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GAO/T-AIMD-00-334

FINANCIAL

MANAGEMENT

USDA Continues to Face

Major Financial

Management Challenges

Statement of Linda M. Calbom, Director

Accounting and Information Management Division

Testimony

Before the Subcommittee on Research, Nutrition, and

General Legislation, Committee on Agriculture, Nutrition,

and Forestry, U.S. Senate

United States General Accounting Office

GAO
Page 1 GAO/T-AIMD-00-334 Financial Management at USDA

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss U. S. Department of Agriculture

(USDA) financial management issues. Much of my testimony today is an

update of our March 2000 testimony on USDA’s financial management,1

which focused on the problems identified in the USDA Inspector General’s

(IG) audit report on USDA’s fiscal year 1999 financial statements.

In February 2000 the IG issued a disclaimer of opinion2 on USDA’s fiscal

year 1999 consolidated financial statements--the sixth disclaimer of

opinion in as many years—indicating that the agency has pervasive

problems in accounting for its $118 billion in assets and $120 billion in

budgetary resources provided for fiscal year 1999. Before USDA can

achieve financial accountability, it must address a number of issues that

we and USDA’s Office of Inspector General (IG) have reported as serious

problems. Financial accountability is achieved when an agency has strong

financial management systems and internal controls that can generate

useful, relevant, and reliable day-to-day financial information to support

ongoing management and accountability.

My statement will focus on the agency’s challenges in achieving financial

accountability and complying with key financial management laws and

regulations. I will also discuss the corrective actions that USDA and its

component agencies have completed or have underway to resolve these

problems. Regarding financial accountability, USDA faces significant

challenges in four major areas: (1) implementing the Federal Credit

Reform Act of 1990 and related accounting standards,3 (2) reconciling its

Fund Balance with Treasury accounts, (3) addressing weaknesses in the

Forest Service’s financial accounting and reporting, and (4) correcting

certain other material internal control weaknesses.

1Financial Management: USDA Faces Major Financial Management Challenges (GAO/T-AIMD-00-115,

Mar. 21, 2000).

2A disclaimer of opinion means that the auditor is unable to form an opinion on the financial

statements. A disclaimer results when a pervasive material uncertainty exists, or there is a significant

restriction on the scope of the audit.

3The Federal Accounting Standards Advisory Board (FASAB) developed the accounting standard for

credit programs, Statement of Federal Financial Accounting Standards (SFFAS) No. 2, Accounting for

Direct Loans and Loan Guarantees (SFFAS No. 2), which became effective beginning in fiscal year

1994. This statement was supplemented by SFFAS No. 18, Amendments to Accounting Standards for

Direct Loans and Loan Guarantees, which becomes effective for periods beginning after September 30,

2000.
Page 2 GAO/T-AIMD-00-334 Financial Management at USDA

In brief, USDA continues to face major challenges in correcting

severe and long-standing financial management problems and

achieving financial accountability. During the last 2 years USDA

financial managers have taken these challenges seriously and made

a commitment of resources not only to resolve financial

management weaknesses that have precluded the agency from

receiving an unqualified, or “clean” opinion on its financial

statements, but also to begin moving toward a long-term goal of

achieving financial accountability. There is one notable exception,

however, to our assessment of USDA’s efforts. In August 2000, we

reported4 that Rural Development (RD), one of USDA’s major

component agencies, has made slow progress in improving credit

program cost estimates and missed several milestone dates because

of a shortage in both the staff and funding resources that are needed

to resolve long-standing credit reform weaknesses. Because of this

issue, USDA is likely several years away from achieving financial

accountability.

Improving financial accountability throughout the federal

government has been an area of emphasis since implementation of

the Chief Financial Officers (CFO) Act of 1990, which established a

CFO structure in 24 major agencies and charged the Office of

Management and Budget to provide the necessary financial

management leadership and focus. To help instill greater

accountability and fix pervasive and costly breakdowns in internal

controls, financial statements were required to be prepared and

audited, beginning with those for fiscal year 1991, for revolving and

trust funds and commercial activities. For 10 agencies–including

USDA–audited financial statements were required as part of a pilot

program to test this concept for an agency’s entire operations.

Since USDA’s participation in the pilot program in 1991, USDA and

several of its component agencies have received a series of

unfavorable financial audit reports due to deficiencies in financial

reporting that are attributable primarily to weaknesses in the

4Credit Reform: Improving Rural Development’s Credit Program Cost Estimates (GAO/AIMD-00-286R,

Aug. 22, 2000).

Background
Page 3 GAO/T-AIMD-00-334 Financial Management at USDA

agency’s financial management systems. USDA’s Chief Financial

Officer recognizes the seriousness of these problems and has a

number of efforts underway to address these issues.

The Government Management Reform Act (GMRA) of 1994

expanded the CFO Act by mandating that (1) major departments

and agencies produce annual financial statements subject to

independent audit, beginning with those for fiscal year 1996, and (2)

the Secretary of the Treasury, in cooperation with the Director of

the Office of Management and Budget, prepare financial statements

for the U.S. government that are audited by GAO, starting with those

for fiscal year 1997.

In addition, the Congress passed the Federal Financial Management

Improvement Act (FFMIA) of 1996. FFMIA requires auditors for

each of the 24 major departments and agencies named in the CFO

Act to report, as part of their audit report on agencies’ annual

financial statements, whether the agencies’ financial management

systems comply substantially with three requirements: (1) federal

financial management systems requirements, (2) applicable federal

accounting standards, and (3) the U. S. Government Standard

General Ledger (SGL)5 at the transaction level. These requirements

are critical for ensuring that agency financial management activities

are consistently and accurately recorded and promptly and

uniformly reported throughout the federal government.

Departments and agencies must comply with these requirements in

order to maximize their performance and ensure their

accountability.

USDA is responsible for a variety of major programs that (1) boost

farm production and exports, (2) promote small community and

rural development, (3) ensure a safe food supply for the nation, (4)

manage natural resources, and (5) improve the nutrition of families

and individuals with low incomes. The financial results of these

programs are reported in USDA’s consolidated financial statements

and make up a significant portion of certain components of the

consolidated financial statements of the U.S. government. For

5The SGL provides a standard chart of accounts and standardized transactions that agencies are to use

in all their financial systems.
Page 4 GAO/T-AIMD-00-334 Financial Management at USDA

example, USDA is responsible for managing the nation’s largest

federal direct loan portfolio, with reported net credit program

receivables of about $70.7 billion as of September 30, 1999. In

addition, USDA reported net costs of $32.7 billion for fiscal year

1999 for its food assistance programs such as the Food Stamp

Program and Child Nutrition Programs, which represent a

significant portion of income security net cost reported in the U. S.

consolidated financial statements.

USDA’s fiscal year 1999 audit was conducted by the Office of

Inspector General. We reviewed the IG’s workpapers between

January and February 2000. We conducted our update work for this

testimony from September 12 to 25, 2000, in accordance with

generally accepted government auditing standards.

USDA faces significant financial management challenges in four

major areas: (1) implementing the Federal Credit Reform Act of

1990 and related accounting standards, (2) reconciling its Fund

Balance with Treasury accounts, (3) addressing weaknesses in the

Forest Service’s financial accounting and reporting, and (4)

correcting certain other material internal control weaknesses. USDA

and its component agencies must resolve these issues to obtain a

clean audit opinion and begin to move toward achieving financial

accountability. I will briefly discuss the importance of each of these

issues and why they represent major challenges to USDA and its

component agencies.

Prior to the implementation of the Federal Credit Reform Act

(FCRA) of 1990, credit programs—like most other federal

programs—were reported in the budget on a cash basis. Thus, loan

guarantees appeared to be free in the budget year, while direct loans

appeared to be as expensive as grants. As a result, costs were

distorted and credit programs could not be compared meaningfully

with other programs and with each other. FCRA and the related

accounting standard, together known as credit reform, are intended

to more accurately measure the government’s costs of federal loan

programs and to permit better comparisons both among credit

programs and between credit and noncredit programs. As part of

implementing credit reform, agencies are required to estimate the

Major Accounting and

Reporting

Deficiencies

Barriers to Implementing

Credit Reform
Page 5 GAO/T-AIMD-00-334 Financial Management at USDA

net cost of extending credit, generally referred to as subsidy costs,

based on the present value6 of estimated net cash flows, excluding

administrative costs.

Since 1994,7 the IG has reported material weaknesses in the

processes and procedures used by USDA’s lending agencies to

estimate and reestimate loan subsidy costs. In January 1999, we

reported8 that the agency was unable to make reasonable estimates

of the cost of its loan programs because it did not maintain key

historical data needed as a basis to estimate future cash flows and

that USDA’s computer systems were not configured to capture the

data needed to make the estimates. USDA’s Chief Financial Officer

established a task force in March 1999 to assist in resolving the

agency’s credit reform problems.

Due to the magnitude of RD’s credit programs, an unqualified audit

opinion on USDA’s consolidated financial statements will not be

possible without the successful implementation of credit reform.

However, as we reported in our March 2000 testimony and again in

August 2000, progress in resolving RD’s problems in implementing

credit reform has been slow because USDA has not provided

sufficient resources needed to properly address this problem. We

also stated that without sustained top level management

commitment and the necessary dedicated staff and funding

resources, RD will not be able to improve the quality of its credit

program cost estimates in a timely manner. Furthermore, for most

of USDA’s credit programs, cost estimates based on unreliable data

can affect the availability of credit programs to potential borrowers

because changes in these estimates can affect the number and

amount of loans and guarantees that can be made.

6Present value is the worth of a future stream of returns or costs in terms of money paid immediately.

In calculating present value, prevailing interest rates provide the basis for converting future amounts

into their “money now” equivalents.

71994 was the first year in which agencies were to apply credit reform in their financial reporting,

following FASAB’s publication of SFFAS No. 2 in July 1993.

8Credit Reform: Key Credit Agencies Had Difficulty Making Reasonable Loan Program Cost Estimates

(GAO/AIMD-99-31, January 29, 1999).
Page 6 GAO/T-AIMD-00-334 Financial Management at USDA

USDA is the largest direct federal lender, with reported credit

program receivables of about $70.7 billion as of September 30, 1999.

As these loans are significant to the federal government’s financial

statements, USDA’s inability to make reasonable cost estimates for

its loan programs will continue to contribute to our inability to give

an opinion on the consolidated financial statements of the U. S.

government. This problem also raises questions about the quality of

the budget data related to USDA’s loan programs since the

accounting data under credit reform generally mirror the related

budget data. This “mirroring” provides the opportunity to improve

the integrity of the budget estimates through the financial statement

audit. However, USDA is not in a position to take advantage of this

opportunity.

USDA records its budget authority in asset accounts called Fund

Balance with Treasury and increases or decreases these accounts as

it collects or disburses funds. The Inspector General was unable to

fully substantiate the Fund Balance accounts with the U. S.

Treasury, which totaled over $38 billion as of September 30, 1999,

because the agency had not reconciled the balance with the amount

reported by Treasury. Prior to May 1999, USDA merely adjusted its

records to agree with Treasury’s without determining which, if

either, number was correct, and did not establish or analyze the

causes of the differences between its and Treasury’s records before

reporting its ending balance to Treasury. Since May 1999, USDA

discontinued adjusting its records to agree with Treasury’s records

and began disclosing any differences in its reports to Treasury.

Because most assets, liabilities, revenues, and expenses stem from

or result in cash transactions, errors in the receipt or disbursement

data affect the accuracy of various USDA financial reports,

including certain data concerning fiscal year 1999 obligations and

outlays that USDA provided for inclusion in the President’s Budget.

The Office of the Inspector General first identified unreconciled

differences between USDA and Treasury records in its fiscal year

1992 audit. According to the IG, differences in some instances have

gone uncorrected for more than 10 years. As of September 30, 1999,

the IG reported the unreconciled amount was about $5 billion.

Unreconciled amounts continue to occur because of, among other

things, timing differences, missing documentation, input errors, and

Status of Reconciling Fund

Balance With Treasury

Accounts
Page 7 GAO/T-AIMD-00-334 Financial Management at USDA

the inability of USDA’s supporting computerized systems–referred

to by USDA as feeder systems--to properly transfer data to the

accounting system and/or the accounting system’s inability to

record transactions in the correct general ledger accounts.

To address the Fund Balance with Treasury reconciliation problem, USDA

formed a task force consisting primarily of members representing the

Forest Service, the National Finance Center (NFC), USDA’s Office of the

Chief Financial Officer, and an outside consultant—

PricewaterhouseCoopers LLP—to resolve outstanding differences and

develop procedures that will prevent this problem from recurring in the

future. In addition, the IG and we have monitored this effort for the past

year. Until this problem is corrected, the integrity of much of USDA’s

financial data is questionable.

The IG recently issued a report and a letter to USDA’s Chief Financial

Officer on the results of its work to monitor USDA’s efforts to resolve its

Fund Balance with Treasury reconciliation problems.9 The report deals

with the adequacy of corrective actions taken by USDA to correct its

reconciliation problems with its old accounting system. This report

concluded that recommendations made by USDA’s contractor,

PricewaterhouseCoopers LLP, when fully implemented, would resolve this

long-standing material weakness. In the letter, however, the IG raised

some concerns about USDA’s progress in resolving unreconciled balances

recorded in the Forest Service’s new accounting system, the Foundation

Financial Information System (FFIS) implemented on October 1, 1999.

This letter stated that the absolute difference between Treasury and the

Forest Service general ledger records as of June 2000, was over $276

million for disbursements, and over $41 million for collections. This letter

also stated that the IG staff had discussed these problems with officials

from the USDA’s Office of the Chief Financial Officer and the Forest

Service who agreed that actions need to be taken and have developed a

time-phased plan to address the FFIS cash reconciliation problems.

As a major USDA component agency, the Forest Service accounts

for a substantial portion of USDA’s general property, plant, and

9OCFO Commits to Correct a 10-Year Problem with Its Fund Balance with Treasury Account (Report

No. 11099-14-FM, Sept. 2000) and FFIS Fund Balance with Treasury (Letter to the USDA CFO, Sept.

2000).

Forest Service Financial

Management Weaknesses
Page 8 GAO/T-AIMD-00-334 Financial Management at USDA

equipment and almost all of USDA’s stewardship land. As of

September 30, 1999, the Forest Service reported $3.1 billion of

general property, plant, and equipment—82 percent of USDA’s

total—and 192 million acres of national forest land and grasslands

that the Forest Service holds in stewardship for current and future

generations.

Since the first audit of the Forest Service’s financial statements,

which covered fiscal year 1991, USDA’s IG has found serious

accounting and financial reporting weaknesses. The IG’s February

2000 audit report on the Forest Service’s fiscal year 1999 financial

statements—a disclaimer of opinion—shows that the agency

remained unable to reliably track and report on major assets worth

billions of dollars. For example, the IG could not verify the accuracy

of the Forest Service’s pooled assets, such as roads and trails,

valued at $1.5 billion because the agency lacked sufficient

documentation to support their purchase price, date acquired, and

related depreciation costs. Furthermore, the independence afforded

by the agency’s autonomous field structure has hampered efforts to

correct accounting and financial reporting weaknesses. These

shortcomings mean that the agency and the Congress do not have

accurate financial data to track the cost of programs and activities

and to help make informed decisions about future funding. They

also raise questions about the accuracy of program performance

measures and of certain budget data drawn from the same database.

The Forest Service has completed several actions and begun others

that, if successfully carried through, represent important steps

toward achieving financial accountability. Nevertheless, as we

testified in March 2000 and previously in July 1998,10 major barriers

remain, and the Forest Service may need several years to achieve

financial accountability. Therefore, in January 1999, we designated

the Forest Service’s financial management as a high-risk area

because of the serious and long-standing accounting and financial

reporting weaknesses plaguing its operations. Because of this high10Forest Service: Financial Management Issues (GAO/T-AIMD-98-230, July 7, 1998).
Page 9 GAO/T-AIMD-00-334 Financial Management at USDA

risk designation, we have given sustained attention to monitoring

the Forest Service’s efforts to achieve financial accountability.

A strong internal control system provides the framework for the

accomplishment of management objectives, accurate financial

reporting, and compliance with laws and regulations. Effective

internal controls serve as checks and balances against undesired

actions and, as such, provide reasonable assurance that agencies

operate in a safe and sound manner. The lack of good internal

controls puts an agency at risk of mismanagement, waste, fraud, and

abuse. Furthermore, without strong internal controls, an agency is

unable to generate consistent, reliable financial information needed

to maintain accountability over its assets on an ongoing basis.

At USDA, several persistent internal control weaknesses

contributed to the IG’s inability to form an opinion on the agency’s

fiscal year 1999 consolidated financial statements. Three of these

weaknesses—food stamp recipient claims, financial management

systems, and accounting for personal property—identified by the IG

are discussed below.

The IG has reported material internal control weaknesses related to

Food and Nutrition Service (FNS) food stamp recipient claims since

fiscal year 1991. FNS relies on state agencies to administer the

program and collect and report on any overissuance of food stamp

benefits. FNS has been working with state agencies to put systems

and procedures in place to collect identified overissued food stamp

benefits, which were estimated to total $193 million11 as of

September 30, 1999. However, based on a review of the status of

state agencies’ progress in improving their claim systems, FNS

noted that only 24 of the 53 state agencies in June 2000 had claim

systems that can report accurate, complete, and supportable

information on overissued food stamp benefits and related

collections. Of the remaining 29 state agencies, 28 have prepared

11This amount represents USDA’s estimate of collectible overissued amounts. However, USDA

statistically projected that total overissuance of food stamps could have been as much as $1.3 billion

for fiscal year 1998.

Material Internal Control

Weaknesses Hamper

Accountability

Food Stamp Recipient Claims
Page 10 GAO/T-AIMD-00-334 Financial Management at USDA

corrective action plans to address reported deficiencies in their

systems and only one has not prepared a corrective action plan. FNS

has established September 2001 as the deadline for implementation

of all corrective action plans. In addition, FNS issued claims

regulations in July 2000 that strengthened controls over states’

handling of food stamp recipient claims. For example, these

regulations created detailed procedures for establishing, processing,

and monitoring claims.

While we recognize that these efforts have strengthened controls

over recipient claims, additional efforts are needed. FNS must

continue to work with state agencies on implementing systems and

controls to properly identify and collect overissuances because

program funds are lost when claims are not established promptly

and pursued vigorously.

Since fiscal year 1997, the IG has reported that USDA’s financial

systems do not always process and report departmentwide financial

information accurately. The IG has reported that many of these

systems are not fully integrated with other USDA systems and do

not fully comply with federal financial management systems

requirements. Among the more serious problems cited by the

Inspector General were that USDA

• had a net difference of about $130 million between its accounting records

and the supporting personal property system;

• had a payroll system that contained data dating as far back as 1979 that

had not been properly analyzed; and

• lacked controls to ensure that transactions recorded in its old accounting

system were accurate and properly authorized.

It is critical that USDA correct these problems by implementing new

or revamped systems that are properly designed and implemented to

integrate budgetary and cost information with external reporting to

provide USDA with the capability to accurately track assets and

identify all costs associated with an activity.

USDA’s attempts to address this need go back to December 1994

when the Office of the Chief Financial Officer (OCFO) purchased

FFIS, a new accounting system, with the goal of replacing the old

Financial Management Systems
Page 11 GAO/T-AIMD-00-334 Financial Management at USDA

accounting system USDA-wide. But while USDA has implemented

the new system in several component agencies over the past few

years, it has experienced delays in agencywide implementation.

Current plans call for complete implementation of the system

USDA-wide by October 1, 2002. Meanwhile, USDA’s CFO has agreed

with the IG’s recommendation to develop a long-range plan to

consolidate, integrate, and/or reengineer the feeder systems.

In its fiscal year 1999 audit report, the IG reported that material internal

control problems existed in the accountability and valuation of personal

property at agency field offices, headquarters, and the National Finance

Center. For example, the IG noted that about 60 percent of approximately

10,000 USDA accountable property officers as of December 7, 1999, were

either delinquent in performing physical inventories or had never recorded

that an inventory had been taken. In addition, IG staff noted that

documentation supporting the purchase price of property was lacking, and

numerous errors in the property values were recorded in the system. For

example, the staff found a motor vehicle recorded in the system at over

$97 million and a microscope recorded in the system at $11 million. Until

all counts are taken and recorded in the accounting records, USDA does

not fully know what assets it has, where they are, and what they are worth.

Further, the Congress cannot be assured that USDA requests for additional

funds to purchase property and equipment are fully warranted.

Over the past decade the Congress has passed several important pieces of

legislation designed to improve financial accountability in the federal

government: the Chief Financial Officers (CFO) Act of 1990, the

Government Management Reform Act (GMRA) of 1994, and the Federal

Financial Management Improvement Act (FFMIA) of 1996. Generally

accepted government auditing standards require auditors to report on

whether or not agencies complied with laws and regulations where

instances of noncompliance could have a material impact on the agency’s

financial reporting. Instances of noncompliance include situations in

which an agency fails to follow a requirement of a law or regulation or

performs an act that is prohibited by a law or regulation. The management

of USDA is responsible for complying with laws and regulations that are

applicable to the agency. The IG reported some instances in which USDA

was noncompliant, including the two discussed below.

First, the IG concluded that USDA had not fully addressed problems

related to compliance with the CFO Act. Specifically, the agency had

not implemented a fully integrated financial information system. The

Accounting for Personal

Property

USDA Does Not Fully

Comply With Certain

Key Laws and

Regulations
Page 12 GAO/T-AIMD-00-334 Financial Management at USDA

current system relies on data from various program and

administrative systems throughout the agency in order to prepare

USDA’s consolidated financial statements. In addition, USDA had

not (1) conducted required biennial reviews of the fees, royalties,

and other charges imposed by USDA agencies for services and (2)

made recommendations on revising those charges to reflect costs

incurred by the agencies in providing those services as required by

the CFO Act. The IG noted that one agency did not update its user

fees for its inspection services for fiscal year 1998 and part of fiscal

year 1999. As a result, the agency did not bill for millions of dollars

that it was entitled to receive because the fees were not adjusted for

salary increases and inflation factors.

Second, the IG noted that some component agencies’ financial

management systems do not substantially comply with the three

requirements of FFMIA. The act requires agencies to implement and

maintain financial management systems that comply substantially

with federal financial management systems requirements, applicable

federal accounting standards, and the Standard General Ledger at

the transaction level. As required by the act, USDA has prepared a

remediation plan that includes corrective actions that are scheduled

to be completed no later than September 2003.

To its credit, USDA has achieved some accomplishments this fiscal

year in addressing its financial management weaknesses. I would

like to highlight the efforts of both USDA and the Forest Service to

resolve these problems and work toward financial accountability.

USDA’s 1999 Annual Program Performance Report, issued on March

29, 2000, lists various financial management improvements

accomplished by USDA’s Office of the Chief Financial Officer. These

and other corrective actions identified based on other documents

and discussions with USDA’s financial managers, follow:

• Increased the number of component agencies receiving an unqualified

audit opinion from two to three;

Status of Efforts to

Resolve USDA’s

Financial

Management

Problems

USDA
Page 13 GAO/T-AIMD-00-334 Financial Management at USDA

• Hired a contractor to study USDA’s deficient supporting computerized

systems–referred to by USDA as feeder systems--to recommend solutions

for integrating, consolidating, or reengineering these systems;

• Implemented USDA’s new accounting system in the Risk Management

Agency;

• Substantially increased funding to study and resolve the reconciliation

problems with its Fund Balance with Treasury account--as of June 1, 2000,

USDA incurred over $2.8 million dollars, according to the IG, in contract

costs, and millions more in direct and indirect personnel costs; and

• Worked closely with Forest Service financial managers on correcting the

Forest Service’s financial management problems.

Although USDA has strengthened the involvement of its credit

reform steering committee in monitoring the agency’s progress, thus

far USDA management has been slow in providing the necessary

resources to resolve the agency’s problems in implementing credit

reform.

The Forest Service has completed several corrective actions and

begun others that, if successfully carried through, represented

important steps toward achieving financial accountability. While the

Forest Service has a long way to go to achieve financial

accountability, it continues to make progress in addressing its

financial management weaknesses. Specifically, the Forest Service

has accomplished the following:

• Implemented a new accounting system on October 1, 1999, as scheduled;

• Reorganized and strengthened the Office of Finance at agency

headquarters;

• Initiated an assessment of the Forest Service’s highly decentralized and

autonomous field office financial management structure, with a final

report expected this fall;

• Completed and implemented its methodology for valuing road assets with

the IG’s concurrence;

• Developed 34 financial management performance measures in such areas

as debt management and personal property to address weaknesses in

financial accountability;

Forest Service
Page 14 GAO/T-AIMD-00-334 Financial Management at USDA

• Developed and proposed a simplified budget structure for the National

Forest System and the Capital Improvement and Maintenance

Appropriations;12

• Worked towards addressing problems in reconciling the Fund Balance

with Treasury account;

• Implemented a new concept in October 1999 for charging expenditures

based on work performed in addition to a standard set of definitions for

indirect costs; and

• finalized a long-range plan with goals and objectives, timeframes, and

measures for attaining financial accountability.

As these accomplishments demonstrate, the Forest Service is

making progress in addressing its financial management deficiencies

and is on the right track towards financial accountability. However,

much work remains, and sustained top management commitment is

necessary to ensure that progress continues.

In conclusion, USDA is a large, complex agency with many difficult

issues to address before it can be accountable to you, the Congress,

and taxpayers for the money provided to carry out its varied

missions. Many of the problems are deep rooted and will take time,

sustained top management commitment, and substantial resources

to correct. Therefore, continued congressional oversight, such as

this hearing, are essential to help ensure that USDA focuses

adequate attention on resolving its financial management

deficiencies.

Mr. Chairman, this concludes my statement. I would be happy to

answer any questions you or other Members of the Subcommittee

may have.

12According to the Forest Service’s Office of Finance, the House appropriations subcommittee

responded with a variation of the Forest Service’s proposal that is expected to be included in the

Forest Service’s final fiscal year 2001 appropriation.

Conclusion
Page 15 GAO/T-AIMD-00-334 Financial Management at USDA

For information about this statement, please contact McCoy

Williams at (202) 512-6906. Individuals making key contributions to

this statement included Lou Schuster, Phillip McIntyre, Dan Blair,

Carla Lewis, and Maria Zacharias.

(913917)

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