United States Government Accountability Office

GAO Report to the Secretary of the Treasury

FINANCIAL 

MANAGEMENT 

SYSTEMS 

Lack of Disciplined 

Processes Puts 

Effective 

Implementation of 

Treasury’s 

Governmentwide 

Financial Report 

System at Risk 

April 2006 

 

GAO-06-413 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2006

FINANCIAL MANAGEMENT SYSTEMS

Lack of Disciplined Processes Puts 

Effective Implementation of Treasury’s 

Governmentwide Financial Report 

System at Risk 

Highlights of GAO-06-413, a report to the 

Secretary of the Treasury 

For the past 9 years, since the first 

audit of the consolidated financial 

statements of the U.S. government 

(CFS), one of the major 

impediments to our ability to 

render an opinion on the CFS is 

that the federal government has not

had adequate system, controls, and

procedures to properly prepare the 

CFS. To address some of the 

internal control weaknesses 

identified in our audit report, 

Treasury began developing the 

Governmentwide Financial Report 

System (GFRS). The goal of this 

new system is to directly link 

information from federal agencies’ 

audited financial statements to

amounts reported in the CFS, a 

concept that we strongly support.

We reported internal control 

weaknesses and GAO 

recommendations regarding the 

preparation of the CFS, along with

progress made in this area in a 

separate report. This report

provides our assessment of 

Treasury’s ongoing effort to

develop and implement GFRS and 

makes recommendations for 

reducing the risks associated with 

the development of GFRS. 

What GAO Recommends

GAO is making three 

recommendations focused on 

reducing the risks associated with 

the development of GFRS. 

Treasury stated that it concurs with

the recommendations in this report 

and is working to adopt them. 

Treasury’s development of GFRS is a positive initiative and Treasury has 

made progress towards preparing the CFS based on agencies’ audited 

financial statements, which has been one of our principal concerns. 

Treasury, though, has not yet effectively implemented the disciplined system 

development processes necessary to provide reasonable assurance that 

GFRS will meet all of its performance, schedule, and cost goals and result in 

the most efficient and effective means of preparing the CFS. Specifically,

Treasury has not 

• developed a concept of operations or any other document that 

adequately defines or documents the expected performance of GFRS; 

• developed a detailed project plan and schedule through completion of 

GFRS; 

• developed a budget justification for GFRS in its Capital Asset Plan and 

Business Case (commonly referred to as the Exhibit 300), as called for in 

Office of Management and Budget (OMB) Circular No. A-11; and 

• implemented the disciplined processes necessary to effectively manage

the GFRS project, which has contributed to usability problems 

encountered by its users. 

A disciplined software development and acquisition process can maximize 

the likelihood of achieving the intended results (performance) within 

established resources (costs) on schedule. Because of this relationship, 

these factors can be viewed as an equilateral triangle as shown below. 

Software Development Trade-Off Triangle 

In our work at certain other federal agencies, we have found that project 

deficiencies such as those we have identified with the GFRS project have led 

to a range of problems, from increased cost and reduced functionality to 

system failure. Going forward, it will be important that Treasury better 

mitigate its risks so that long-standing internal control weaknesses regarding

the preparation of the CFS can be eliminated and, more importantly, 

Treasury ends up with a system that fully meets its and agencies’ needs. 

www.gao.gov/cgi-bin/getrpt?GAO-06-413.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gary Engel at 

(202) 512-3406 or engelg@gao.gov. 
Contents 

Letter 1

Results in Brief 2 

Background 3

Scope and Methodology 5 

Effective Implementation of the Disciplined Processes Are Key to 

Reducing Project Risks 6 

Lack of Disciplined Processes Puts GFRS at Risk of Not Meeting 

Its Performance, Schedule, and Cost Goals 10 

Conclusions 17

Recommendations for Executive Action 18 

Agency Comments and Our Evaluation 18 

Appendix I Comments from the Department of Treasury 21 

Figures 

Figure 1: Percent of Effort Associated with Undisciplined Projects 8 

Figure 2: Software Development Trade-off Triangle 9 

Figure 3: Relationship between Requirements Development and 

Testing 12

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Page i GAO-06-413 Treasury's Governmentwide Financial Report System
United States Government Accountability Office

Washington, DC 20548 

April 21, 2006

The Honorable John W. Snow 

The Secretary of the Treasury 

For the past 9 years, we have reported that the federal government did not 

have adequate systems, controls, and procedures to properly prepare its 

consolidated financial statements. Many of the weaknesses in internal 

control that contributed to our continuing disclaimers of opinion were 

identified by federal agency financial statement auditors during their 

audits of federal agencies’ financial statements and were reported in detail 

with recommendations to the federal agencies in separate reports. 

However, some of the internal control weaknesses were identified during 

our tests of the Department of the Treasury’s (Treasury) process for 

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

(CFS). The ability to prepare the CFS has been a long-standing challenge 

for Treasury’s Financial Management Service. To address some of the 

internal control weaknesses identified in our audit report,1

 Treasury began 

developing the Governmentwide Financial Report System (GFRS). The 

goal of this new system is to directly link information from federal 

agencies’ audited financial statements to amounts reported in the CFS, a 

concept that we strongly support and is a necessary prerequisite for our 

reliance on the individual agency audits in auditing the CFS. Once 

Treasury is able to achieve adequate systems, controls, and procedures to 

properly prepare its consolidated financial statements, a major 

impediment to our ability to audit the CFS would be eliminated. 

This report provides our assessment of Treasury’s ongoing effort to 

develop and implement GFRS. Although the implementation of any 

information system, such as GFRS, is never risk-free, organizations that 

follow and effectively implement accepted best practices in systems 

development and implementation (commonly referred to as disciplined 

processes) have been shown to reduce these risks to acceptable levels. 

The term acceptable levels acknowledges the fact that any system 

acquisition has risks and will suffer the adverse consequences associated 

with defects. A disciplined software development and acquisition process 

can maximize the likelihood of achieving the intended results 

(performance) within established resources (costs) on schedule. Effective 

 1

Department of the Treasury, 2005 Financial Report of the United States Government 

(Washington, D.C.: December 2005). This report includes GAO’s audit report. 

Page 1 GAO-06-413 Treasury's Governmentwide Financial Report System
implementation of the disciplined processes reduces the potential for risks 

to occur and helps prevent those that do occur from having any significant 

adverse impact on the cost, timeliness, and performance of the project. 

Our reviews have found, like those performed by others, that the 

effectiveness of the processes used to manage the project provide valuable 

insight into whether a project will meet its cost, schedule, and 

performance objectives.

We last briefed your staff on our initial assessment of this development 

effort in September 2004. This report updates our work and focuses on 

whether Treasury has effectively implemented disciplined processes 

necessary to reduce the risks to the GFRS project to acceptable levels and 

accordingly provide reasonable assurance that GFRS will meet its 

performance, schedule, and cost goals. We reported internal control 

weaknesses and our recommendations regarding the preparation of the 

CFS, along with progress made in this area in a separate report.2

For fiscal years 2004 and 2005 Treasury’s GFRS was able to capture 

certain agency financial information from agencies’ audited financial 

statements. At the same time, the system was not yet at the stage of 

development that it could be used to compile the consolidated financial

statements from the information that was captured. Therefore, for fiscal 

years 2004 and 2005 Treasury continued to have to primarily use manual 

procedures to prepare the CFS as GFRS continued to be developed. We 

identified some risks in Treasury’s development of GFRS. 

Results in Brief 

We found that Treasury had not yet effectively implemented the 

disciplined processes necessary to provide reasonable assurance that 

GFRS will meet its performance, schedule, and cost goals. Specifically, 

Treasury had not 

• developed a concept of operations or any other document that 

adequately defines or documents the expected performance of GFRS; 

• developed a detailed project plan and schedule through completion of 

GFRS; 

 2

 GAO, Financial Audit: Significant Internal Control Weaknesses Remain in Preparing 

the Consolidated Financial Statements of the U.S. Government, GAO-06-415 (Washington, 

D.C.: Apr. 21, 2006). 

Page 2 GAO-06-413 Treasury's Governmentwide Financial Report System
• developed a budget justification for GFRS in its Capital Asset Plan and 

Business Case (commonly referred to as the Exhibit 300), as called for 

in Office of Management and Budget (OMB) Circular No. A-11;3 and 

• implemented the disciplined processes necessary to effectively manage 

the GFRS project, which has contributed to usability problems 

encountered by its users. 

In our work at certain other federal agencies, we have found that not 

effectively implementing disciplined processes has led to a range of 

problems, from increased cost and reduced functionality to system failure. 

Going forward, it will be important that Treasury better mitigate its risks 

so that long-standing internal control weaknesses regarding the 

preparation of the CFS can be eliminated and, more importantly, Treasury 

ends up with a system that fully meets its and agencies’ needs. This report 

includes three recommendations to the Secretary of the Treasury and the 

Fiscal Assistant Secretary focused on reducing the risks associated with 

the development of GFRS. 

In commenting on a draft of this report, Treasury stated that it concurs 

with our recommendations and is working to adopt them. Treasury also 

stated that it plans to develop a concept of operations for GFRS and 

recently started to develop a budget justification for GFRS in a Capital 

Asset Plan and Business Case. Further, Treasury stated that although it 

uses manual procedures to prepare the CFS, it does not agree that manual 

processes necessarily create internal control weaknesses. We agree. Our 

discussion of Treasury’s manual processes was not intended to imply that 

using manual processes will by itself lead to internal control weaknesses; 

rather, it was to highlight that Treasury, as a user of GFRS, has to perform 

manual compilation procedures because GFRS was not yet at the stage of 

development that it could be used to compile the consolidated financial

statements from the agency financial information that was captured. 

Treasury began implementing a new process for preparing the CFS using 

GFRS during fiscal year 2004. GFRS is an application that is being 

developed to meet the business needs of Treasury to prepare the CFS. 

Treasury has stated that the goal of the new system is to be able to directly

link information from federal agencies’ audited financial statements to 

Background 

 3

Section 300 of OMB Circular No. A-11, Preparation, Submission, and Execution of the 

Budget (Nov. 2, 2005), sets forth requirements for federal agencies for planning, budgeting, 

acquiring, and managing information technology capital assets. 

Page 3 GAO-06-413 Treasury's Governmentwide Financial Report System
amounts reported in the CFS and to address our recommendations4

regarding the preparation of the CFS. For the fiscal year 2004 and 2005 

reporting process, GFRS had enough functionality to capture certain 

federal agency financial information from federal agencies’ audited 

financial statements. We also found that Treasury made progress in 

demonstrating that amounts in the Balance Sheet and the Statement of Net 

Cost were consistent with federal agencies’ audited financial statements 

prior to eliminating intragovernmental activity and balances. GFRS, 

though, was not yet at the stage of development that it could be used to 

compile the CFS from the information that was captured. Treasury’s plans 

had been to evaluate and consider the manual processes used during fiscal 

year 2004 to develop the necessary requirements needed for the 

development of the compilation module of GFRS. Although some 

enhancements to GFRS were implemented for fiscal year 2005, Treasury

continued to primarily use manual procedures to prepare the most 

recently issued CFS. 

As part of the concept of directly linking information from agencies’ 

audited financial statements to amounts reported in the CFS, Treasury has 

classified 35 federal agencies as verifying5

 agencies and approximately 125 

as nonverifying agencies and required these agencies to enter data in 

GFRS. Verifying agencies are required to reclassify certain of their audited 

financial statement line items to the appropriate CFS line items within 

GFRS. Both verifying and nonverifying agencies are required to enter 

certain of their financial statement notes and other requested data into 

GFRS. Treasury then uses this information to prepare the CFS. GFRS 

users at verifying and nonverifying agencies include financial statement 

preparers, Chief Financial Officers (CFOs), Inspectors General (IGs), and 

contracted independent public accountants. GFRS grants certain 

permissions to different user roles which limit each type of user to 

 4

GAO, Financial Audit: Process for Preparing the Consolidated Financial Statements of 

the U.S. Government Continues to Need Improvement, GAO-05-407 (Washington, D.C.: 

May 4, 2005). 

5

Treasury defines the verifying agencies as the 24 Chief Financial Officer (CFO) Act 

agencies, Export-Import Bank of the United States, Farm Credit System Insurance 

Corporation, Federal Communications Commission, Federal Deposit Insurance 

Corporation, National Credit Union Administration, U.S. Postal Service, Pension Benefit 

Guaranty Corporation, Railroad Retirement Board, Securities and Exchange Commission, 

Smithsonian Institution, and Tennessee Valley Authority. Treasury also refers to the 

verifying agencies as “significant” agencies. 

Page 4 GAO-06-413 Treasury's Governmentwide Financial Report System
designated locations within the system. Only certain roles have permission 

to input, modify, and approve data. 

As part of our annual audit of the CFS, we evaluate Treasury’s financial 

reporting procedures and related internal control, including the 

development of GFRS. Our work was performed in accordance with U.S. 

generally accepted government auditing standards. In fiscal years 2004 and 

2005, GFRS was used to collect federal agencies’ audited financial 

statement data compiled in the CFS.

Scope and 

Methodology 

To assess Treasury’s implementation of disciplined processes in the 

development of GFRS, we reviewed industry standards and best practices

from the Institute of Electrical and Electronics Engineers (IEEE), 

Software Engineering Institute (SEI), OMB Circular No. A-11, and prior 

GAO reports. Beginning in fiscal year 2004, we reviewed and analyzed 

available GFRS documentation and made inquiries of Treasury’s GFRS 

project team and other Treasury personnel to determine whether Treasury 

has effectively implemented disciplined processes necessary to reduce the 

risks to the GFRS project to acceptable levels and accordingly provide

reasonable assurance that GFRS will meet its performance, schedule, and 

cost goals. We briefed Treasury on our initial assessment of this 

development effort in September 2004. We reported internal control 

weaknesses related to GFRS in our fiscal year 2004 audit report6

 and made 

a recommendation related to GFRS in our fiscal year 2004 internal control 

report.7

 In fiscal year 2005, we reviewed documentation related to the 

planned enhancements for GFRS for 2005 and made inquiries of Treasury’s 

GFRS project team and other Treasury personnel to further determine 

whether Treasury has effectively implemented disciplined processes. We 

again reported internal control weaknesses related to GFRS in our fiscal 

year 2005 audit report. 

We requested comments on a draft of this report from the Secretary of the

Treasury or his designee. Treasury’s comments are reprinted in appendix I 

and are also discussed in the Agency Comments and Our Evaluation 

section. 

 6

Department of the Treasury, 2004 Financial Report of the United States Government 

(Washington, D.C.: December 2004). This report includes GAO’s audit report. 

7

GAO-05-407. 

Page 5 GAO-06-413 Treasury's Governmentwide Financial Report System
Effective 

Implementation of the 

Disciplined Processes 

Are Key to Reducing 

Project Risks 

Disciplined processes, which are fundamental to successful systems 

development and implementation efforts, have been shown to reduce the

risks associated with software development and acquisition to acceptable 

levels. A disciplined software development and acquisition process can 

maximize the likelihood of achieving the intended results (performance) 

within established resources (costs) on schedule. Although there is no 

standard set of practices that will ever guarantee success, several 

organizations, such as SEI8

 and IEEE,9 as well as individual experts, have 

identified and developed the types of policies, procedures, and practices 

that have been demonstrated to reduce development time and enhance 

effectiveness. The key to having a disciplined system development effort is 

to have disciplined processes in multiple areas, including project planning

and management, requirements management, configuration management, 

risk management, quality assurance, and testing. Effective processes 

should be implemented in each of these throughout the project life cycle 

because change is constant. Effectively implementing the disciplined 

processes necessary to reduce project risks to acceptable levels is hard to 

achieve because a project must effectively implement several best 

practices, and inadequate implementation of any one may significantly 

reduce or even eliminate the positive benefits of the others. 

As part of the disciplined processes, acquiring and implementing a new 

financial management system such as GFRS requires a methodology that

starts with a clear definition of the organization’s mission and strategic 

objectives and ends with a system that meets specific information needs. 

We have seen many system efforts fail because federal agencies started 

with a general need, but did not define in precise terms (1) the specific 

problems they were trying to solve, (2) what their operational needs were, 

and (3) what specific information requirements flowed from these 

operational needs. Instead, they plunged into the acquisition and 

implementation process in the belief that these specifics would somehow 

be defined along the way. The typical result was that systems were 

 8

SEI is a federally funded research and development center operated by Carnegie Mellon 

University and sponsored by the Department of Defense. The SEI objective is to provide 

leadership in software engineering and in the transition of new software engineering 

technologies into practice. 

9

IEEE is a nonprofit, technical professional association that develops standards for a broad

range of global industries including the information technology and information assurance 

industries. The IEEE standards program serves the global needs of industry, government, 

and the public. It also works to assure the effectiveness and high visibility of the standards 

program both within IEEE and throughout the global community. 

Page 6 GAO-06-413 Treasury's Governmentwide Financial Report System
delivered well past anticipated milestones; failed to perform as expected;

and, accordingly, were over budget because of required costly

modifications. 

Figure 1 shows how organizations that do not effectively implement the 

disciplined processes lose the productive benefits of their efforts as a 

project continues through its development and implementation cycle. 

Although undisciplined projects show a great deal of productive work at 

the beginning of the project, the rework associated with defects begins to

consume more and more resources. In response, processes are adopted in

the hopes of managing what later turns out, in reality, to have been 

unproductive work. Generally, these processes are “too little, too late” and

rework begins to consume more and more resources because sufficient 

foundations for building the systems were not established or not 

established adequately. Experience has shown that projects for which 

disciplined processes are not implemented at the beginning are forced to

implement them later when it takes more time and they are less effective.

10

 10Steve McConnell, Rapid Development: Taming Wild Software Schedules (Redmond, 

Wash: Microsoft Press, 1996).

Page 7 GAO-06-413 Treasury's Governmentwide Financial Report System
Figure 1: Percent of Effort Associated with Undisciplined Projects 

Percent of effort

Time

100

0

Lucky projects

finish here

Unlucky projects

get stuck here

Visible progress (coding)

Thrashing (unplanned rework and wasted effort)

Planning and process management

Thrashing and planning combine to limit ability to make any visible progress

Source: Reproduced by permission from Steve McConnell, Professional Software Development: Shorter Schedules, Higher Quality

Products, More Successful Projects, Enhanced Careers (Boston, Mass.: Pearson Education, Inc., 2004).

As shown in figure 1, a major consumer of project resources in 

undisciplined efforts is rework (also known as thrashing). Rework occurs 

when the original work has defects or is no longer needed because of 

changes in project direction. Disciplined organizations focus their efforts 

on reducing the amount of rework because it is expensive. Fixing a 

requirements defect after the system is released costs anywhere from 10 to 

100 times as much as fixing it when the requirements are defined.11 As 

shown in figure 1, projects that are unable to successfully address their 

rework will eventually only be spending their efforts on rework and the 

 11Steve McConnell, Code Complete, Second Edition (Redmond, Wash: Microsoft Press,

2004). 

Page 8 GAO-06-413 Treasury's Governmentwide Financial Report System
associated processes rather than on productive work. In other words, the 

project will continually find itself reworking items. 

A disciplined software development and acquisition process can maximize 

the likelihood of achieving the intended results (performance) within 

established resources (costs) on schedule. Because of this relationship, 

these factors can be viewed as an equilateral triangle as shown in figure 2. 

Figure 2: Software Development Trade-off Triangle 

The performance corner of the triangle is also referred to as the product 

corner. This corner includes quality and all other product-related 

attributes including complexity, usability, maintainability, and defect rate. 

For example, beyond a certain point, it is difficult to increase performance 

without changing the cost and/or schedule attributes. Similarly, a schedule 

cannot be drastically compressed without degrading the quality of the 

software project or increasing the cost of development. Schedule, cost, 

and performance must be in balance for a project to succeed. The 

following sections of this report address our observations regarding the 

performance, schedule, and cost of Treasury’s GFRS development effort. 

Page 9 GAO-06-413 Treasury's Governmentwide Financial Report System
Treasury’s development of GFRS is a positive initiative and Treasury has 

made progress towards preparing the CFS based on agencies’ audited 

financial statements, which is one of our principal concerns. While we 

support the goals of GFRS, we are concerned that Treasury has not yet 

effectively implemented a number of disciplined processes that have been

shown to reduce project risks to acceptable levels. Specifically, we noted 

that Treasury has not yet implemented the types of project management 

processes necessary to provide the information required to assess the 

progress of GFRS and whether it is meeting its cost, schedule, and 

performance objectives. First, Treasury has not described its vision for the 

project in a manner that can be used to guide the development efforts. 

Although disciplined projects use a concept of operations document to 

serve this purpose, Treasury has not yet developed such a document. 

Treasury also has not developed a detailed project plan or schedule 

through the completion of GFRS or followed OMB’s guidance for major 

investment planning, budgeting, and acquisition. Some adverse impacts 

associated with these process weaknesses have already been realized. 

Specifically, significant usability issues have arisen and little meaningful 

project management information is available to assess the project 

performance. 

Treasury has not adequately defined or documented the expected 

functionality for GFRS. One approach for describing the functionality that

is expected from a system is to document the vision in a concept of 

operations. According to IEEE Standard 1362-1998, a concept of 

operations document is normally one of the first documents produced 

during a disciplined development effort because it describes system 

characteristics for a proposed system from the user’s viewpoint. This is 

important because a good concept of operations document can be used to 

communicate overall quantitative and qualitative system characteristics to 

the user, developer, and other organizational elements typically involved 

in a systems development effort. This allows the reader to understand the 

user organizations, missions, and organizational objectives from an 

integrated systems point of view. Until such a document is developed, it is 

virtually impossible for the project to develop a firm foundation for its 

requirements and testing activities. Experience has shown that poor 

Lack of Disciplined 

Processes Puts GFRS 

at Risk of Not Meeting 

Its Performance, 

Schedule, and Cost 

Goals 

Treasury Has Not 

Developed a Concept of 

Operations 

Page 10 GAO-06-413 Treasury's Governmentwide Financial Report System
requirements12 are a major factor associated with projects that do not meet

their cost, schedule, and performance objectives. Furthermore, without 

good requirements, it is impossible to develop a disciplined testing 

program. Figure 3 shows the relationship between requirements and 

testing and how the concept of operations provides the foundation for the 

requirements. 

 12Requirements are the specifications that system developers and program managers use to

design, develop, and acquire a system. They need to be unambiguous, consistent with one 

another, verifiable, and directly traceable to higher level business or functional 

requirements. It is critical that requirements flow directly from the organization’s concept 

of operations. 

Page 11 GAO-06-413 Treasury's Governmentwide Financial Report System
Figure 3: Relationship between Requirements Development and Testing 

The Treasury project team stated they consider the November 2001 

Working Group Report on the Financial Report of the United States 

Government Preparation Process to be their concept of operations. Our 

analysis noted at least two reasons why this document would not be 

acceptable for that purpose. First, the November 2001 report resembles an 

alternatives analysis where Treasury weighed several options to change its 

current process for preparing the CFS. The report does not address the 

Page 12 GAO-06-413 Treasury's Governmentwide Financial Report System
objectives of a concept of operations because it does not outline the 

business processes that are expected to be implemented in the new 

system. For example, when we compared the November 2001 report to the 

current functionality of GFRS, we found that the November 2001 report 

stated that federal agencies would be required to submit an analysis of 

changes in net position and to split net position between 

intragovernmental and operations with the public. However, over 2 years 

ago Treasury stated to GAO that they would not be requiring federal 

agencies to split their net position and did not provide an alternative 

solution for addressing this key net position weakness affecting the 

preparation of the CFS. Second, the November 2001 report was issued 

prior to the Federal Accounting Standards Advisory Board’s issuance of 

Statement of Federal Financial Accounting Standard No. 24, Selected 

Standards for the Consolidated Financial Report of the United States 

Government, which requires two additional financial statements to be 

included in the Financial Report—Reconciliation of Net Operating Cost 

and Unified Budget Deficit and Statement of Changes in Cash Balance

from Unified Budget and Other Activities. Because the November 2001 

report could not contemplate the preparation of these two statements, it is 

at least partially obsolete in terms of reporting requirements for two of the 

five primary consolidated financial statements. 

Going forward, an effective concept of operations could help Treasury 

reach its goal of having GFRS, when fully implemented, resolve several

continuing weaknesses that we have identified during our CFS audit work, 

including providing additional functionality that would allow Treasury to 

eliminate some of the manual processes and provide improvements from 

its previous process. Treasury has not yet developed and documented in a 

concept of operations document or any other document (1) the corrective 

actions for financial reporting weaknesses that the system is expected to

address and (2) the functionality it needs GFRS to provide when it is 

completed to implement these corrective actions. Accordingly, Treasury 

does not have adequate assurance that the resulting system will have the 

needed functionality to address the weaknesses that Treasury 

management may expect the system to eliminate or reduce the time it 

takes Treasury to produce the CFS. This basic information is critical for 

the project team to effectively develop a complete set of high-level 

requirements for GFRS and reach agreement with Treasury management 

on the functionality GFRS is expected to provide and how to determine 

when GFRS is complete and has ultimately met management’s 

expectations. 

Page 13 GAO-06-413 Treasury's Governmentwide Financial Report System
Treasury Has Not 

Developed a Detailed 

Project Plan and Schedule 

through Completion of 

GFRS 

Treasury has not clearly defined what GFRS will encompass and when 

that functionality is expected to be delivered. This basic information 

should serve as the foundation to support realistic project scheduling 

efforts, so that Treasury could (1) determine the work needed to complete

the project and (2) make informed decisions on when that work can be

expected to be completed. 

While we understand that GFRS will take several years to develop, a 

“blueprint” guiding these efforts has not been developed. Rather than 

using best practices to schedule out the functionality to be developed and 

implemented over the entire development period, each year Treasury 

decides on the high-level requirements to be developed and implemented 

only during that given year. These requirements are not “placed in 

context” to the overall system goals and needs. This approach presents the 

following issues. 

• It is unclear how the requirements selected for implementation each 

year move GFRS closer to providing the necessary functionality to 

address the material weaknesses Treasury expects the system to 

correct. 

• Without a detailed project plan and schedule through completion of 

GFRS, it is unclear whether the project is capable of meeting its 

established time frames and goals, how to determine the progress 

made with a given year’s efforts, or how to estimate the funding 

necessary to develop the system. 

These weaknesses have already had adverse project impacts. Specifically, 

even once the requirements for a given year have been “defined”, we found 

that little meaningful project scheduling was used. For example, Treasury 

provided us with a list of its milestones for the fiscal year 2005

development of GFRS; however, this documentation did not provide 

information such as the detailed tasks to be performed, duration of the 

tasks, person responsible for completing each task, or how these 

development efforts link to the overall functionality required for GFRS. 

Accordingly, Treasury did not have the basic project management 

information necessary to determine whether its efforts were meeting the 

project’s cost, schedule, and performance objectives. 

In our September 2004 briefing to Treasury on our initial assessment of the 

GFRS development effort, we noted that Treasury faced the risk of rework 

by using a single-year scheduling approach rather than developing a 

schedule for the entire development period. We stated that implementing 

any of management’s high-level requirements for the current year of 

Page 14 GAO-06-413 Treasury's Governmentwide Financial Report System
development could cause significant rework of the functionality that was 

implemented in the prior year. Disciplined organizations focus their efforts 

on reducing the amount of rework because it is expensive. Without a 

detailed project plan and schedule, the program does not have a process 

that is designed to avoid doing things twice and runs a much greater risk 

that it will cost additional time, money, and resources. 

Impacts of Not Following 

OMB Guidance 

Treasury has not yet developed a budget justification for GFRS in a Capital 

Asset Plan and Business Case (commonly referred to as the Exhibit 300), 

called for in OMB Circular No. A-11. The OMB circular provides 

instructions on how to prepare the necessary budget justification and 

reporting requirements for major information technology investments,13

such as GFRS. The Exhibit 300 helps demonstrate to federal agency

management and OMB that the federal agency has employed the 

disciplines of good project management, represented a strong business 

case for the investment, and met other administration priorities to define 

the proposed cost, schedule, and performance goals for the investment if 

funding approval is obtained. The business case should include security, 

privacy, and enterprise architecture, and provide the effectiveness and 

efficiency gains planned by the business lines and functional operations. 

According to Treasury personnel, it was a Treasury policy decision not to

prepare an Exhibit 300 for submission to OMB. 

The circular states that an “exhibit 300 must be submitted for all major 

investments in accordance with this section.” The circular also notes that 

“[g]ood budgeting requires appropriations for the full risk adjusted costs 

of asset acquisition be enacted in advance to help ensure that all costs and 

benefits are fully taken into account when decisions are made about 

providing resources.” We found that Treasury has not yet determined the 

cost of GFRS to date or estimated its cost through completion. Instead, 

Treasury’s project team stated that, to date, they have used funds 

remaining from other Treasury projects to pay for the development of 

GFRS.14 According to Treasury’s project team, the development of GFRS is 

 13OMB Circular No. A-11, section 300 defines a major investment as a system or project 

requiring special management attention because of its importance to the mission or 

function of the agency, a component of the agency or another organization; is for financial 

management and obligates more than $500,000 annually; has significant program or policy 

implications; has high executive visibility; has high development, operating, or 

maintenance costs; or is defined as major by the agency’s capital planning and investment

control process. 

14We did not review Treasury’s alternative funding sources. 

Page 15 GAO-06-413 Treasury's Governmentwide Financial Report System
guided, limited, and constrained by the funds that they can “beg, borrow, 

and steal” from other Treasury development efforts. As noted in OMB 

Circular No. A-11, when “capital assets are funded in increments, without 

certainty if or when future funding will be available, it can and 

occasionally does result in poor planning, acquisition of assets not fully 

justified, higher acquisition costs, project (investment) delays, cancellation 

of major investments, the loss of sunk costs, or inadequate funding to 

maintain and operate the assets.” 

GFRS Has Some Usability 

Issues 

Effectively implementing disciplined processes helps ensure the system 

meets the users’ needs. To date, GFRS has had some significant usability 

issues. In February 2005, Treasury held a forum with GFRS federal agency

users, including agency CFO, IG, and independent public accountant staff, 

to discuss lessons learned from the fiscal year 2004 GFRS reporting 

process and planned changes to GFRS for fiscal year 2005. At the forum, 

the users noted the lack of user-friendly reporting capabilities in GFRS. As 

we noted in our September 2004 briefing to Treasury, user-friendly 

reporting capabilities were not available to federal agency users for fiscal 

year 2004 and such functionality was critical to the ultimate usefulness of 

the system. The process of viewing the information entered into GFRS is 

especially burdensome for the 32 federal agencies15 required to have this 

information audited. GFRS does not provide the ability for an agency to 

develop one report containing all of the information required to be entered 

into GFRS. Instead, users are required to run over 35 separate reports in 

GFRS, which has proven to be time-consuming. Compounding this is that 

agencies have only a very short period of time to enter the data into GFRS. 

Specifically, federal agencies are required to have their audited financial

information in the GFRS closing package by November 18—just 3 days 

after their audited financial statements are due to OMB. 

We believe the lack of user-friendly reporting capabilities is a result of 

Treasury not effectively implementing disciplined processes. Treasury had 

not defined types of reporting that would be available to the users and 

 15The Treasury Financial Manual states that the Inspector General or their contracted 

independent public accountant for each verifying agency, except those agencies with a year

end other than September 30 (Federal Deposit Insurance Corporation, National Credit

Union Administration, and Farm Credit System Insurance Corporation), must opine on the 

closing package data, entered by the Chief Financial Officer into GFRS, as to its 

consistency with the comparative, audited, consolidated, department-level financial 

statements. Of the 35 verifying agencies, 32 are currently required to have an audit of their 

closing package. 

Page 16 GAO-06-413 Treasury's Governmentwide Financial Report System
when it would be available. Treasury’s project team stated that it is now 

trying to address this issue and has acknowledged that a lack of an 

adequate understanding of users’ reporting needs contributed to the 

problem. They also noted the lack of funding as another reason this issue 

has not been fully addressed. In our view, if Treasury had implemented 

disciplined processes during the planning of GFRS, such as developing a

concept of operations and implementing an effective requirements 

management process, this issue (1) would have been identified and (2) 

actions could have been taken at the outset to develop a viable solution 

earlier in the process rather than waiting until significant amounts of 

development work had been performed. 

In our discussions with the Treasury project team over the reporting issue, 

we were told that they are concerned that providing more robust reporting 

capabilities to users could cause the system to fail and “crash” should all 

of the GFRS users run these reports at the same time. In our September 

2004 briefing, we noted that one of the challenges to Treasury was 

adequately testing GFRS to ensure that it could function properly when all 

federal agencies use the system at the same time, which includes allowing 

users to run all needed GFRS reports. Treasury’s project team told us that 

they were unable to test GFRS capacity because they had not identified or

developed all the needed user-friendly reporting capabilities. 

We believe other usability issues exist that directly affect Treasury as a 

user of GFRS as well. For example, currently, Treasury cannot rely on the 

system to compile the CFS from the information that is captured. 

Therefore, for 2 years in a row, Treasury primarily used manual 

procedures to prepare the CFS. While Treasury’s initial plans were to 

evaluate and consider the manual processes used during fiscal year 2004 

to develop the necessary requirements needed for the development of the 

compilation module of GFRS, this capability has not been added and it is 

unclear when or if it will be available. 

The implementation of any major system, such as GFRS, is not a risk-free 

proposition. However, organizations that follow and effectively implement 

accepted best practices in systems development and implementation have

been shown to reduce these risks to acceptable levels. Treasury has not 

yet done so. If it continues on this path, it runs an unnecessary risk of 

building a system that may be more costly and take longer to deploy, while 

not providing all of the intended system functionality. Going forward, it 

will be important that Treasury take the actions necessary to implement 

the disciplined processes that provide reasonable assurance that GFRS 

Conclusions 

Page 17 GAO-06-413 Treasury's Governmentwide Financial Report System
will achieve Treasury’s ultimate goal of preparing the CFS with a direct 

link to federal agencies’ audited financial statements and addressing longstanding internal control weaknesses. A key first step will be for Treasury 

to develop and document its view of how GFRS will operate, including 

how it will be used to address significant internal control weaknesses. 

We recommend that the Secretary of the Treasury direct the Treasury 

Fiscal Assistant Secretary to take the following three actions to reduce the

risks associated with the development of GFRS: 

• Follow the budget justification and reporting processes set out in OMB 

Circular No. A-11 and ensure that funding needs are fully addressed. 

• Develop and adopt a concept of operations that fully describes the 

functionality expected to be provided by GFRS and the material 

internal control weaknesses that are expected to be addressed by the 

system. 

• Develop and effectively implement the disciplined processes necessary 

to properly manage the development of GFRS, including the

development of a detailed project plan and schedule through the 

completion of the system. 

In written comments on a draft of this report, which are reprinted in 

appendix I, Treasury stated that our report clearly points out 

recommendations for reducing the risks associated with the continued 

development of GFRS. Treasury also stated that it concurs with our 

recommendations and is working to adopt them. Further, Treasury stated 

that it plans to develop a concept of operations for GFRS and recently

started to develop a budget justification for GFRS in a Capital Asset Plan 

and Business Case. 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 

Treasury provided additional comments regarding Treasury’s manual 

procedures used in preparing the CFS. In particular, Treasury stated that 

although it uses manual procedures to prepare the CFS, it does not agree 

that manual processes necessarily create internal control weaknesses. We 

agree. Our discussion of Treasury’s manual processes was not intended to

imply that using manual processes will lead to internal control 

weaknesses, but rather to highlight that Treasury, as a user of GFRS, has 

to perform manual compilation procedures because GFRS was not yet at 

the stage of development that it could be used to compile the consolidated

financial statements from the agency financial information that was 

captured. Our understanding is that one of the automated functions 

Treasury expected GFRS to perform was the compilation of the CFS from 

Page 18 GAO-06-413 Treasury's Governmentwide Financial Report System
the information captured rather than performing these functions manually.

This capability has not yet been added to GFRS, and it is unclear when or 

if it will be available because, as we have reported, Treasury does not 

currently have a concept of operations that defines or documents the 

expected functionality for GFRS. 

This report contains recommendations to the Secretary of the Treasury. 

The head of a federal agency is required by 31 U.S.C. 720 to submit a 

written statement on actions taken on these recommendations. You should 

submit your statement to the Senate Committee on Homeland Security and 

Governmental Affairs and the House Committee on Government Reform 

within 60 days of the date of this report. A written statement must also be 

sent to the House and Senate Committees on Appropriations with the 

agency’s first request for appropriations made more than 60 days after the

date of the report. 

We are sending copies of this report to the Chairmen and Ranking 

Minority Members of the Senate Committee on Homeland Security and 

Governmental Affairs; the Subcommittee on Federal Financial

Management, Government Information, and International Security, Senate

Committee on Homeland Security and Governmental Affairs; the House 

Committee on Government Reform; and the Subcommittee on 

Government Management, Finance, and Accountability, House Committee 

on Government Reform. In addition, we are sending copies to the Fiscal 

Assistant Secretary of the Treasury. Copies will be made available to 

others upon request. This report is also available at no charge on GAO’s 

Web site at www.gao.gov. 

We appreciate the courtesy and cooperation extended to us by your staff 

throughout our work. We look forward to continuing to work with your 

offices to help improve systems development efforts in the federal 

government. If you have any questions about the contents of this report, 

please contact Gary Engel, Director, Financial Management and 

Assurance, who may be reached at (202) 512-3406 or by e-mail at 

Page 19 GAO-06-413 Treasury's Governmentwide Financial Report System
engelg@gao.gov, or Keith Rhodes, Chief Technologist, Applied Research 

and Methods, who may be reached at (202) 512-6412 or by e-mail at 

rhodesk@gao.gov. Key contributors to this letter were Chris Martin, Lynda 

Downing, and Katherine Schirano. 

Gary T. Engel 

Director 

Financial Management and Assurance 

Keith A. Rhodes 

Chief Technologist 

Applied Research and Methodology Center for 

Engineering and Technology 

Page 20 GAO-06-413 Treasury's Governmentwide Financial Report System
Appendix I: Comments from the Department Appendix I: Comments from the Department of Treasury 

of Treasury 

Page 21 GAO-06-413 Treasury's Governmentwide Financial Report System
Appendix I: Comments from the Department 

of Treasury 

(198415) Page 22 GAO-06-413 Treasury's Governmentwide Financial Report System
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