, and they came to us and said can we use your financial

management architecture, and we said certainly, we would welcome that.

Our architecture is standard.

It is about payables and receivables.

So, there is nothing that any other agency could not use.

Mr. PLATTS. So, GSA is the lead agency for coordinating the financial management line of business for everybody, right?

Ms. TURCO. Technically, it is OMB. It is the Office of Federal Financial Management, and then OGP, the office of FSIO that is led

by Mary Mitchell, works with OFSM, Danny Werfel and Linda

Combs, to coordinate the financial management line of business.

FSIO sets out the financial system standards that we all must

follow, as well now as the expanded standards around shared service providers.

Mr. PLATTS. So, your agency, as far as how someone becomes a

shared service provider and then implement it, you really do not

have a say in that. OMB is directly responsible for that.

Ms. TURCO. That is correct. OMB is directly responsible for that

determination.

Mr. PLATTS. OK.

How about internally with the fact that you are a shared service

provider and seeking clients? It is my understanding that—I guess

I am not sure—your regional offices and the services—are they

using you, your entity, as their shared service provider at their

own agency, or are they doing their own work?

Ms. TURCO. Yes, sir, they are using us, yes.

We provide the financial operations for GSA, all offices, all regions, yes, all business lines, yes, all program areas, yes.

Mr. PLATTS. OK.

Coming back to the technology investment with Pegasys and

your system—and I think, actually, it was in your testimony, Mr.

Waszily, some of the delays, some of the challenges, that originally

it was a 3-year plan, and that was not going to work.

If you or both want to give us an update of where we are with

Pegasys and what challenges, if any, remain in the full implementation.

Ms. TURCO. Again, when I started in August 2002, I was told, in

6 weeks, that we were to stand up Pegasys, we were going to go

live October 1st, fiscal year 2003. So, I sort of walked into what

was sort of the tail-end.

Did we have challenges? Yes, like any Federal agency, we had

challenges in terms of the stand-up, but we actually had a bigger

challenge, and we are in the midst of it right now.

We implemented the vast majority of the Momentum software.

However, our accounts receivable module and our billing module

are still in the old system known as Near, and I felt very strongly

that, once we implemented what we did with Pegasys, we needed

to step back.

47

There were challenges. I went back and I read the audit reports.

I talked to the auditors, and many of our internal customers, and

we needed a new way of doing business.

We also just cannot simply, you know, sort of pull the plug on

the old system because of the extensive billing practices that we

have.

So, we decided that what we would do is develop our financial

management enterprise architecture. We also put in place a program, a performance management office within the Office of the

CFO.

I designated certain positions as requiring PM certification.

We have sent an extensive amount of staff to program management training.

We have put in configuration management. We have a change

control board, and we now have a more disciplined, rigorous process in terms of how we go about the investment, whether it is a

module or something as straightforward as the e-travel system,

which we are in the midst of putting in place.

We do business case analysis, cost-benefit analysis. We look at

all software.

So, our challenge going forward is what is the best solution for

replacing our accounts receivable module and our billing activities

at GSA.

We have drafted a business case that is being reviewed internally, and we will use that, along with the financial management

enterprise architecture, to go out to the vendors and offer out a bid

in terms of how we want to provide a solution for GSA.

Mr. PLATTS. Now, is that something, Mr. Waszily, that—you are

part of that review?

Mr. WASZILY. Yes, sir.

We are consistently doing followup reviews, both from our technology side and our financial audit activities, in addition to the

work that we do on the financial statement audit.

So, it is a constant sort of checking every few months to just see

where progress is going.

I might want to add, one of the challenges that GSA has—we

have one of the ironies in that the Momentum system was basically

built as a specialized accounting system for Federal agencies, and

of course, OMB also has asked the agencies to adopt a standard

general ledger.

The irony is that, because GSA looks more like a business, in

many ways, than it does a Federal agency, we have had to reconfigure the Government accounting system, because we look like a

business. So we have to translate it back into government accounting, and the same way we had to adapt Momentum to have these

business features to it, because it basically was set up just for

obligational activity that the typical agency would have.

So, on some days—I think Kathleen would agree with me—some

days we would prefer to go corporate and just report to the Congress the profits we make.

Mr. PLATTS. Right.

Is there a timeframe for the review, your accounts receivable,

and where you hope to be and when?

48

Ms. TURCO. We are currently in the midst of a upgrade, a software upgrade from 5.2 to 6.12 with the Momentum software. That

is this summer.

We are implementing an asset management module, and in the

midst of all this, we are doing the analysis around the accounts receivable. We hope, during 2007, to put it out on the market, and

then the implementation would be the beginning of 2008.

Mr. PLATTS. It is not in current use. Is that correct?

Ms. TURCO. Chairman Platts, we were fully aware of this problem 2 years ago, and we, in fact, had pointed it out to our auditors.

You will be happy to know we are doing it in an automated fashion now.

So, it has been put in place, and going forward, we do not think

there is going to be a problem. The challenge for us is we are still

having to do work sheet adjustments this year, but beginning in

fiscal year 2007, we feel it will be fully automated. Data is loaded

into the system at the beginning of the fiscal year.

As I understand right now, there is new requirements that have

just been published. Is that correct? They are in draft, and I honestly have not looked at them. I have not had a chance. So, I would

be actually hard pressed for me to comment.

Mr. PLATTS. That is something you could followup with us.

Ms. TURCO. OK. I will look into it and get back with you.

Mr. PLATTS. Thank you.

Is there anything that either of you wanted to address that we

have not covered in the statements or the questions?

Mr. WASZILY. No, sir.

Mr. PLATTS. We really need that example for the rest of the departments of the Federal Government.

With that, we stand adjourned.

[Whereupon, at 3:17 p.m., the subcommittee was adjourned.]

Æ