a

GAO

United States General Accounting Office

Report to Congressional Committees

October 2001 FINANCIAL 

MANAGEMENT 

FFMIA 

Implementation 

Critical for Federal 

Accountability

GAO-02-29

Page i GAO-02-29 FFMIA FY 2000 Results

Contents

Letter 1

Results in Brief 2

Background 9

Scope and Methodology 16

Continued System Weaknesses Prevent Full Financial Management 

Accountability 17

Reasons for Noncompliance 23

Criteria for Assessing Compliance With FFMIA Should Be Made 

More Rigorous 38

Successful FFMIA Implementation Requires Top Management 

Commitment, Adequate Resources, and Redesigned Processes 

43

Remediation Plans Improved but Continue To Lack Important 

Details 45

OMB Plays an Important Role By Providing Advice on FFMIA 

Remediation Plans 53

Conclusions 54

Recommendations for Executive Action 56

Agency Comments and Our Evaluation 57

Appendixes

Appendix I: Publications in the Federal Financial Management Systems 

Requirements Series 62

Appendix II: Statements of Federal Financial Accounting Concepts, 

Statements of Federal Financial Accounting Standards, and 

Interpretations 63

Appendix III: AAPC Technical Releases 64

Appendix IV: Checklists for Reviewing Systems Under the Federal 

Financial Management Improvement Act 65

Appendix V: Comments From the Office of Management and Budget 66

Appendix VI: GAO Contacts and Staff Acknowledgements 68

GAO Contacts 68

Acknowledgements 68

Figures Figure 1: Framework for Providing Accountability and Good 

Management Information 10

Figure 2: Agency System Architecture 12

Figure 3: Auditors’ FFMIA Determinations for Fiscal Year 2000 18
Contents

Page ii GAO-02-29 FFMIA FY 2000 Results

Figure 4: Framework for Providing Accountability and Good 

Management Information 20

Figure 5: Problems Reported by Auditors for Fiscal Year 2000 25

Figure 6: Results of Review of Fiscal Year 1999 Remediation 

Plans 47

Abbreviations

AAPC Accounting and Auditing Policy Committee

ACF Administration for Children and Families

AID Agency for International Development

CFO Chief Financial Officer

COTS Commercial Off-the-Shelf

DOD Department of Defense

EPA Environmental Protection Agency

FAA Federal Aviation Administration

FAM Financial Audit Manual

FASAB Federal Accounting Standards Advisory Board

FEMA Federal Emergency Management Agency

FFIS Foundation Financial Information System

FFMIA Federal Financial Management Improvement Act

FFMSR Federal Financial Management System Requirements

FHA Federal Housing Administration

FIA Federal Managers’ Financial Integrity Act

FMIP Financial Management Improvement Plan

GAO General Accounting Office

GISR Government Information Security Reform

GMRA Government Management Reform Act

GPRA Government Performance and Results Act

GSA General Services Administration

HHS Health and Human Services

HUD Housing and Urban Development

IFMS Integrated Financial Management System

IG Inspector General

IRS Internal Revenue Service

IT Information Technology

JFMIP Joint Financial Management Improvement Program

NASA National Aeronautics and Space Administration

NBC National Business Center

NIH National Institutes of Health

NIST National Institutes of Standards and Technology
Contents

Page iii GAO-02-29 FFMIA FY 2000 Results

NRC Nuclear Regulatory Commission

NSF National Science Foundation

OCFO/NFC Office of the Chief Financial Officer/National Finance 

Center

OMB Office of Management and Budget

OPM Office of Personnel Management

PCIE President’s Council on Integrity and Efficiency

SBA Small Business Administration

SFFAC Statements of Federal Financial Accounting Concepts

SFFAS Statements of Federal Financial Accounting Standards

SGL Standard General Ledger

SSA Social Security Administration

USDA United States Department of Agriculture

VA Department of Veterans Affairs 
Contents

Page iv GAO-02-29 FFMIA FY 2000 Results
Page 1 GAO-02-29 FFMIA FY 2000 Results

United States General Accounting Office

Washington, D.C. 20548

Comptroller General A of the United States

October 1, 2001 Letr

The Honorable Joseph I. Lieberman

Chairman

The Honorable Fred Thompson 

Ranking Minority Member

Committee on Governmental Affairs

United States Senate

The Honorable Dan Burton

Chairman

The Honorable Henry A. Waxman

Ranking Minority Member

Committee on Government Reform

House of Representatives

The inability to produce the data needed to efficiently and effectively 

manage the day-to-day operations of the federal government and provide 

accountability to taxpayers and the Congress has been a long-standing 

weakness at most federal agencies. The central challenge to producing 

reliable, useful, and timely data throughout the year and at year-end is 

overhauling financial and related management information systems. One 

of the key legislative underpinnings for addressing this issue is the Chief 

Financial Officers (CFO) Act of 1990.1

 The CFO Act calls for the 

modernization of financial management systems, including the systematic 

measurement of performance, the development of cost information, and 

the integration of program, budget, and financial information. 

The Federal Financial Management Improvement Act of 1996 (FFMIA)2

builds on the CFO Act by emphasizing the need for agencies to have 

systems that can generate timely, accurate, and useful information with 

which to make informed decisions and to ensure accountability on an 

ongoing basis. FFMIA requires the 24 major departments and agencies 

covered by the CFO Act to implement and maintain financial management 

systems that comply substantially with (1) federal financial management 

systems requirements, (2) applicable federal accounting standards,3

 and 

1

Pub. L. 101-576, 104 Stat. 2838 (1990).

2

Title VIII of Public Law 104-208 is entitled the Federal Financial Management Improvement 

Act of 1996.
Page 2 GAO-02-29 FFMIA FY 2000 Results

the U.S. Standard General Ledger (SGL)4 at the transaction level. FFMIA 

also requires auditors to report in their CFO Act5

 financial statement audit 

reports whether the agencies’ financial management systems comply with 

FFMIA’s requirements. We are required to report annually on the 

implementation of the act. This, our fifth annual report, discusses (1) the 

FFMIA determinations, (2) our assessment of the auditors’ bases for the 

determinations, and (3) agencies’ plans to bring their systems into 

compliance. 

Results in Brief The government continues to face a range of serious financial management 

system weaknesses. Agencies have recognized the seriousness of their 

financial system problems, and many initiatives are underway and planned 

to address them. The Office of Management and Budget (OMB) has made 

financial management systems reform a priority and provided renewed 

leadership in this area. Most importantly, improvement in financial 

management systems is central to achieving improved financial 

performance—one of the five governmentwide initiatives in the President’s 

Management Agenda, Fiscal Year 2002.6

Agencies continue to make some progress in addressing their financial 

management systems weaknesses. At the same time, many have a long 

way to go. In some cases, it could be years before corrective actions are 

completed. The most difficult challenges are faced by the Department of 

Defense (DOD), where financial management systems reform will have to 

be part of a broader initiative to transform its overall business processes 

that will take years to complete. The Secretary of Defense and the Defense 

Comptroller have stated that such a transformation will be a priority and 

3

The American Institute of Certified Public Accountants now recognizes the federal 

accounting standards developed by the Federal Accounting Standards Advisory Board 

(FASAB) as generally accepted accounting principles.

4

The SGL provides a standard chart of accounts and standardized transactions that agencies 

are to use in all their financial systems.

5

As part of a CFO Act agency’s financial statement annual audit report, the auditor is to 

report whether the agency’s financial management systems substantially comply with 

FFMIA.

6

The President’s Management Agenda, Fiscal Year 2002, Executive Office of the President, 

Office of Management and Budget.
Page 3 GAO-02-29 FFMIA FY 2000 Results

efforts have begun to address DOD’s serious financial management system 

weaknesses. 

The fiscal year 2000 audit reports disclosed that most agencies’ financial 

management systems continue to have serious shortcomings. Auditors for 

19 of the 24 CFO Act agencies reported that their agencies’ financial 

management systems did not comply substantially with certain FFMIA 

requirements, compared to 21 agencies reported as not being substantially 

compliant for fiscal year 1999.

The primary reasons agencies’ financial management systems were 

reported as not being in substantial compliance are highlighted in table 1.

Table 1: Primary Reasons for FFMIA Noncompliance

As a result of these deficiencies, most agencies’ financial management 

systems are unable to routinely produce timely, reliable, and useful 

financial information. Having such financial information is the goal of 

FFMIA and the CFO Act. Agency managers and other decisionmakers need 

this information for managing day-to-day operations effectively, efficiently, 

and economically; measuring program performance; executing the budget; 

maintaining accountability; and preparing financial statements.

For example, agency financial management systems are required to 

produce information on the full cost of programs and projects. This is not a 

new expectation—the requirement for managerial cost information has 

been in place for more than a decade, since 1990, under the CFO Act and 

since 1998 stemming from applicable accounting standards. Currently, 

some agencies are only able to provide cost accounting information at the 

end of the fiscal year through periodic cost surveys. The lack of timely 

Reasons for noncompliance

Number of

agencies reported

as noncompliant

Lack of integrated financial management systems 13

Inadequate reconciliation procedures 16

Lack of accurate and timely recording of financial information 14

Noncompliance with the SGL 8

Lack of adherence to the accounting standards 12

Weak security controls over information systems 19
Page 4 GAO-02-29 FFMIA FY 2000 Results

information on the full cost of operations precludes meaningful data such 

as are needed for resource allocation choices, making contracting-out 

decisions, determining program efficiencies, assessing user fees, and 

reporting performance.

In another key area, many agencies are not yet able to link program, 

budget, and financial information, as required by the CFO Act. Also in this 

regard, good information on financial program performance is necessary 

for the full and effective implementation of the Government Performance 

and Results Act (GPRA) of 1993.7

 The success of GPRA is crucial to 

transitioning to a more results-oriented federal government where agencies 

are held accountable for achieving specified program results.

Further, the serious shortcomings reported for many agencies’ financial 

management systems result in their being unable to support annual 

financial statement preparation. While 18 of the 24 CFO Act agencies 

produced annual financial statements for fiscal year 2000 that received 

auditors’ unqualified opinions,8

 in many cases this occurred only by 

agencies using costly, time-consuming, and inefficient processes. The 

President’s Management Agenda calls these efforts “extraordinary, laborintensive assaults on financial records.” Moreover, auditors for 13 of the 18 

CFO Act agencies that received unqualified audit opinions reported that the 

agencies’ financial systems did not comply substantially with FFMIA 

requirements in fiscal year 2000.9

Because of the poor condition of accounting systems, agencies’

extraordinary efforts to produce annual financial statements also result in 

billions of dollars in adjustments to derive financial statements 5 months 

after the end of the fiscal year. This situation, which the Secretary of the 

Treasury has called “simply not good enough,” can be misleading and cause 

7

Pub. L. 103-62, 107 Stat. 285 (1993).

8

In an unqualified opinion, the auditor concludes that the principal statements and 

accompanying notes present fairly, in all material respects, the assets, liabilities, and net 

position of the entity at the end of the period, and the net costs, changes in net position, 

budgetary resources, and reconciliation of net costs with budgetary obligations for the 

period then ended.

9

The 13 agencies with systems that were noncompliant include the Social Security 

Administration (SSA). SSA’s independent public accountant reported that SSA’s systems 

complied substantially with FFMIA. However, SSA’s Inspector General reported that 

instances of substantial noncompliance with federal financial management systems 

requirements under FFMIA remain.
Page 5 GAO-02-29 FFMIA FY 2000 Results

a false sense of security. Further, this is not a measure of financial 

management success and requires resources that could otherwise be better 

used to address underlying financial management systems and control 

problems.

The auditors for five CFO Act agencies reported that the results of tests 

disclosed no instances in which the agencies’ systems did not substantially 

comply with FFMIA. These auditors, however, did not definitively state 

whether the agencies’ financial management systems substantially 

complied with FFMIA. This distinction is important and warrants further 

explanation. OMB Bulletin No. 01-02, Audit Requirements for Federal 

Financial Statements, does not require auditors to make an affirmative 

statement as to an agency’s financial management system’s substantial 

compliance with FFMIA. Rather than requiring such a definitive statement, 

OMB’s Bulletin permits auditors to report negative assurance, meaning that 

their report can be based on limited incidental audit testing that disclosed 

no substantial instances of FFMIA noncompliance. With negative 

assurance, the auditor is not saying that they determined the systems to be 

substantially compliant. If readers of the audit report do not understand 

this distinction, which is important in terms of how much audit testing is 

required, they may have a false impression that the auditor is stating that 

they found the systems to be substantially compliant. To provide positive 

assurance, or an opinion, which we believe is what the law requires and 

what GAO does in the CFO Act financial statement audits it performs, 

auditors need to perform sufficient testing to determine whether the 

system is in substantial compliance. 

Also, our discussions with the CFO and audit communities identified what 

they viewed as some ambiguity with OMB’s Bulletin No. 01-02 and, in 

particular, with what they view as the lack of a clear definition of 

substantial compliance. We have identified some ways that the OMB 

Bulletin can be further clarified to make clear to auditors the scope of work 

necessary for proper FFMIA reporting.
Page 6 GAO-02-29 FFMIA FY 2000 Results

FFMIA also requires agencies to prepare remediation plans describing the 

actions they took or plan to take to overcome financial management 

systems problems and bring them into FFMIA compliance.10 Such 

remediation plans were prepared by 16 of the 19 agencies that determined 

their systems were not in compliance during fiscal year 1999.11 Our review 

of these 16 remediation plans showed, overall, that the plans had improved 

somewhat over the fiscal year 1998 plans, in part because of the leadership 

of OMB staff in working with the agencies. Further enhancements in these 

plans, though, are needed. Eleven of the plans continued to lack important 

details describing the corrective actions, and 10 of the plans did not 

disclose the type and amount of resources needed to execute the corrective 

actions. Because of similar inadequacies we identified in reviewing prior 

years’ remediation plans, we have previously recommended that OMB 

review agencies’ plans to ensure they include this type of information. 

As discussed in our FFMIA report last year,12 OMB officials told us that 

their approach for reviewing agencies’ remediation plans now includes 

integrating an agency’s plans for overhauling or replacing financial 

management systems with an agency’s information technology capital 

planning process. OMB has met with or contacted officials from the 

agencies to discuss this strategy. When we talked to agency CFO officials, 

we found many were aware of OMB’s strategy; but a number of the agency 

officials we spoke with were unaware of the strategy. While OMB has 

worked with the agencies to revise FFMIA remediation plans over the past 

year, carrying out the recently issued President’s Management Agenda for

10Fiscal year 1999 remediation plans, addressing instances of noncompliance with FFMIA 

identified in financial statement audits covering fiscal year 1999, were due to OMB by 

December 15, 2000. The plans, addressing instances of noncompliance identified in the 

financial statement audits covering fiscal year 2000, were due to OMB by September 10, 

2001. Therefore, in reviewing remediation plans, we reviewed the fiscal year 1999 plans.

11Auditors for 21 of the 24 CFO Act agencies reported that the agencies’ systems did not 

substantially comply with FFMIA in fiscal year 1999. Two agencies did not submit 

remediation plans for fiscal year 1999 because agency management determined that their 

systems were in substantial compliance with FFMIA. While agency management 

acknowledged that the weaknesses identified by the auditors existed, they did not agree 

that the weaknesses resulted in a lack of “substantial” compliance. Three other agencies—

the Departments of Justice and State and the General Services Administration—did not 

submit remediation plans for fiscal year 1999 for various other reasons.

12Financial Management: Federal Financial Management Improvement Act Results for 

Fiscal Year 1999 (GAO/AIMD-00-307, September 29, 2000).
Page 7 GAO-02-29 FFMIA FY 2000 Results

improving financial management will require intensified, rigorous, and 

aggressive collaborative efforts by OMB and the agencies.

In this regard, the President’s Management Agenda states that OMB will 

work with agencies to ensure that federal financial systems produce 

accurate and timely information to support operating, budget, and policy 

decisions. This will be critical, since overhauling agency financial 

management systems is a world-class management challenge. Our work to 

identify financial management best practices13 in world-class organizations 

has identified key factors for successfully modernizing financial systems, 

including (1) reengineering business processes in conjunction with 

implementing new technology, (2) developing systems that support the 

partnership between finance and operations, and (3) translating financial 

data into meaningful information.

Agencies can help to ensure that financial management systems 

investments deliver intended results by using Clinger-Cohen Act 

information technology (IT) management requirements, undertaking 

financial management systems modernization in a broad enterprise 

architecture14 context, and making appropriate use of commercial off-theshelf (COTS) financial management systems. Other factors include having 

top management commitment, adequate funding resources, and staff with 

the right skill mix. 

Our discussions with CFO and Inspector General (IG) officials indicated 

that the key success factors to FFMIA implementation followed many of 

these same themes. Many CFO and IG officials acknowledged that past 

problems with the lack of top management commitment have been 

detrimental to achieving compliance with FFMIA. They also emphasized 

that the lack of sufficient resources—funding and human capital—has been 

an overriding obstacle to implementing modern financial management 

systems and sustaining reliable financial management information on a 

timely basis.

13Best practices include the processes, practices, and systems that perform exceptionally 

well in specific areas of public and private organizations.

14An enterprise architecture establishes an agency’s roadmap to achieve its mission through 

optimal performance of its core business practices within an efficient IT environment. 

Enterprise architectures are “blueprints” used for defining an agency’s current (baseline) or 

desired (target) environment.
Page 8 GAO-02-29 FFMIA FY 2000 Results

On August 13, 2001, the Principals of the Joint Financial Management 

Improvement Program15 (JFMIP)—the Secretary of the Treasury, the 

Director of OMB, the Director of the Office of Personnel Management 

(OPM), and the Comptroller General—met to discuss financial 

management reform issues. Commitment and cooperation among the 

highest levels of leadership in the federal financial management community 

can provide the impetus for accelerating the needed changes to financial 

management systems and operations. The JFMIP Principals are developing 

an agenda to address the long-standing challenges discussed in this report. 

We anticipate that a number of recommendations and action items will 

come from the initiatives contemplated by this group related to issues such 

as addressing impediments to an opinion on the U.S. government’s 

consolidated financial statements, defining success in financial 

management, and modernizing financial management systems. Therefore, 

we are making no specific recommendations in this report regarding OMB’s 

overall system improvement strategy or any of these other matters, other 

than to reiterate the importance of OMB’s continuing governmentwide 

leadership in this area. We are, however, making several recommendations 

to OMB that Bulletin No. 01-02 be clarified with respect to guidance to 

auditors on the scope of work necessary for proper FFMIA review and 

reporting. 

In commenting on a draft of this report, OMB agreed with our overall 

observations and conclusions concerning the financial management 

systems weaknesses faced by the government and the need for sustained 

management commitment at the highest levels in order to overcome them. 

OMB stated that it has begun to reexamine its approach to systems 

development and implementation in the federal government, including its 

FFMIA guidance, and believes that more emphasis should be placed on 

system performance and results. We and OMB have differing views on the 

level of audit assurance necessary for assessing compliance with FFMIA. 

We plan to continue to work with OMB on this issue. 

In oral comments on a draft of this report, several of the officials from the 

24 CFO Act agencies expressed concern that our report did not 

acknowledge all of their recent actions to address systems weaknesses. It 

was not our objective to independently assess specific management actions 

15JFMIP is a joint and cooperative undertaking of OMB, the Department of the Treasury, 

OPM, and GAO working with executive agencies to improve financial management 

practices throughout the government.
Page 9 GAO-02-29 FFMIA FY 2000 Results

for the 24 CFO Act agencies. However, our report does acknowledge 

actions taken and underway to address systems weaknesses and makes 

clear that overall progress is being made. Finally, NASA officials disagreed 

with our questioning of NASA’s compliance with FFMIA because of issues 

related to cost accounting and the lack of an integrated financial 

management system. Our position on this matter remains unchanged. Our 

detailed evaluation of OMB’s and agencies’ comments can be found at the 

end of this letter.

Background FFMIA and other financial management reform legislation have 

emphasized the importance of improving financial management across the 

federal government. The primary purpose of FFMIA is to ensure that 

agency financial management systems routinely provide reliable, useful, 

and timely financial information. With such information, government 

leaders will be better positioned to invest resources, reduce costs, oversee 

programs, and hold agency managers accountable for the way they run 

government programs. Financial management systems’ compliance with 

federal financial management systems requirements, applicable accounting 

standards, and the SGL are building blocks to help achieve these goals.

Management Reform 

Legislation

FFMIA is part of a series of management reform legislation passed by the 

Congress over the past two decades. This series of legislation started with 

the Federal Managers’ Financial Integrity Act of 198216 (FIA), which the 

Congress passed to strengthen internal control and accounting systems 

throughout the federal government, among other purposes. Issued 

pursuant to FIA, the Comptroller General’s Standards for Internal Control 

in the Federal Government17 provide the standards that are directed at 

helping agency managers implement effective internal control, an integral 

part of improving financial management systems. 

Effective internal control also helps in managing change to cope with 

shifting environments and evolving demands and priorities. As programs 

change and as agencies strive to improve operational processes and 

implement new technological developments, management must 

16Pub. L. 97-255, 96 stat. 814 (1982).

17GAO/AIMD-00-21.3.1, November 1999.
Page 10 GAO-02-29 FFMIA FY 2000 Results

continually assess and evaluate its internal control to ensure that the 

control activities being used are effective and updated when necessary. 

While agencies had achieved some success in identifying and correcting 

material internal control and accounting system weaknesses, their efforts 

to implement the FIA had not produced the results intended by the 

Congress. 

Therefore, in the 1990s, the Congress passed additional management 

reform legislation to improve the general and financial management of the 

federal government. As shown in figure 1, the combination of reforms 

ushered in by (1) the CFO Act of 1990, (2) the Government Management 

Reform Act (GMRA) of 1994, (3) FFMIA, (4) GPRA, and (5) the ClingerCohen Act of 1996, if successfully implemented, provides a basis for 

improving accountability of government programs and operations as well 

as routinely producing valuable cost and operating performance 

information, thereby making it possible to better assess and improve the 

government’s effectiveness, financial condition, and operating 

performance. 

Figure 1: Framework for Providing Accountability and Good Management 

Information

Clean opinions on...

Yield

Accountability

and Good

Management

Information

Provides

Impetus for

Fully Integrated

Financial Management

Systems

Reliable, Timely

Financial

Statements

Effective

Internal

Control

Management

Reform

Legislation

CFO Act

Clinger-Cohen

GMRA

FFMIA

GPRA

Strong financial

management

that provides

reliable, timely,

and useful

information for

decisionmakers

Yield

FIA
Page 11 GAO-02-29 FFMIA FY 2000 Results

Financial Management 

Systems Requirements

The financial management systems policies and standards prescribed for 

executive agencies to follow in developing, operating, evaluating, and 

reporting on financial management systems are defined in OMB Circular A127, Financial Management Systems. Circular A-127 references the series 

of publications entitled Federal Financial Management System 

Requirements (FFMSR), issued by JFMIP as the primary source of 

governmentwide requirements for financial management systems. JFMIP 

systems requirements, among other things, provide a framework for 

establishing integrated financial management systems to support program 

and financial managers. 

JFMIP also issues financial system requirements for both administrative 

and programmatic financial management systems. Administrative systems 

include those generally common to all federal agency operations such as 

budget, acquisition, travel, property, and payroll. Agencies implement 

programmatic systems as needed to fulfill the agency’s mission, such as 

inventory, grants, insurance and benefit payments, and loans. For example, 

SSA would need a benefit payment system to fulfill its mission of providing 

social security and disability payments to the elderly and disabled. 

However, SSA would not need to implement a loan system since it does not 

process loans. Figure 2 is the JFMIP model that illustrates how these 

systems interrelate in an agency’s overall systems architecture. 
Page 12 GAO-02-29 FFMIA FY 2000 Results

Figure 2: Agency System Architecture

Source: JFMIP

The first of JFMIP’s system requirements documents covering the core 

financial systems requirements was issued in 1988. Since then, JFMIP has 

been issuing system requirement documents covering specific functional 

areas, such as inventory systems. Most recently, JFMIP issued an exposure 

draft on Benefit System Requirements in May 2001, and has an ongoing 

project underway to develop system requirements for acquisition systems. 

Appendix I lists the current publications in the FFMSR series and their 

issue dates. JFMIP recently updated and revised the Core Financial 

System Requirements and issued an exposure draft in June 2001. 

JFMIP tests vendor COTS packages and certifies that they meet current 

financial management system requirements for core financial management 
Page 13 GAO-02-29 FFMIA FY 2000 Results

systems. To maintain a certificate of compliance, vendors with qualified 

software packages must successfully complete any incremental tests 

required by JFMIP. These tests are conducted to ensure that vendor 

software offerings are aligned with current federal financial management 

requirements.

Federal Accounting 

Standards

Federal accounting standards, which agency CFOs use in preparing 

financial statements and in developing financial management systems, are 

promulgated by the Federal Accounting Standards Advisory Board 

(FASAB).18 FASAB develops accounting standards after considering the 

financial and budgetary information needs of the Congress, executive 

agencies, and other users of federal financial information and comments 

from the public. FASAB forwards the standards to the three principals—

the Comptroller General, the Secretary of the Treasury, and the Director of 

OMB—for a 90-day review. If there are no objections during the review 

period, the standards are considered final and FASAB publishes them on its 

Web site and in print.

The American Institute of Certified Public Accountants now recognizes the 

federal accounting standards promulgated by FASAB as being generally 

accepted accounting principles for the federal government. This 

recognition enhances the acceptability of the standards, which form the 

foundation for preparing consistent and meaningful financial statements 

both for individual agencies and the government as a whole.

Currently, there are 19 statements of federal financial accounting standards 

(SFFAS) and 3 statements of federal financial accounting concepts 

(SFFAC).19 The concepts and standards are the basis for OMB’s guidance 

to agencies on the form and content of their financial statements and the 

government’s consolidated financial statements. Appendix II lists the 

concepts, standards, and interpretations20 along with their respective 

effective dates. 

18 In October 1990, the Secretary of the Treasury, the Director of OMB, and the Comptroller 

General established FASAB to develop a set of generally accepted accounting standards for 

the federal government.

19Accounting standards are authoritative statements of how particular types of transactions 

and other events should be reflected in financial statements. SFFACs Explain the objectives 

and ideas upon which FASAB develops the standards.
Page 14 GAO-02-29 FFMIA FY 2000 Results

FASAB’s Accounting and Auditing Policy Committee (AAPC)21 assists in 

resolving issues related to the implementation of accounting standards. 

AAPC’s efforts result in guidance for preparers and auditors of federal 

financial statements in connection with implementation of accounting 

standards and the reporting and auditing requirements contained in OMB’s 

Form and Content Bulletin and Audit Bulletin. To date, AAPC has 

released five technical releases, which are listed in appendix III along with 

their release dates. 

Standard General Ledger The SGL was established by an interagency task force through the direction 

of OMB and mandated for use by agencies in OMB and Treasury regulations 

in 1986. The SGL promotes consistency in financial transaction processing 

and reporting by providing a uniform chart of accounts and pro forma 

transactions used to standardize federal agencies’ financial information 

accumulation and processing, enhance financial control, and support 

budget and external reporting, including financial statement preparation. 

The SGL is intended to improve data stewardship throughout the 

government, enabling consistent reporting at all levels within the agencies 

and providing comparable data and financial analysis at the 

governmentwide level.22

Remediation Plans FFMIA requires an agency head to determine, based on a review of the 

auditor’s report on the agency’s financial statements and any other relevant 

information, whether the agency’s financial management systems 

substantially comply with the act. The agency head is required to make this 

determination no later than 120 days after (1) the receipt of the auditor’s 

report or (2) the last day of the fiscal year following the year covered by the 

audit, whichever comes first. If the agency head disagrees with the 

auditor’s determination that the systems do not substantially comply, the 

20An interpretation is a document of narrow scope that provides clarifications of original 

meaning, additional definitions, or other guidance pertaining to an existing federal 

accounting standard.

21In 1997, FASAB, in conjunction with OMB, Treasury, GAO, the CFO Council, and the 

President’s Council on Integrity and Efficiency, established AAPC to assist the federal 

government in improving financial reporting.

22SGL guidance is published in the Treasury Financial Manual. Treasury’s Financial 

Management Service is responsible for maintaining the SGL and answering agency inquiries.
Page 15 GAO-02-29 FFMIA FY 2000 Results

Director of OMB is to review the agency head’s determination and report to 

the Congress. If the agency head agrees that the systems do not 

substantially comply, FFMIA requires that the agency head, in consultation 

with the Director of OMB, establish a remediation plan to bring the systems 

into substantial compliance with FFMIA’s requirements.

According to FFMIA, remediation plans are to include corrective actions, 

intermediate target dates, and resources necessary to bring the financial 

management systems into substantial compliance with FFMIA’s 

requirements within 3 years of the date the agency head’s noncompliance 

determination is made. If, with the concurrence of the Director of OMB, 

the agency head determines that substantial compliance cannot be reached 

within 3 years, the remediation plan must specify the most feasible date by 

which the agency’s systems will achieve compliance and designate an 

official responsible for effecting the necessary corrective actions.

In accordance with the revisions to OMB guidance contained in Circular A11,23 Preparing and Submitting Budget Estimates, effective July 19, 2000, 

agencies are to include their remediation plans in their annual budget 

submissions due to OMB by December 15, 2000. The guidance requires that 

the plans include corrective actions, resources needed, and interim target 

dates to bring the financial management systems into substantial 

compliance within 3 years of the date of the agencies’ determination that 

their systems are not in substantial compliance. The plan must also list the 

officials responsible for bringing the systems into substantial compliance 

with FFMIA. 

OMB Guidance Related to 

FFMIA 

Under its mandate to set governmentwide financial management policies 

and requirements, OMB currently has two sources of guidance related to 

FFMIA. First, OMB Bulletin No. 01-02, Audit Requirements for Federal 

Financial Statements, prescribes specific language auditors should use 

when reporting on compliance with FFMIA. Second, in a January 4, 2001, 

memorandum, OMB revised its implementation guidance for agencies and 

auditors to use in assessing compliance with FFMIA. 

The revised implementation guidance is to be used for financial reports and 

audits for fiscal year 2000 and thereafter. This guidance (1) describes the 

23OMB Circular A-11 was revised in July 2001 and required that remediation plans for fiscal 

year 2000 be submitted in September 2001.
Page 16 GAO-02-29 FFMIA FY 2000 Results

factors that should be considered in determining an agency’s systems 

compliance with FFMIA and (2) provides guidance to agency heads to 

assist in developing corrective action plans for bringing their systems into 

compliance with FFMIA. Examples are also provided on the types of 

indicators that should be used as a basis in assessing whether an agency is 

in substantial compliance with FFMIA. 

Scope and 

Methodology

We reviewed fiscal year 2000 financial statement audit reports for the 24 

CFO Act agencies to determine (1) which agencies had systems that their 

auditors found to be noncompliant with FFMIA requirements, (2) the 

reasons why the systems were found to be noncompliant, and (3) evidence 

of agencies’ progress in becoming compliant. Using structured interviews, 

we interviewed agency management and auditors for each of the 24 CFO 

Act agencies to obtain their perspectives on FFMIA implementation, 

including the factors that contributed to agencies’ systems compliance with 

FFMIA and the obstacles faced by management in becoming compliant. 

We also reviewed the auditors’ workpapers for the 24 CFO Act agencies to 

assess the nature and extent of FFMIA testing.

We reviewed OMB’s FFMIA guidance. To obtain an understanding of the 

fiscal year 2000 audit requirements, we analyzed OMB’s January 4, 2001, 

memorandum that revised FFMIA implementation guidance and reviewed 

OMB Bulletin No. 01-02, Audit Requirements for Federal Financial 

Statements and predecessor guidance. Further, we reviewed the guidance 

for preparing remediation plans for fiscal year 1999 contained in revisions 

to OMB Circular A-11, Preparing and Submitting Budget Estimates. We 

reviewed agencies’ fiscal year 1999 remediation plans to determine if they 

contained the required elements and if the corrective actions, if 

implemented successfully, had a reasonable likelihood of resolving 

agencies’ systems problems. We did not review the agencies’ fiscal year 

2000 remediation plans because these plans were not due to OMB until

September 10, 2001. We compared the fiscal year 1999 remediation plans 

to those for fiscal year 1998 to determine if they had improved. We held 

discussions with OMB officials to apprise them of the scope and nature of 

our work and reviewed applicable federal accounting standards and 

systems requirements documents. We made inquiries of JFMIP staff to 

determine recent developments in their respective efforts to issue new 

system requirements documents.

We conducted our work from January through August 2001 at the 24 CFO 

Act agencies, OMB, and JFMIP in the Washington, D.C., area in accordance 
Page 17 GAO-02-29 FFMIA FY 2000 Results

with generally accepted government auditing standards. We requested 

comments on a draft of this report from the Director of OMB or his 

designee. The Deputy Controller of OMB provided us with written 

comments. These comments are discussed in the “Agency Comments and 

Our Evaluation” section and reprinted in appendix V. We also requested 

oral comments from selected agency officials whose financial management 

systems or audit procedures are specifically discussed in the report. These 

comments have been incorporated as appropriate.

Continued System 

Weaknesses Prevent 

Full Financial 

Management 

Accountability 

Overall, the government continues to face serious financial management 

systems weaknesses. Agencies have recognized the seriousness of their 

problems, and OMB has made financial systems reform a priority. Today,

there are many ongoing initiatives to address the overarching financial 

management systems problems that are at the heart of the serious financial 

management weaknesses that are prevalent. Importantly, financial 

management systems reform is a part of one of the five governmentwide 

initiatives in the President’s Management Agenda. 

Agencies continue to make progress in addressing their financial 

management system weaknesses. At the same time, they have a long way 

to go. The vast majority of these agencies are still not substantially

complying with FFMIA’s requirements. Auditors for 1924 of the 24 CFO Act 

agencies reported that for fiscal year 2000, the agencies’ systems did not 

comply substantially with one or more FFMIA requirements—federal 

systems requirements, federal accounting standards, or the SGL.25

For fiscal year 2000, 7 agencies were reported not to be in substantial 

compliance with all 3 FFMIA requirements; 18 were reported not in 

24The 19 agencies whose systems were reported in noncompliance with FFMIA include the 

Departments of Agriculture, Commerce, Defense, Education, Health and Human Services 

(HHS), Housing and Urban Development (HUD), and the Interior, Justice, Labor, State, 

Transportation (DOT), the Treasury, and Veterans Affairs (VA), and the Agency for 

International Development (AID), the Environmental Protection Agency (EPA), Federal 

Emergency Management Agency (FEMA), the Nuclear Regulatory Commission (NRC), OPM 

and SSA.

25Management of 2 of the 19 agencies—EPA and SSA—disagreed with their agency auditor’s 

FFMIA determination. Management of EPA disagreed with the OIG’s determination that 

EPA was noncompliant with SFFAS No. 4. SSA management disagreed with the OIG as to 

whether SSA’s information technology (IT) security issues were instances of FFMIA 

noncompliance.
Page 18 GAO-02-29 FFMIA FY 2000 Results

substantial compliance with systems requirements; 12 were reported not in 

substantial compliance with accounting standards; and 8 were reported not 

in substantial compliance with the SGL. Auditors for five agencies—the 

Department of Energy, the National Aeronautics and Space Administration 

(NASA), the National Science Foundation (NSF), the Small Business 

Administration (SBA), and the General Services Administration (GSA)—

reported that the results of tests disclosed no instances in which the 

agencies’ systems did not substantially comply with the three requirements 

of FFMIA. By reporting negative assurance, which is the form of reporting 

called for in OMB Bulletin No. 01-02, these auditors are not saying that the 

systems are in substantial compliance, but that the results of their tests 

disclosed no instances in which the agencies’ systems did not substantially 

comply with FFMIA. We discuss this issue further in this report. Figure 3 

summarizes the auditors’ FFMIA determinations for fiscal year 2000.

Figure 3: Auditors’ FFMIA Determinations for Fiscal Year 2000

Note: Management of 17 of the 24 agencies agreed with their auditors’ FFMIA compliance 

determinations. Management of two agencies—EPA and SSA—did not agree with their auditors’ 

FFMIA determination. Management of EPA disagreed with the IG’s determination that EPA was 

noncompliant with SFFAS No. 4. Management of SSA disagreed with the IG as to whether SSA’s IT 

security issues were instances of FFMIA noncompliance.

Source: GAO analysis of agency audit reports

18

12

8

0

4

8

12

16

20

24

System 

requirements

Accounting 

standards

SGL

Agencies-Noncompliant
Page 19 GAO-02-29 FFMIA FY 2000 Results

Eighteen of the 24 CFO Act agencies received unqualified audit opinions on 

their financial statements for fiscal year 2000, up from 15 in fiscal year 

1999, 12 in fiscal year 1998, and 6 in fiscal year 1997. This represents steady 

progress and a lot of hard work by the agency CFOs and their staffs, OMB, 

Treasury, and the audit community. 

At the same time, auditors for 13 of the 18 agencies that received 

unqualified opinions reported that the agencies’ financial systems did not 

comply substantially with FFMIA’s requirements in fiscal year 2000. In 

many instances, agencies have been able to obtain unqualified audit 

opinions only through extensive labor-intensive efforts, which include 

expending significant resources to use extensive ad hoc procedures, and 

making billions of dollars in adjustments to derive financial statements. 

This is usually the case when agencies have inadequate systems that are 

not integrated and routinely reconciled. The President’s Management 

Agenda calls these efforts “extraordinary, labor-intensive assaults on 

financial records.” These time-consuming procedures must be combined 

with sustained efforts to improve agencies’ underlying financial 

management systems and controls. If agencies continue year after year to 

rely on significant costly and time-intensive manual efforts to achieve or 

maintain unqualified opinions, it can serve to mislead the public as to the 

true status of agencies’ financial management capabilities. In such a case, 

an unqualified opinion would become an accomplishment without much 

substance.

Although the CFO Act agencies face challenges, some formidable, in 

preparing financial statements, all issued their financial statements on 

time. In a prior report,26 we recommended that OMB work with the 

agencies to ensure that the agencies’ financial statements are audited and 

issued by the March 1 statutory deadline. For fiscal year 2000, all 24 of the 

CFO Act agencies met the March 1 statutory due date, 5 months after the 

end of the fiscal year. In comparison, in fiscal year 1999, 5 of the 24 CFO 

Act agencies issued their audited statements after the statutory due date. 

Going forward, we anticipate the timeframes becoming tighter and 

reporting requirements earlier, which will intensify the need to overhaul 

the financial management systems. The Director of OMB and the Secretary 

of the Treasury have indicated that more timely and more frequent financial 

statement reporting will be an objective to help improve financial 

26Financial Management: Federal Financial Management Improvement Act Results for 

Fiscal Year 1998 (GAO/AIMD-00-3, October 1999).
Page 20 GAO-02-29 FFMIA FY 2000 Results

management. As a first step, OMB recently proposed that agencies prepare 

and issue unaudited interim financial statements starting with the 6-month 

period ending March 31, 2002, and submit these statements to OMB by May 

31, 2002. Beginning with fiscal year 2003, OMB will require agencies to 

prepare and submit unaudited interim financial statements on a quarterly 

basis. Also, for fiscal year 2002, OMB has moved the reporting date from 

March 1 to February 1. We support these actions by OMB.

Financial statement audit results are key indicators of the quality of agency 

financial data at year-end and provide an annual public scorecard on 

accountability. While the increase in the number of agencies that are 

receiving unqualified audit opinions is noteworthy, it is only one of three 

indicators of the quality of financial management information. Having 

effective internal controls to help managers better achieve agencies’

missions and program results and minimize operational problems along 

with financial management systems that routinely generate reliable, useful, 

and timely information are also key indicators of the quality of an agency’s 

financial management information. As shown in figure 4, fully integrated 

financial systems, reliable and timely financial statements, and effective 

internal control serve as indicators for an entity’s financial management 

health. 

Figure 4: Framework for Providing Accountability and Good Management 

Information

Management

Reform

Legislation

CFO Act

Clinger-Cohen

GMRA

FFMIA

GPRA

Accountability

and Good

Management

Information

Provides

Impetus for

Strong financial

management

that provides

reliable, timely,

and useful

information for

decisionmakers

Yield

Fully Integrated Financial

Management Systems

Reliable, Timely

Financial Statements

Effective

Internal Control

FIA
Page 21 GAO-02-29 FFMIA FY 2000 Results

A clean audit opinion alone only provides credibility to an agency’s 

financial statements as of the date of the financial statements—the last day 

of the fiscal year. It provides no assurance about the effectiveness or 

efficiency of financial systems used to prepare the statements, the quality 

of internal control, or whether the systems can produce reliable data for 

decision-making purposes on demand throughout the year. 

For example, the Department of the Treasury received its first unqualified 

opinion on its fiscal year 2000 departmentwide financial statements. 

However, like several other agencies, despite the unqualified opinion, 

Treasury’s IG reported that Treasury’s systems did not comply substantially 

with FFMIA.27 For example, the Internal Revenue Service (IRS) continues 

to face most of the pervasive systems and internal control weaknesses that 

we have reported each year since we began auditing IRS’ financial 

statements in fiscal year 1992.28 

As discussed in our report29 on the IRS fiscal year 2000 financial 

statements, IRS’ unqualified opinion was the culmination of 2 years of 

extraordinary efforts on the part of IRS senior management and staff to 

develop compensating processes to work around its serious systems and 

control weaknesses to derive year-end balances for its financial statements. 

Top management at IRS and its staff are to be applauded for their 

dedication that resulted in an unqualified opinion. While IRS’ efforts did 

address several management issues we raised in previous audits, its 

approach to obtaining an unqualified opinion on its fiscal year 2000 

financial statements relied heavily on costly, time-consuming, and laborintensive efforts, including the need for statistical projections, external 

contractor support, substantial adjustments, and monumental human 

efforts that extended well after the fiscal year-end. This was particularly 

the case for reporting amounts for both tax receivables and property and 

equipment. 

Because IRS’ systems cannot accurately track amounts representing taxes 

receivable, IRS has for the past 4 years employed a complex statistical 

27Audit of the Department of the Treasury’s Fiscal Year 2000 Financial Statements, Report 

No. OIG-01-050, February 28, 2001.

28 Financial Audit: Examination of IRS’ Fiscal Year 1992 Financial Statements

(GAO/AIMD-93-2, June 1993).

29 Financial Audit: IRS’ Fiscal Year 2000 Financial Statements (GAO-01-394, March 2001).
Page 22 GAO-02-29 FFMIA FY 2000 Results

sampling process to derive the balance reported on its financial statements; 

this process takes months to complete, requires extensive human and 

financial resources, and results in tens of billions of dollars in adjustments 

annually to present a balance that is good for one day only. Additionally, 

because IRS does not have an adequate property management system, it 

had to use contractors to (1) perform statistical sampling procedures to 

derive a reliable balance for property and equipment in fiscal year 1999; 

and (2) analyze fiscal year 2000 transactions to derive the September 30, 

2000, balance for property and equipment, a process that extended into 

February 2001.

Situations such as those at IRS demonstrate the tremendous efforts many 

agencies make to produce auditable annual financial statements. These 

agencies undertake far more work to prepare financial statements than 

would be necessary if they had basic financial systems in place to routinely 

provide both the data for financial statements and management 

information. The financial statement preparation and audit process puts a 

tremendous strain on the staff of the CFO and the auditors and diverts 

resources from correcting the underlying problems. To quote the Secretary 

of the Treasury, “it takes the federal government 5 months to close our 

books...This is not the stuff of excellence.”

As we discuss below, one of the main problems agencies face is the lack of 

an integrated financial management system. Having an effective, 

integrated financial management system that can produce financial 

information in a timely manner minimizes the need for time-consuming and 

costly procedures to prepare financial statements and, most importantly, 

provides the information needed to manage on an ongoing basis. To 

remedy their problems, agencies are in the process of either implementing 

new core financial systems or upgrading their current systems to lay the 

foundation for compliance with FFMIA. 

In this regard, by far DOD faces the most complex and difficult challenges 

of any agency. Today, DOD relies on an overly complex and error prone 

network of systems that are not integrated. Millions of transactions must 

be manually keyed and rekeyed into the vast number of systems involved in 

any given DOD business process. Weak systems and controls leave DOD 

vulnerable to fraud and improper payments. In addition, as we recently 

testified,30 lacking an effective network of systems and the related inability 

to obtain reliable cost and budget information severely constrains DOD’s 

ability to maintain adequate funds control, measure performance, reduce 

costs, and maintain effective accountability over its estimated $1 trillion 
Page 23 GAO-02-29 FFMIA FY 2000 Results

investment in weapon systems and inventories. Because of the 

unparalleled size and complexity of DOD’s operations along with the 

serious, deeply entrenched nature of its financial management system 

deficiencies, it will not be possible to fully implement an integrated system 

structure overnight. Such a dramatic transformation will require a 

sustained effort over a number of years. As discussed later in this report, 

the Secretary of Defense and the DOD Comptroller have stated that priority 

will be given to financial management reform.

Other agencies such as the Departments of Commerce, Agriculture, and 

Education, SBA, GSA, and AID are planning or are in the process of 

implementing new systems. And yet others, such as NASA, have failed in 

recent attempts to successfully implement new systems, and are starting 

over. One thing that stands out though is that across the board, agencies 

have recognized their shortcomings and assisted by OMB and with input 

from the audit community are working to modernize their financial 

management systems and processes.

In addition, several agencies have made progress in other areas aimed at 

improving their financial management systems. For example, in fiscal year 

2000, the Department of Agriculture IG reported the establishment of a 

Senior Executives group to develop a corporate strategy, including a 

budget and timeframes, for administrative and financial system changes to 

the agency’s various systems. According to Agriculture officials, this was a 

clear sign that senior level executives for the department were 

acknowledging that there was a need to develop overall agency financial 

systems rather than continue to rely on multiple stand-alone subsystems. 

In another instance, auditors for the Department of Education reported 

that the agency made progress in strengthening controls over IT processes. 

The auditors also reported that the implementation of new controls and the 

reinforcement of existing controls increased the effectiveness of internal 

controls in areas such as IT planning and security management.

Reasons for 

Noncompliance

Based on our review of fiscal year 2000 audit reports for the 19 agencies’

systems that were reported to be substantially noncompliant with FFMIA, 

we identified 6 primary reasons either cited by the auditors or identified in 

30DOD Financial Management: Integrated Approach, Accountability, and Incentives Are 

Keys to Effective Reform (GAO-01-681T, May 8, 2001).
Page 24 GAO-02-29 FFMIA FY 2000 Results

our structured interviews with agency officials as to why their systems 

were noncompliant:

• lack of integrated financial management systems,

• inadequate reconciliation procedures,

• lack of accurate and timely recording of financial information,

• noncompliance with the SGL,

• lack of adherence to federal accounting standards and/or OMB 

requirements, and

• weak security controls over information systems.

Figure 5 shows the relative frequency of these problems at the 19 agencies 

with noncompliant systems and the problems relevant to FFMIA that were 

reported by their auditors or obtained through interviews with agency 

officials. Auditors reported these problems among the weaknesses 

identified during the audits; however, the auditors may not have reported 

the problems as specific reasons for why they concluded that the agencies’

systems did not substantially comply with FFMIA. We included all 

weaknesses relevant to FFMIA identified by the auditors because such 

problems must be resolved in order for the agencies’ systems to generate 

the reliable, useful, and timely information needed for decision-making. 

Also, the reported problems may not be all inclusive. For some agencies, 

the problems are so serious and well known that the auditor can readily 

determine the systems to be noncompliant without examining every facet 

of FFMIA compliance.
Page 25 GAO-02-29 FFMIA FY 2000 Results

Figure 5: Problems Reported by Auditors for Fiscal Year 2000

Source: GAO analysis of agency audit reports and structured interviews with agency officials

Nonintegrated Financial 

Management Systems

One of the federal financial management systems requirements is that 

agencies’ financial management systems be integrated.31 The CFO Act calls 

for agencies to develop and maintain an integrated accounting and 

financial management system that complies with federal systems 

requirements and provides for (1) complete, reliable, consistent, and timely 

information that responds to the financial information needs of the agency 

and facilitates the systematic measurement of performance; (2) the 

development and reporting of cost information; and (3) the integration of 

accounting, budgeting, and program information. In this regard, OMB 

Circular A-127, Financial Management Systems, requires agencies to 

Agencies

14

12

19

16

13

8

Nonintegrated

 financial

 management

 systems

 Inadequate

reconciliation

 procedures

Lack of

 accurate 

and timely

 reporting

 Noncompliance

 with the SGL

 Lack of

adherence 

 to federal

 accounting

 standards

 Weak 

 security

 over 

 information

 systems

0

4

8

12

16

20

24

31Federal financial system requirements define an integrated financial system as one that 

coordinates a number of previously unconnected functions to improve overall efficiency 

and control. Characteristics of such a system include (1) standard data classifications for 

recording financial events; (2) common processes for processing similar transactions; (3) 

consistent internal controls over data entry, transaction processing, and reporting; and (4) a 

system design that eliminates unnecessary duplication of transaction entry.
Page 26 GAO-02-29 FFMIA FY 2000 Results

establish and maintain an integrated financial management system that 

conforms with JFMIP’s functional requirements. 

An integrated financial system coordinates a number of functions to 

improve overall efficiency and control. When agencies do not have an 

integrated financial management system—which includes administrative 

and program systems that maintain financial information, such as 

budgeting, logistics, personnel, acquisition, and property systems—they 

are often forced to rely on ad hoc programming, analysis, or actions such as 

duplicative transaction entries. In these situations, agencies must expend 

major efforts and resources to generate financial information that their 

systems should be able to provide on a daily or recurring basis. 

The lack of integrated financial systems is a continuing serious problem for 

most agencies. Based on discussions with agency officials at the 19 

agencies that were reported to be noncompliant with FFMIA, lack of an 

integrated system and adequate funding to replace old systems were key 

obstacles in achieving compliance with FFMIA. Some agencies rely heavily 

on external consultants to develop financial information. The results of our 

work showed that 13 of the 24 CFO Act agencies used the assistance of 

contractors in preparing their financial statements because their systems 

were not able to produce this information. Many of these officials agree 

that a key to improving financial management and complying with FFMIA 

is to have an integrated financial system that provides reliable, useful, and 

timely information that managers can use for day-to-day operations. 

However, according to these officials, to upgrade or replace existing 

systems requires funding and a strong commitment from management, 

which many of them said they did not have in the past. In this regard, the 

President’s Management Agenda makes clear the commitment of the 

President to ensure that federal financial systems produce accurate and 

timely information.

As shown in figure 5, auditors for 13 of the 19 agencies with noncompliant 

systems reported lack of integrated systems as a problem. To illustrate, VA 

achieved an unqualified opinion on its fiscal year 2000 consolidated 

financial statements, but to do so required a significant amount of 

resources and manual processes. Auditors for VA noted continued 

difficulties related to the preparation, processing, and analysis of financial 

information to support the preparation of VA’s consolidated financial 

statements. Considerable manual work-arounds and “cuff,” or out-of-date 

feeder systems are still in place as VA has not yet completed its transition 

to a new fully integrated financial management system, Core Financial and 
Page 27 GAO-02-29 FFMIA FY 2000 Results

Logistics System. As a result, significant efforts were made at the 

component and consolidated levels to assemble, compile, and review the 

necessary financial information for annual financial reporting 

requirements. Specifically, auditors noted that a significant number of 

adjustments were recorded as part of the year-end closing process, many to 

record additional activities—both budgetary and proprietary—not 

reflected in the general ledger prior to the year-end close. The general 

ledgers for some smaller funds are maintained outside the existing core 

financial management system. Thus, until the new system is successfully 

implemented and functional, a significant amount of resources will be 

devoted to preparing the financial statements.

We recently reported32 that NASA could not provide detailed support 

required in time for our audit of its space station or shuttle obligations 

because it does not have an integrated financial management system. 

According to NASA officials, transaction-level obligation data are available 

at NASA’s 10 space centers on separate and different financial systems. 

NASA officials also told us that NASA has long-term plans for implementing 

an integrated financial management system that will make access to 

detailed obligation data more readily available.

Further, as we discussed in our performance and accountability series 

report,33 according to NASA, the agency’s financial management 

environment is comprised of decentralized, nonintegrated systems with 

policies, procedures, and practices that are unique to its field centers. For 

the most part, data formats are not standardized, automated systems are 

not interfaced, and on-line financial information is not readily available to 

program managers. Thus, it is difficult to ensure contracts are being 

efficiently and effectively implemented and budgets are executed as 

planned. In addition, NASA has pointed out that the cost to maintain these 

systems has been high, since both data and software are replicated at each 

field center.

Deficiencies in agencies’ automated systems, including the lack of 

integrated systems, can also contribute to improper payments. The 

reported estimates of improper payments across the government totaled 

32NASA: International Space Station and Shuttle Support Cost Limits (GAO-01-1000R, 

August 31, 2001).

33Performance and Accountability Series: Major Management Challenges and Program 

Risks, National Aeronautics and Space Administration (GAO-01-258, January 2001).
Page 28 GAO-02-29 FFMIA FY 2000 Results

approximately $20 billion for both fiscal years 2000 and 1999. These 

improper payments frequently occur because agency personnel lack 

needed information, rely on inaccurate data, and/or do not have timely 

information. 

For example, we identified issues34 related to the National Institutes of 

Health’s (NIH) oversight and monitoring of grant recipients—an area with 

over $17 billion appropriated in fiscal year 2000 to conduct and sponsor 

biomedical research. Among other things, there were discrepancies 

between the data in NIH’s management, payment, and accounting systems. 

These discrepancies affected the accuracy of grant award amounts. These 

system deficiencies could result in NIH’s erroneously awarding grants to 

ineligible grant receipts and in funds being used for improper purposes. If 

these systems were integrated, NIH would have fewer discrepancies in its 

data and would need to devote substantially less effort to assuring that the 

data across those three functions were consistent. According to HHS 

officials, NIH has implemented compensating controls to address these 

systems deficiencies. Moreover, system deficiencies are also a factor for 

DOD. DOD’s payment process suffers from nonintegrated computer 

systems that require data to be entered multiple times, sometimes 

manually, which poses substantial increases in the risk of incorrect 

payments and overpayments.

Inadequate Reconciliation 

Procedures

A reconciliation process, even if performed manually, is a valuable part of a 

sound financial management system. The general maxim would be that the 

less integrated the financial management system, the greater the need for 

adequate reconciliations because data for the same transaction may be 

separately entered in multiple systems. Reconciliation of records from the 

multiple systems would ensure that transaction data were entered 

correctly in each one. Reconciliation procedures are a control necessary in 

order to maintain and substantiate the accuracy of the data reported in an 

agency’s financial statements and reports. The Comptroller General’s 

Standards for Internal Control in the Federal Government highlight 

reconciliation as a key control activity. 

As shown in figure 5, auditors for 16 of the 19 agencies with reported 

noncompliant systems reported that the agencies had reconciliation 

34 NIH Research: Improvements Needed in Monitoring Extramural Grants

(GAO/HEHS/AIMD-00-139, May 31, 2000).
Page 29 GAO-02-29 FFMIA FY 2000 Results

problems, including difficulty reconciling their Fund Balance with Treasury 

accounts35 with the Department of the Treasury’s records. Treasury policy 

requires agencies to reconcile their accounting records with Treasury 

records monthly, which is comparable to individuals reconciling their 

checkbooks to their monthly bank statements. However, such 

reconciliations are not being routinely performed.

For example, Agriculture’s Office of the Chief Financial Officer/National 

Finance Center’s (OCFO/NFC) Fund Balance with Treasury account had 

not been properly reconciled with Treasury records since 1992. In its audit 

report36 on Agriculture’s fiscal year 1998 financial statements, the IG 

reported that the absolute value of the differences between OCFO/NFC’s 

and Treasury’s records was $4.4 billion for disbursements and $383 million 

for deposits as of September 30, 1998. In fiscal year 2000, Agriculture 

contracted with a public accounting firm to assess OCFO/NFC’s 

reconciliation efforts, provide recommendations for resolving the 

reconciliation problem, assist in leading the actual reconciliations, as well 

as recommend ways to improve the overall reconciliation process. The IG 

recently reported that the absolute value of the out-of-balance amount for 

Agriculture’s Central Accounting System had been reduced to $226 million 

as of September 30, 2000. The OCFO proposed a one-time adjustment to 

write off $160 million of the total $226 million. 

In another instance, the Department of Health and Human Services (HHS) 

made numerous adjustments at year-end to correct errors and to develop 

accurate financial statements. Many of these adjustments would not have 

been necessary had management routinely reconciled and analyzed 

accounts throughout the year. For example, the HHS IG reported37 that 

differences between the Administration for Children and Families’ (ACF) 

Fund Balance with Treasury account and Treasury’s records ranged from 

$200 million to $6.3 billion at various times during fiscal year 2000. 

35Agencies record their budget spending authorizations in their Fund Balance with Treasury 

accounts. Agencies increase or decrease these accounts as they collect or disburse funds.

36U.S. Department of Agriculture Consolidated Financial Statements for Fiscal Year 1998 

(Audit Report No. 50401-30-FM, February 1999).

37Report on the Financial Statement Audit of the Department of Health and Human 

Services for Fiscal Year 2000, (Audit Report No. A-17-00-00014, February 2001).
Page 30 GAO-02-29 FFMIA FY 2000 Results

Lack of Accurate and Timely 

Recording of Financial 

Information

Accurate and timely recording of financial information is key to successful 

financial management. Recording transactions in the general ledger in a 

timely manner can facilitate accurate reporting in agencies’ financial 

reports and other management reports that are used to guide managerial 

decisionmaking. The Comptroller General’s Standards for Internal 

Control in the Federal Government state that transactions should be 

promptly recorded to maintain their relevance and value to management in 

controlling operations and making decisions. As shown in figure 5, 

auditors for 14 of the 19 agencies with reported noncompliant systems 

found that the agencies did not record transactions accurately and timely in 

the general ledger.

For example, the Department of Commerce IG reported that $270 million in 

appropriations for two of the agency’s programs was not recorded in the 

general ledger until 6 months after the apportionment for these 

appropriations was issued. According to SFFAS No. 7, Accounting for 

Revenue and Other Financing Sources, appropriations should be 

recognized when available to the agency to be apportioned. The IG 

reported that the apportionment for these two programs was issued on 

September 30, 1999, and should have been recorded in the general ledger at 

that time. According to the IG, the failure to record these appropriations 

was due to confusion among agency officials as to which fiscal year the 

program was established and where the program should be recorded. 

Because the agency did not include these appropriations in its fiscal year 

1999 financial statements, during fiscal year 2000 a prior period adjustment 

of $270 million was made to properly recognize the budget authority for the 

two programs.

In other instances, auditors for five agencies reported that unliquidated 

obligations38 were not deobligated on a timely basis due to the lack of 

procedures for reviewing unliquidated obligations or the failure to follow 

these procedures. For example, auditors for the EPA reported that 

although EPA was aggressive during fiscal year 2000 in identifying and 

deobligating invalid obligations, EPA’s annual process39 for reviewing

38The value of goods and services ordered and obligated which have not been received.

39EPA’s policies require that the agency review unliquidated obligations at least once a year 

to ensure that these obligations are still available and needed for the purpose and time 

period specified.
Page 31 GAO-02-29 FFMIA FY 2000 Results

inactive unliquidated obligations for validity still needed improvement. The 

annual review by EPA management revealed that due to significant 

backlogs, EPA did not timely process and deobligate inactive unliquidated 

obligations. As a result of the weaknesses identified in its annual review, a 

special review was performed to obtain a more accurate accounting of its 

unliquidated obligations. In fiscal year 2000, the special review identified 

$26.5 million in open unliquidated obligations that should have been 

deobligated by September 30, 2000. EPA had to make a $26.5 million 

adjustment to more accurately present its Statements of Financing and 

Budgetary Resources. 

Noncompliance with the 

SGL

Implementing the SGL at the transaction level is one of the specific 

requirements of FFMIA. Applying the SGL at the transaction level means 

that a financial management system will process transactions following the 

SGL definitions of the general ledger accounts. Specifically, compliance 

with the SGL at the transaction level requires that (1) data used in financial 

reports be consistent with the SGL, (2) transactions be recorded 

consistently with SGL accounting transaction definitions and processing 

rules, and (3) transaction detail supporting SGL accounts be directly 

traceable to specific SGL account codes. By not implementing the SGL, 

agencies are challenged to provide consistent financial information across 

their component entities and functions. The effect of such differences has 

contributed to our disclaimer of opinion on the U.S. government’s 

consolidated financial reports for the last 4 fiscal years because the 

government could not ensure that the information in its financial 

statements was properly and consistently compiled.40 

As shown in figure 5, auditors for 8 of the 19 agencies with noncompliant 

systems reported that the agencies’ systems did not comply with the SGL 

requirement for fiscal year 2000. This is compared to the 14 agencies that 

were reported in noncompliance with SGL requirements in fiscal year 1999. 

An example of improvement is the Department of Labor, where the IG 

reported that for fiscal year 2000, management took steps to improve the 

financial accounting for back wages with the design and implementation of 

40Financial Audit: 1997 Consolidated Financial Statements of the United States 

Government (GAO/AIMD-98-127, March 31, 1998), Financial Audit: 1998 Financial Report 

of the United States Government (GAO/AIMD-99-130, March 31, 1999), Financial Audit: 

1999 Financial Report of the United States Government (GAO/AIMD-00-131, March 31, 

2000), and U.S. Government Financial Statements: FY 2000 Reporting Underscores the 

Need to Accelerate Federal Financial Reform (GAO-01-570T, March 30, 2001).
Page 32 GAO-02-29 FFMIA FY 2000 Results

Labor’s new Back Wage Collection and Disbursement System. With the 

improvements made, the IG concluded that the new system was 

substantially in compliance with the SGL. 

Other agencies are working to become SGL compliant. For example, the 

HUD IG reported that HUD was not compliant with the SGL at the 

transaction level. The Federal Housing Administration (FHA), a major 

component of HUD, provides consolidated summary level data to HUD’s 

Central Accounting and Program System (HUDCAPS). FHA has 19 

subsidiary systems that feed transactions to its own commercial general 

ledger system. To provide consolidated summary level data from FHA to 

HUDCAPS, FHA used numerous manual procedures, including the use of 

personal computer based software to convert its commercial accountsbased general ledger to the government SGL and then transfer the account 

balances to HUDCAPS. During fiscal year 2000, FHA purchased a COTS 

financial system to replace its current system. FHA management 

anticipates that the implementation of the new accounting system will 

result in FHA’s compliance with the requirement for automated posting of 

transactions to SGL accounts. 

Lack of Adherence to 

Federal Accounting 

Standards

One of FFMIA’s requirements is that agencies’ financial management 

systems comply with federal accounting standards. Agencies face 

significant challenges implementing these standards. As shown in figure 5, 

auditors for 12 of the 19 agencies with reported noncompliant systems 

reported that the agencies had problems complying with one or more of 

these standards. Some agencies have experienced difficulty implementing 

the standards because their financial management systems are not capable 

of producing the financial data needed. The standards most often cited by 

the auditors relate to managerial cost accounting; property, plant, and 

equipment; accounting for inventory and related property; and accounting 

for revenue and other financing sources. FASAB continues to deliberate on 

new and emerging accounting issues that could result in its issuing 

additional standards; therefore, agencies’ systems also must be flexible 

enough to be able to accommodate any standards that may be issued in the 

future.

A major cornerstone of FFMIA is good cost accounting information that 

program managers can use in managing day-to-day operations. Managerial 

cost accounting is aimed at providing reliable and timely information on 

the full cost of federal programs, their activities, and outputs. The cost 

information can be used by the Congress and federal executives in making 
Page 33 GAO-02-29 FFMIA FY 2000 Results

decisions about allocating federal resources, authorizing and modifying 

programs, and evaluating program performance. Developing the necessary 

information, which is needed as well to support GPRA implementation, will 

be a substantial undertaking. 

Of the 12 agencies’ systems reported to be noncompliant with one or more 

of the federal accounting standards, 7 of these agencies were reported in 

noncompliance with SFFAS No. 4, Managerial Cost Accounting Concepts 

and Standards. However, as mentioned earlier, if an agency had serious 

problems overall, the auditor may not have reviewed every area for 

compliance so the extent of this specific shortcoming may be greater. Our 

sense is that today few agencies may have good cost accounting 

information. The seven agencies’ systems that were reported by their 

auditors as noncompliant with the cost accounting standard are not able to 

provide timely full cost accounting information and at best can only 

provide this information at the end of the fiscal year through periodic cost 

surveys or other cost finding techniques. The lack of timely cost 

information seriously impinges the capacity to make informed managerial 

decisions on a daily basis, precludes meaningful and timely reporting on 

performance measures, and could result in project cost overruns and 

program inefficiencies. Performance information is necessary to 

determine the value of government programs and their success in achieving 

their goals. Further, the move to implementation of performance-based 

budgeting highlights the need for cost accounting information at the 

program level. If program managers are going to be more accountable for 

the achievement of output targets, they will need timely, accurate 

information on the cost of their programs. At the present, program 

managers do not always have information on, or control of, the full costs of 

support services, retirement, and other nondirect costs associated with 

their programs. 

For example, the IG for AID reported that the agency did not comply with 

the five fundamental elements of managerial cost accounting. AID’s current 

financial management system does not provide complete, reliable, timely, 

or consistent information. Specifically, missions41 cannot determine the 

cost of their program strategic objectives. Furthermore, AID does not have 

cost allocation tools to utilize detailed administrative and program cost 

41An AID mission is a representative in a cooperating country. AID has overseas missions 

and offices that manage projects associated with this foreign assistance.
Page 34 GAO-02-29 FFMIA FY 2000 Results

information from overseas accounting stations. As a result, AID is not able 

to assign costs to organizations, locations, projects, programs, or activities. 

The IG for DOT reported42 that the Federal Aviation Administration (FAA) 

has made progress implementing its cost accounting system, but still has 

much to do. FAA’s actual cost for air traffic controller and airways facilities 

maintenance labor, estimated at $3.4 billion for fiscal year 2001, cannot be 

broken down further to a specific shift of air traffic control or airways 

facilities maintenance. Therefore, FAA cannot develop potentially useful 

information such as the cost associated with a particular shift. FAA’s labor 

costs are more than half of its total costs. An effective cost accounting 

system that fully accounts for labor cost by activities and services would 

allow FAA to identify areas of low productivity and high cost, as well as 

high productivity and cost efficiency. 

While we recently reported43 that NASA did not have needed cost 

accounting data for the actual costs of completed space station 

components, its auditors reported that the results of their tests disclosed 

no instances in which NASA’s systems did not comply substantially with 

FFMIA. The results of our work raise questions about NASA’s compliance 

with SFFAS No. 4, Managerial Cost Accounting Concepts and Standards. 

NASA systems do not track and maintain cost data for NASA’s completed 

space station components. Because NASA does not attempt to track these 

costs, the agency does not know the actual cost of completed space station 

components and is not able to re-examine its cost estimates for validity 

once costs have been realized. Further, as discussed earlier, NASA does 

not have an integrated financial management system. These issues raise 

questions about management’s assertion regarding compliance with 

FFMIA. 

Weak Security Over 

Information Systems

Information security weaknesses are one of the primary causes for 

agencies’ systems noncompliance with FFMIA. As a result, federal assets 

continue to be at risk of inadvertent or deliberate misuse, financial 

information at risk of unauthorized modification or destruction, sensitive 

42Status Assessment of FAA’s Cost Accounting System and Practices, Federal Aviation 

Administration, Office of Inspector General, Department of Transportation (FI-2001-023), 

February 28, 2001.

43NASA: International Space Station and Shuttle Support Cost Limits (GAO-01-1000R, 

August 31, 2001).
Page 35 GAO-02-29 FFMIA FY 2000 Results

information at risk of inappropriate disclosure, and critical operations at 

risk of disruption. Significant computer security weaknesses in systems 

that handle the government’s unclassified information continue to be 

reported in each of the major federal agencies.

As shown in figure 5, auditors for the 19 agencies with reported 

noncompliant systems reported information security weaknesses as a 

problem in fiscal year 2000. Our high-risk series report44 shows that all of 

the 24 CFO Act departments and agencies have significant computer 

security weaknesses. The computer security weaknesses covered the full 

range of computer security controls. For example, physical and logical 

access controls45 were not effective in preventing and detecting system 

intrusions and misuse. In addition, software change controls46 were 

ineffective in ensuring that only properly authorized and tested software 

programs were implemented. Further, duties were not adequately 

segregated to reduce the risk that one individual could execute 

unauthorized transactions or software changes without detection. Finally, 

sensitive operating system software47 was not adequately controlled, and 

adequate steps had not been taken to ensure continuity of operations. The 

risks associated with these weaknesses are heightened because of the 

increasing interconnectivity of today’s computerized systems and use of 

the Internet that further exposes them to outside hackers.

The Standards for Internal Control in the Federal Government highlight 

the need for adequate control over automated information systems to 

ensure protection from inappropriate access and unauthorized use by 

hackers and other trespassers or inappropriate use by agency personnel. 

Unresolved information security weaknesses could adversely affect the 

ability of agencies to produce accurate data for decision-making and 

44High Risk Series: An Update (GAO-01-263, January 2001). 

45Access controls are designed to limit or detect access to computer programs, data, 

equipment, and facilities to protect these resources from unauthorized modification, 

disclosure, loss, or impairment.

46Software change controls include controls over the design, development, and modification 

of application software to ensure that all programs and program modifications are properly 

authorized, tested, and approved. Such controls help prevent security features from being 

inadvertently or deliberately turned off and processing irregularities or malicious code from 

being introduced. 

47System software coordinates and helps control the input, processing, output, and data 

storage associated with all of the applications that run on a system.
Page 36 GAO-02-29 FFMIA FY 2000 Results

financial reporting because such weaknesses could compromise the 

reliability and availability of data that are recorded in or transmitted by an 

agency’s financial management system. 

The degree of risk caused by security weaknesses is extremely high and 

places a broad array of federal operations and assets at risk of fraud, 

misuse, and disruption. For example, weaknesses at the Department of the 

Treasury increase the risk of fraud associated with billions of dollars of 

federal payments and collections, and weaknesses at DOD increase the 

vulnerability of various military operations. Further, information security 

weaknesses place enormous amounts of confidential data, ranging from 

personal and tax data to proprietary business information, at risk of 

inappropriate disclosure. 

One of our most recent reports48 on computer security highlights 

significant and pervasive computer security weaknesses that place 

sensitive Department of Commerce systems at risk. Individuals both 

within and outside Commerce could gain unauthorized access to these 

systems and thereby read, copy, modify, and delete sensitive economic, 

financial, personnel, and confidential business data. Moreover, intruders 

could disrupt the operations of systems that are critical to the mission of 

the department. Poor detection and response capabilities at the Commerce 

bureaus we reviewed increase the likelihood that incidents of unauthorized 

access to sensitive systems will not be detected in time to prevent or 

minimize damage. 

Commerce’s weaknesses were attributable to the lack of an effective 

information security program, that is, lack of centralized management, a 

risk-based approach, up-to-date security policies, security awareness and 

training, and the effectiveness of implemented controls. These weaknesses 

are exacerbated by Commerce’s highly interconnected computing 

environment in which the vulnerabilities of individual systems affect the 

security of systems in the entire department, since a compromise in a 

single poorly secured system can undermine the security of the multiple 

systems that connect to it.

Similarly, in another recent report,49 we reported that in spite of progress 

made in correcting computer security weaknesses previously identified by 

48 Information Security: Weaknesses Place Commerce Data and Operations at Serious 

Risk (GAO-01-751, August 2001).
Page 37 GAO-02-29 FFMIA FY 2000 Results

the Interior IG and other steps to improve security, our review of Interior’s 

information system general controls identified additional weaknesses at its 

National Business Center (NBC) in Denver, CO. These weaknesses 

affected the center’s ability to (1) prevent and detect unauthorized changes 

to financial information, including payroll and other payment data; (2) 

control electronic access to sensitive personnel information; and (3) 

restrict physical access to sensitive computing areas. The effect of these 

weaknesses is to place sensitive NBC-Denver financial and personnel 

information at risk of unauthorized disclosure, critical financial operations 

at risk of disruption, and assets at risk of loss. These weaknesses and risks 

also affect other agencies that use computer-processing services at NBCDenver.

In recognition of these serious security weaknesses, we and the Inspectors 

General have issued numerous reports that identify computer security 

weaknesses in the federal government and have made recommendations to 

agencies regarding specific steps they should take to make their security 

programs more effective. Also, in 2001, we again reported information 

security as a high-risk area across government, as we did in our 1997 and 

1999 high-risk series.50 In addition, we have identified best practices for 

improving information security management, which we published in two 

guides.51 Our guides are consistent with guidance on information security 

program management provided to agencies by OMB and the National 

Institute of Standards and Technology (NIST).52

Further, recognizing the highly networked federal computing environment 

and the resulting need for improved security management measures, the

49Information Security: Weak Controls Place Interior’s Financial and other Data at Risk

(GAO-01-615, July 2001).

50See, for example, GAO-01-263, January 2001. 

51Information Security Management: Learning from Leading Organizations (GAO/AIMD98-68, May 1998) and Information Security Risk Assessment: Practices of Leading 

Organizations (GAO/AIMD-00-33, November 1999).

52OMB guidance is contained in its Circular A-130, Appendix III, Security of Federal 

Automated Information Resources, updated November 2000. NIST has issued numerous 

Federal Information Processing Standards as well as a comprehensive description of basic 

concepts and techniques entitled, An Introduction to Computer Security: The NIST 

Handbook, Special Publication 800-12, October 1995, and Generally Accepted Principles 

and Practices for Securing Information Technology Systems, published in September 1996.
Page 38 GAO-02-29 FFMIA FY 2000 Results

Congress enacted the Government Information Security Reform (GISR) 

provisions as part of the fiscal year 2001 Defense Authorization Act.53 The 

legislation seeks to provide a comprehensive framework for establishing 

and ensuring the effectiveness of information security controls over 

information resources that support federal government operations and 

assets. GISR requires agencies to implement an information security 

program that is founded on a continuing risk management cycle and largely 

incorporates existing security policies found in OMB Circular A-130, 

Appendix III. GISR also added an important new requirement by calling for 

both annual management and independent evaluations of the information 

security program and practices of an agency. The results of these reviews, 

which are initially scheduled to become available in late 2001, will provide 

a more complete picture of the status of federal information security than 

currently exists, thereby providing the Congress and OMB an improved 

means of overseeing agency progress and identifying areas needing 

improvement.

Criteria for Assessing 

Compliance With 

FFMIA Should Be 

Made More Rigorous

OMB’s current FFMIA implementation guidance, which was revised on 

January 4, 2001, and was effective for fiscal year 2000 audits, provides 

information for auditors to consider in evaluating and reporting audit 

results. This guidance requires auditors to plan and perform their audit 

work in sufficient detail to enable them to determine the degree of 

compliance and report on instances of noncompliance for all of the 

applicable FFMIA requirements. We agree with this objective. The 

guidance describes specific minimum requirements that agency systems 

must meet to achieve compliance and provides indicators of compliance. 

The FFMIA implementation guidance also indicates that auditors should 

report on FFMIA compliance as part of the financial statement audit 

process based upon OMB Bulletin No. 01-02, Audit Requirements for 

Federal Financial Statements. OMB Bulletin No. 01-02 states that auditors 

shall perform tests of the entity’s compliance with FFMIA.

In providing guidance on reporting on substantial compliance with FFMIA, 

OMB Bulletin No. 01-02 states that auditors should report that “the results 

of our tests disclosed no instances in which the agency’s financial 

management systems did not substantially comply” [with FFMIA]. In 

contrast, FFMIA requires the auditors to “...report whether the agency 

53Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001, Pub.L. 106-398, 

Title X, Subtitle G, 114 stat. 1654, 1654A-266 (2000).
Page 39 GAO-02-29 FFMIA FY 2000 Results

financial management systems comply with the requirements of [the act].” 

This is an important distinction because under auditing standards the 

terminology “disclosed no instances” means that the auditor is providing 

negative assurance. Under generally accepted government auditing 

standards, only limited incidental testing is necessary for an auditor to give 

negative assurance. However, to “report whether,” or to provide positive 

assurance, auditors need to perform sufficient testing to draw a conclusion. 

Auditors for the five agencies that were not reported to be noncompliant 

with FFMIA provided negative assurance in accordance with OMB 

guidance. If the readers of the report do not understand this distinction, 

they may have a false impression that the systems have been reported to be 

substantially compliant by the auditors. 

Today for most agencies, because their systems deficiencies are well 

known and well documented and based on other audit work the auditor 

may have performed outside of the financial statement audit, the auditor 

may have sufficient knowledge to conclude that an agency is not in 

substantial compliance with FFMIA without performing additional testing 

beyond that needed for the financial statement audit opinion. The auditors 

for the 19 agencies that reported agencies’ systems to be noncompliant 

with FFMIA for fiscal year 2000 told us they relied on knowledge obtained 

from prior years’ audits or the internal control and compliance with laws 

and regulation testing performed during the current year financial 

statement audits. 

However, to provide positive assurance when assessing substantial 

compliance with FFMIA requirements, sufficient testing is needed. Some of 

the promising audit procedures noted during our review included the use of 

detailed audit programs and an assessment of financial systems’

functionality. For example, auditors for 7 of the 24 agencies—the 

Department of Energy, AID, NSF, EPA, HUD, NRC, and OPM—designed 

and used separate FFMIA audit programs to test for compliance.54 Other 

procedures that auditors could perform to provide positive assurance when 

assessing compliance with FFMIA include using the GAO and JFMIP 

checklists that were developed as assessment tools. For example, the 

auditors for NRC used the GAO checklist to determine systems’

54Auditors for two of the seven agencies—the Department of Energy and NSF—provided 

negative assurance that the agency systems were substantially compliant and auditors for 

five of these agencies—AID, EPA, HUD, NRC, and OPM—reported the agencies’ systems to 

be noncompliant.
Page 40 GAO-02-29 FFMIA FY 2000 Results

compliance with JFMIP systems requirements, while the auditors for the 

Department of Labor used the JFMIP checklist to determine the agency’s 

core financial system’s compliance with FFMIA. For both agencies, the 

auditor reported that the agency systems were not compliant with FFMIA.

GAO and the President’s Council on Integrity and Efficiency (PCIE)55

recently issued a joint Financial Audit Manual (GAO/PCIE FAM). This 

manual provides the methodology for performing financial statement 

audits of federal entities. Section 350 of this manual describes the 

procedures auditors should follow in determining the nature, timing, and 

extent of control tests and of tests for systems’ compliance with FFMIA 

requirements. Specifically, the manual states that the auditor should use 

any management-provided documentation of the work that management 

did for its assertion about the systems’ conformance with the agency’s 

annual Financial Integrity Act report56 and any work management may have 

done for FFMIA as a basis for determining the nature and extent of audit 

work needed. Management’s role is important and the comprehensive 

nature of its determination as to whether it is in substantial compliance is 

important in the audit process. 

For example, if management provides the auditor with a checklist detailing 

the functions the systems are able to perform, the auditor generally should 

select some significant functions from the checklist and determine whether 

the systems perform them. Overlap exists between testing for FFMIA 

compliance and testing internal controls. The GAO/PCIE FAM cites a 

number of techniques, such as observation, inspection, and walkthroughs 

that the auditor can employ when performing this work. Further, to 

achieve maximum efficiency, these tests for FFMIA compliance generally 

should be done concurrently with other nonsampling control tests. 

The nature of FFMIA will always require a certain degree of judgement on 

the part of auditors and management. OMB's revised implementation 

guidance provides examples for auditors and management to consider 

when assessing compliance with FFMIA. For example, the guidance states 

55The PCIE was established to address integrity, economy, and effectiveness issues that 

transcend individual federal agencies and increase the professionalism and effectiveness of 

IG personnel throughout the government. The PCIE is comprised of all presidentially 

appointed IGs, and members from OMB, the Federal Bureau of Investigation, the Office of 

Special Counsel, the Office of Government Ethics, and OPM.

5631 U.S.C. sec. 3512 (d)(2)(B). 
Page 41 GAO-02-29 FFMIA FY 2000 Results

that an agency’s systems are substantially compliant with FFMIA, if they 

can, (1) prepare financial statements and other required financial and 

budget reports using information generated by the financial management 

systems; (2) provide reliable and timely financial information for managing 

current operations; (3) account for their assets reliably, so that they are 

properly protected from loss, misappropriation, or destruction; and (4) do 

all of the above in a way that is consistent with the federal accounting 

standards and the SGL. Nonetheless, auditors for 10 agencies and financial 

management officials at 4 agencies told us that they encountered problems 

in interpreting the guidance including OMB’s definition of “substantial 

compliance.”

 57 FFMIA states that agencies’ financial management systems 

should “comply substantially” with the systems’ requirements, accounting 

standards, and SGL requirements but does not elaborate on the meaning of 

“comply substantially.” Some in the CFO and audit communities believe 

that without further guidance, the interpretation and application of the 

guidance will likely remain inconsistent throughout the federal 

government.

Auditors for seven agencies told us that, in their view, OMB’s January 2001 

revised guidance appeared to lower the threshold for determining 

compliance with FFMIA, providing more agencies an opportunity to 

become compliant with FFMIA. For example, the auditor for one agency 

believes that the revised guidance is too subjective, while the auditor for 

another agency told us that the guidance eliminated specific systems 

requirements. Further, officials at one agency told us that they believed the 

change in the guidance related to the systems security indicators lowered 

the threshold. In fact, according to the auditors and agency officials for 

this same agency, the change in OMB’s revised guidance, which was 

retroactive for fiscal year 2000, was the reason for the agency’s reported 

systems’ compliance in fiscal year 2000. In fiscal years 1999 and 1998, the 

auditor reported that the agency was not in substantial compliance with 

FFMIA because of reportable conditions related to IT security control 

weaknesses. OMB’s previous guidance characterized IT security controls

57 As we previously discussed, at two agencies, the auditor and agency management publicly 

disagreed about whether an agency’s systems were in substantial compliance with FFMIA. 

Further, at several other agencies, the auditors mentioned that it was a point of contention. 
Page 42 GAO-02-29 FFMIA FY 2000 Results

that were considered reportable conditions58 as an indicator of an instance 

of noncompliance with FFMIA. In contrast, the revised guidance states 

that only material IT security control weaknesses59 should be considered as 

indicators of noncompliance with FFMIA. According to the auditors and 

agency officials, because the revised guidance no longer characterized IT 

security controls that were reportable conditions as indicators of instances 

of noncompliance, the auditors determined that the agency was compliant 

with FFMIA for fiscal year 2000.

Moreover, although the compliance indicators in OMB’s revised 

implementation guidance were meant only as examples of compliance, 

auditors for three of the agencies which ultimately reported the agencies’

systems to be noncompliant with FFMIA and two auditors that provided 

negative assurance used the indicators in OMB’s revised guidance as a 

prescriptive checklist for determining an agency’s systems compliance. 

These auditors compared the material weaknesses and reportable 

conditions identified through the financial statement audit process to the 

OMB compliance indicators, and if no deficiencies in a specifically listed 

indicator had been identified as part of the financial statement audit work, 

no noncompliance with FFMIA was reported. If a deficiency in a specific 

indicator was noted, noncompliance was reported. This was not the way 

the OMB indicators should have been used because just applying the 

indicators is too limiting and was not OMB’s intention. Without a 

comprehensive approach, key systems’ functionalities may not be assessed 

and the extent of noncompliance will remain uncertain. Without testing the 

functionality of a financial management system, auditors cannot be assured 

that the agencies’ systems are operating as designed and that the systems 

substantially comply with FFMIA. 

58Reportable conditions are matters coming to our attention that, in our judgement, should 

be communicated because they represent significant deficiencies in the design or operation 

of internal controls that could adversely affect the organization’s ability to provide 

reasonable assurance of the reliability of its financial reporting, performance reporting, and 

compliance with laws and regulations. It is a significant, yet less severe, category of internal 

control deficiency than a material weakness.

59A material weakness is a condition that precludes the entity’s internal control from 

providing reasonable assurance that misstatements, losses, or noncompliance material in 

relation to the financial statements or to stewardship information would be prevented or 

detected on a timely basis.
Page 43 GAO-02-29 FFMIA FY 2000 Results

Successful FFMIA 

Implementation 

Requires Top 

Management 

Commitment, 

Adequate Resources, 

and Redesigned 

Processes 

Bringing agency financial management systems into compliance with 

FFMIA requirements is a formidable challenge that requires sustained top 

management commitment, adequate funding resources, skilled financial 

management staff, and meaningful management information. Our 

Executive Guide: Creating Value Through World-class Financial 

Management60 identifies these factors, among others, as key success 

factors and practices associated with world-class financial management. 

Agency officials we interviewed repeatedly emphasized the need for top 

management commitment and adequate resources to effect the changes 

needed to upgrade or replace financial management systems. To enhance 

their capabilities of providing meaningful information to decisionmakers, 

leading organizations included in GAO’s Executive Guide reengineered 

their business processes in conjunction with implementing new 

technology. 

The Executive Guide further points out that at world-class financial 

management organizations, top executives demonstrate their commitment 

by ensuring that the necessary resources needed to effect the changes for 

improved financial management are available. However, 11 of the 19 

agencies with reported noncompliant systems cited lack of funds as an 

obstacle in achieving compliance with FFMIA. Our interview results 

showed that agencies also need adequate human capital resources, which 

includes not just enough staff but also skilled staff for critical positions. 

Many of the officials we interviewed told us that having enough staff with 

the right skill mix was a problem for the agencies in achieving their FFMIA 

goals. Officials at 14 of the 19 agencies with noncompliant systems cited 

the lack of adequate human capital resources as an obstacle to achieving 

FFMIA compliance. It is crucial that the federal government has a qualified 

workforce with the right mix of skills to successfully implement financial 

systems. A key factor is having a well-qualified project manager to lead this 

effort. The Core Competencies for Project Managers Implementing 

Financial Systems in the Federal Government61 identifies competencies in 

60Executive Guide: Creating Value Through World-class Financial Management

(GAO/AIMD-00-134, April 2000). To help promote effective implementation of federal 

financial management reform, GAO studied the financial management practices and 

improvement efforts of nine leading public and private sector finance organizations to 

identify the success factors, practices, and outcomes associated with world-class financial 

management.

61The Financial Systems Committee and Human Resources Committee of the CFO Council 

worked with JFMIP in identifying the knowledge, skills, and abilities for project managers. 
Page 44 GAO-02-29 FFMIA FY 2000 Results

three areas: financial management, human resources, and technical. 

Pursuit of these competencies will enable project managers to meet the 

challenge of today’s changing environment and prepare for the future. 

Strategic human capital management is a pervasive challenge in the federal 

government. To highlight the urgency of this governmentwide challenge, in 

January 2001 we added strategic human capital management to our list of 

federal programs and operations identified as high risk.62 As stated in the 

high-risk series report, human capital shortfalls are eroding and 

threatening the ability of many agencies to effectively, efficiently, and 

economically perform their missions. As a result, this area needs greater 

attention to ensure maximum government performance and accountability.

Another key success factor for world-class financial management is 

meaningful management information. Financial information is meaningful 

when it is reliable, useful, and timely. However, as discussed earlier, most 

federal agencies lack the systems and processes required to produce 

meaningful financial information needed for management decision-making. 

To remedy their financial management systems problems, many agencies 

are implementing COTS software packages. In this regard, JFMIP tests 

vendor COTS packages and certifies that they meet current financial 

management system requirements for core financial management 

systems.63 Agencies who have or are currently implementing COTS 

packages include the Departments of Agriculture, Education, 

Transportation, and Veterans Affairs, DOD components such as the 

Defense Finance and Accounting Service64 and the Military Sealift 

Command, HUD’s FHA, and AID. 

A key to successful implementation of COTS systems, according to leading 

finance organizations, is reengineering business processes to fit the new 

software applications that are based on best practices. The Clinger-Cohen 

Act requires agency heads to modernize inefficient mission-related and 

administrative processes (as appropriate) before making a significant 

62High-Risk Series: An Update (GAO-01-263, January 2001).

63To maintain a certificate of compliance, vendors with qualified software packages must 

successfully complete any incremental tests required by JFMIP. These tests are conducted 

to ensure that vendor software offerings are aligned with current federal financial 

management requirements.

64DFAS: Oracle Project and Financials, Perfecting the Recipe for Success, Defense Finance 

and Accounting Service, May 23, 2001. 
Page 45 GAO-02-29 FFMIA FY 2000 Results

investment in IT systems to support them. Thus, an assessment of current 

processes should be completed before any decision is made about 

acquiring technology. As a result, federal agencies are beginning to 

consider the merits of information technology approaches that involve 

reengineering business processes in conjunction with implementing COTS 

software without significant modification.

Remediation Plans 

Improved but Continue 

To Lack Important 

Details

The CFO Act requires OMB to prepare and submit to the Congress a 

governmentwide 5-year financial management plan, including annual status 

updates. Among other requirements, the governmentwide plan is to 

describe strategies for improving financial management. To help compile 

the governmentwide 5-year plan, OMB uses agency-specific financial 

management plans that agencies prepare as part of their budget 

submissions and are also required by the CFO Act. FFMIA requires agency 

management to prepare remediation plans, in consultation with OMB, that 

describe the corrective actions they plan to take to resolve their instances 

of noncompliance, target dates, and resources necessary to bring financial 

systems into substantial compliance with FFMIA requirements. Further, 

the recently issued President’s Management Agenda for improving 

financial management states that OMB will work with agencies to ensure 

that federal financial systems produce accurate and timely information to 

support operating, budget, and policy decisions.

For our report on FFMIA compliance last year,65 we reviewed remediation 

plans agencies prepared to address problems identified in the fiscal year 

1998 financial statement audits. We concluded that the majority of the 

plans lacked sufficient detail to be adequate tools for agency management 

and staff to use in resolving financial management problems. For this 

year’s report, we reviewed agencies’ fiscal year 1999 remediation plans.66 

Overall the plans improved slightly over those for fiscal year 1998. While 

OMB has worked with many agencies to prepare or revise these plans, 

which helped improve the plans, many still lacked sufficient detail and 

descriptions of the resources needed for executing the corrective actions. 

Further, some of the corrective actions included in the remediation plans 

65Financial Management: Federal Financial Management Improvement Act Results for 

Fiscal Year 1999 (GAO/AIMD-00-307, September 29, 2000).

66Remediation plans addressing issues identified in the fiscal year 1999 financial statement 

audits were due to OMB by December 15, 2000.
Page 46 GAO-02-29 FFMIA FY 2000 Results

we reviewed did not fully address the problems they are intended to 

correct. As we reported last year, remediation plans need to be sufficiently 

detailed to provide a “road map” for agency management and staff to 

resolve financial management problems. The severity of problems facing 

agencies as they attempt to replace or overhaul old and outdated financial 

systems and resolve serious information security weaknesses, among other 

things, highlights the need for detailed remediation plans.

Of the 21 agencies whose systems were reported to be noncompliant with 

FFMIA in fiscal year 1999, 16 prepared remediation plans. Two agencies—

SSA and FEMA—did not submit remediation plans for fiscal year 1999 to 

OMB because agency management determined that their systems were in 

substantial compliance with FFMIA. While SSA and FEMA management 

acknowledged that the weaknesses identified by the auditors exist, they 

did not agree with the auditors that the weaknesses resulted in lack of 

“substantial” compliance. However, SSA and FEMA have provided 

comments, including corrective actions, in response to the auditors’

recommendations. 

In addition, 3 of 21 agencies—the Departments of Justice and State and 

GSA—did not prepare separate remediation plans to address reported 

fiscal year 1999 instances of noncompliance. The Department of Justice 

addressed instances of FFMIA noncompliance for both fiscal years 1999 

and 2000 in its Financial Management Status Report and Five-Year Plan

dated May 2001. Department of State officials decided not to issue a 

separate remediation plan for fiscal year 199967 but rather to focus on 

implementing actions in its March 2000 plan and on updating its 

remediation plan to address the fiscal year 2000 instances of 

noncompliance. Lastly, GSA officials told us that management did not 

prepare a remediation plan for fiscal year 1999 because the agency’s 

systems were determined to be in compliance for fiscal year 2000, and the 

severity of the problems for fiscal year 1999 no longer warranted 

development of a plan. 

FFMIA provides that if the compliance determination made by the agency 

head differs from the auditors’ findings, the Director of OMB is to review 

the determinations and provide a report on the findings to the appropriate 

67The Department of State issued its first remediation plan in March 2000. This plan 

addressed instances of noncompliance identified in both the fiscal year 1998 and 1999 

financial statement audits. 
Page 47 GAO-02-29 FFMIA FY 2000 Results

committees of the Congress. Further, although FFMIA does not require a 

remediation plan if an agency head determines the agency’s systems 

comply substantially, OMB Circular A-11 requires agencies to address 

systems weaknesses in their financial management improvement plans. 

We reviewed the 16 available remediation plans to determine whether (1) 

they included all the instances of noncompliance identified in the fiscal 

year 1998 financial statement audit reports; (2) the planned corrective 

actions were accompanied by detailed steps; (3) the corrective actions, if 

successfully implemented, could potentially resolve the problems; (4) they 

included information about resources needed; and (5) they provided target 

dates for completing the corrective actions. Figure 6 presents the results of 

our analysis.

Figure 6: Results of Review of Fiscal Year 1999 Remediation Plans

0

2

4

6

8

10

12

14

16

Number of plans

14

2

11

5

15

1

6

10

16

0

Are corrective 

actions for all 

instances of 

noncompliance

included?

Are corrective 

actions detailed?

Will corrective 

actions likely 

resolve the 

problems?

Are resources

included?

Are time frames

included?

Yes

No
Page 48 GAO-02-29 FFMIA FY 2000 Results

As shown in figure 6, 14 of the agencies’ remediation plans included 

corrective actions that covered all of the reported instances of 

noncompliance identified as a result of the fiscal year 1999 financial 

statement audit. The remediation plans for two agencies, HUD and DOD, 

did not include corrective actions to cover all of the instances of FFMIA 

noncompliance reported. While HUD’s remediation plan covered virtually 

all of its instances of noncompliance, it did not fully address computer 

security weaknesses over its information systems. The corrective actions 

in DOD’s plan, referred to as its Financial Management Improvement Plan 

(FMIP),68could not be specifically related to the reported instances of 

FFMIA noncompliance. 

Another limitation with a number of the remediation plans is that the 

corrective actions were broadly stated and did not include sufficient details 

describing how actions are to be accomplished. As shown in figure 6, 

corrective actions in 11 of the 16 remediation plans fell into this category. 

An example of a plan with sufficient details describing corrective actions is 

HUD’s remediation plan. In its plan, HUD included specific actions for 

addressing FHA’s compliance with the SGL at the transaction level, which 

includes completing the feeder system SGL financial transaction processes 

for 19 systems, validating extracts from existing feeder systems, and 

determining the appropriate SGL accounting treatment and data format.

In contrast, one of the corrective actions in AID’s remediation plan is to 

develop cost allocation models with cost drivers to attribute costs to the 

agency’s goals. Based on our review of AID’s remediation plan, we found 

no information that describes, even in general terms, the cost drivers and 

how the cost allocation models will be developed. As we discuss later, 

when an agency’s corrective actions involve implementing or replacing 

financial management systems, it is important to have a detailed plan that 

includes adopting sound IT investment and control processes.

While there is a substantial amount of professional judgment associated 

with assessing the adequacy of these plans, we determined that the 

corrective actions in the remediation plans of 15 agencies, if successfully 

implemented, could potentially resolve the problems, as shown in figure 6. 

For DOD, we determined that the corrective actions described in the 

agency’s remediation plan probably would not resolve the problems. For 

68DOD’s Financial Management Improvement Plan represents DOD’s response to several 

mandated annual reporting requirements, including FFMIA. 
Page 49 GAO-02-29 FFMIA FY 2000 Results

example, we recently reported69 that while DOD’s fiscal year 2000 FMIP is a 

significant effort and an improvement over prior plans, it largely represents 

a compilation of the military services’ and DOD components’ stovepiped 

approaches, and therefore is not an effective management tool that 

establishes a departmentwide strategic approach for developing an 

integrated DOD-wide financial management system. Such stovepiped 

approaches have been at the heart of previous DOD-wide reform initiatives 

that have produced some incremental improvements, but have not resulted 

in the fundamental reform necessary to resolve these long-standing 

management challenges. As we recently testified,70 DOD’s financial 

management challenges must be addressed as part of a comprehensive, 

integrated, DOD-wide business process reform, including an 

enterprisewide systems architecture to guide and direct its financial 

management modernization investment. If the hundreds of initiatives 

outlined in the plan are not implemented as part of an overall financial 

management architecture, DOD runs the risk that its system efforts will 

result in perpetuating a system environment that is duplicative, not 

interoperable, unnecessarily costly to maintain, and is unable to optimize 

financial management performance and accountability. We are encouraged 

that the Secretary of Defense has stated that he intends to include financial 

management reform among his top priorities. Most recently, DOD has 

initiated a number of actions that hold promise for addressing its longstanding serious problems in this area. For example, DOD recently 

announced plans to (1) dedicate significant funding to this area; (2) 

establish a top level steering committee that is to include leaders of its 

major components and Secretariat-level organizations; and (3) analyze 

ongoing and planned financial management systems initiatives across the 

Department to curtail high-risk efforts that will not lead to an integrated 

financial management structure.

OMB’s guidance and FFMIA state that remediation plans are to include 

resources and target dates necessary to achieve substantial compliance. As 

shown in figure 6, 10 of the 16 remediation plans we reviewed did not 

include a discussion of resources needed. Resource information is 

important for agencies and OMB to determine whether corrective actions 

can realistically be undertaken. 

69Financial Management: DOD Improvement Plan Needs Strategic Focus (GAO-01-764, 

August 17, 2001).

70DOD Financial Management: Integrated Approach, Accountability, and Incentives Are 

Keys to Effective Reform (GAO-01-681T, May 8, 2001).
Page 50 GAO-02-29 FFMIA FY 2000 Results

Finally, as shown in figure 6, all 16 of the remediation plans included 

timeframes. This is an improvement over fiscal year 1998, where 14 of the 

19 remediation plans included timeframes. The plans would be further 

enhanced by including intermediate target dates. Setting specific 

intermediate target dates help keep agencies on track as they implement 

corrective actions. FFMIA, which was enacted 5 years ago, specifies that 

agencies have 3 years to bring their systems into compliance after a 

determination of noncompliance has been made. 

FFMIA also provides for extending the time needed to complete the 

planned actions past 3 years with the concurrence of OMB. As mentioned 

earlier, in our discussion of the extent of long-term challenges facing DOD, 

3 years will not be enough time for some agencies to address their 

remaining problems. Therefore, OMB’s continuing leadership and 

oversight of remediation efforts will be important.

Systems Replacement 

Projects Emphasize a Need 

for Comprehensive Plans

The importance of having a good remediation plan becomes more evident 

when corrective actions in remediation plans involve IT investments, such 

as implementing or replacing financial management systems or software. 

Agencies invest more than $40 billion in IT for about 26,000 information 

systems.71 Technology now affects virtually every aspect of the way the 

government operates, and IT investments are extremely important to the 

success of e-government transforming the delivery of information and 

services. To ensure that IT dollars are directed toward prudent investments 

designed to achieve cost savings, increase productivity, and improve the 

timeliness and quality of service delivery, agencies need to apply the 

framework outlined in the Clinger-Cohen Act of 1996 and implementing 

guidance.72 

The Clinger-Cohen Act requires agencies to use a capital planning and 

investment control process to compare and prioritize all IT projects using 

explicit quantitative and qualitative decision criteria. Moreover, the 

Clinger-Cohen Act requires agencies to adopt an IT architecture, a welldefined and enforced blueprint for operational and technological change. 

71A Blueprint for New Beginnings, A Responsible Budget for America’s Priorities, Office 

of Management and Budget, March 2001. 

72The Clinger-Cohen Act builds on the best practices of leading public and private 

organizations by requiring agencies to better link IT planning and investment decisions to 

program missions and goals.
Page 51 GAO-02-29 FFMIA FY 2000 Results

An enterprise architecture73 provides an agency with a clear and 

comprehensive picture of an entity and includes a capital investment road 

map for transitioning from the current to the target, or the planned future 

environment. In concert with an enterprise architecture, the Clinger-Cohen 

Act requires agencies to have disciplined approaches for developing or 

acquiring software, including an effective evaluation process for assuring 

that the contractor-developed software satisfies the defined requirements. 

OMB officials told us that they are working with agencies regarding the 

application of the framework outlined in the Clinger-Cohen Act and that 

OMB’s review of agencies’ IT capital asset planning processes is linked to 

its review of agencies’ remediation plans. As discussed further in the next 

section, OMB’s continuing leadership is critical to the efforts across 

government to improve financial management systems. Many agencies are 

planning or are in the process of implementing new core financial 

management systems. Implementing or overhauling financial management 

systems can understandably take time, and the systems may not be 

operational for several years. For example, as previously discussed, VA is 

planning to replace its “patchwork” of computer systems74 and correct its 

FMFIA material systems weaknesses by implementing a single commercial 

financial management and logistics system. This system implementation 

effort, called the Core Financial and Logistics System, is targeted to be 

completed by the end of 2003. Similarly, the Centers for Medicare and 

Medicaid Services75 have efforts underway to implement the Integrated 

General Ledger Accounting System and expects to complete 

implementation in fiscal year 2007. 

NASA has found implementation of new financial management systems to 

be a challenge. In describing its need for an integrated financial 

management system, NASA has stated that its financial management 

environment was comprised of decentralized, nonintegrated systems, with 

policies, procedures, and practices unique to its field centers.76 The 

Integrated Financial Management System (IFMS) is expected to correct 

these problems. NASA is undertaking its third attempt to implement an 

73OMB Circular A-130 requires that executive agencies implement an enterprise 

architecture. 

74Department of Veterans Affairs Annual Accountability Report Fiscal Year 2000. 

75On July 1, 2001, the Health Care Financing Administration was renamed as the Centers for 

Medicare and Medicaid Services.
Page 52 GAO-02-29 FFMIA FY 2000 Results

integrated financial management system. In a prior attempt, a former 

contractor working on the IFMS had difficulties upgrading its software to 

support new technologies and to meet all federal requirements. This 

contract was eventually terminated, and the program to implement the 

system has been changed so that implementation of the new system is 

broken into individual software modules. NASA CFO officials told us that 

NASA is now moving to a COTS package for its core financial system. 

NASA expects to implement the core financial system at its centers in fiscal 

year 2003.

Agriculture encountered problems in implementing a COTS package to 

provide a departmentwide accounting system, due to inadequate project 

planning and inexperienced management coupled with insufficient 

business process reengineering. According to PriceWaterhouseCoopers,77

Agriculture’s implementation of the COTS package was impacted by 

insufficient strategic planning. For example, Agriculture did not have a 

single, strong strategic plan to guide the implementation of its Foundation 

Financial Information System (FFIS). The strategic implementation plan 

should have been developed in concert with its component agencies and 

communicated throughout the Department. Moreover, Agriculture did not 

do sufficient analysis of its business processes before attempting to 

implement the FFIS at the Forest Service. As a result, significant effort was 

expended automating existing and complex business processes, some of 

which needed to be reengineered. Agriculture hired experienced financial 

systems program management staff in the fourth quarter of 1998. This staff 

reoriented the FFIS project and has implemented the FFIS in six major 

Agriculture agencies since the beginning of fiscal year 2000. Agriculture 

expects to implement the FFIS at another eight agencies on October 1, 

2001. According to Agriculture officials, the keys to progress for this 

project, required knowledgeable staff, management support, and 

resources.

76NASA is comprised of its headquarters offices, nine Centers located throughout the 

country, and the Jet Propulsion Laboratory. The Jet Propulsion Laboratory is operated by 

the California Institute of Technology. 

77USDA Framework for the FFIS Project Management Office, PriceWaterhouseCoopers 

L.L.P., August 11, 1998. 
Page 53 GAO-02-29 FFMIA FY 2000 Results

OMB Plays an 

Important Role By 

Providing Advice on 

FFMIA Remediation 

Plans

The advisory role FFMIA established for OMB with respect to agency 

remediation plans is important for addressing the types of problems we 

noted in the remediation plans we reviewed. Therefore, in a prior report78

we recommended that OMB work with the agencies to ensure that all 

remediation plans are prepared and submitted timely. We also 

recommended that OMB review agencies’ plans for (1) detailed corrective 

actions that fully address reported problems, (2) inclusion of resource 

requirements, and (3) specific time frames needed to implement and 

resolve problems.

OMB officials have told us that OMB is moving toward full implementation 

of its strategy to link financial management systems improvements detailed 

in FFMIA remediation plans to key agency plans. For example, OMB is 

planning to link its review of the remediation plans with agency 5-year 

financial management plans, IT plans, and capital planning and investment 

control processes. According to OMB officials, OMB is integrating its 

review of FFMIA remediation plans with its capital planning and 

investment control plans process.79 By incorporating FFMIA remediation 

reviews under this framework, OMB will be better able to analyze, track, 

and evaluate FFMIA improvement efforts as part of the budget process. 

OMB officials have told us that they met with each of the CFO Act agencies 

to introduce OMB’s long-term strategy for incorporating FFMIA 

remediation plans into the agencies’ capital asset plans. In scheduling 

these meetings, OMB requires multiple agency officials to attend such as 

the Chief Financial Officers, Chief Information Officers, the Chief 

Procurement officials and, in some instances, the Budget Officer. In 

addition, changes were made to OMB Circular A-11 in July 2000 to provide 

guidance on integrating financial management systems improvements in 

FFMIA remediation plans with agency information on IT capital projects. 

Further, GAO and Treasury participate in annual meetings held by OMB 

with the CFOs and IGs of each CFO Act agency that did not have an 

unqualified audit opinion or had serious systems problems. At these 

meetings, financial management systems initiatives are discussed, and 

78 Financial Management: Federal Financial Management Improvement Act Results for 

Fiscal Year 1998 (GAO/AIMD-00-3, October 1999).

79 OMB receives both FFMIA remediation plans and capital asset plans in agency budget 

submissions prepared under the requirements of OMB Circular A-11.
Page 54 GAO-02-29 FFMIA FY 2000 Results

OMB stresses that the end game of the CFO Act is having systems that 

produce reliable, useful, and timely information on an ongoing basis.

A number of agency CFO officials we interviewed, though, generally 

seemed unsure about OMB’s strategy for integrating FFMIA remediation 

plans with agencies’ capital planning and investment control processes. Of 

the 16 agencies preparing remediation plans for fiscal year 1999, officials 

from 9 were certain that OMB had met with or contacted officials from 

their agencies to discuss its strategy related to remediation plans while 7 

were unaware of the meetings. Officials from 5 of the 16 agencies did say 

that they implemented OMB’s strategy in preparing their fiscal year 1999 

remediation plans due to OMB in December 2000, while 7 told us they had 

not done so, and officials from 4 agencies did not know if the strategy had 

been implemented. This lack of awareness of OMB’s strategy can result in 

agency officials providing less-than-expected attention to the critical issue 

of preparing and submitting remediation plans. Without appropriate 

attention, agencies have a greater risk of failure when attempting to 

implement the plans and the serious weaknesses in the financial 

management systems will remain. With the new Presidential Management 

Agenda, significant attention is expected to be devoted to these issues. 

OMB’s continued leadership will be important to foster effective results.

On August 13, 2001, the JFMIP principals—the Comptroller General, the 

Secretary of the Treasury, the Director of OMB, and the Director of OPM—

met to discuss federal financial management reform issues. Commitment 

and cooperation among the highest levels of leadership in the federal 

financial management community can provide the impetus for accelerating 

changes to financial management reform in the federal government. This 

group is developing an agenda to address the long-standing challenges 

discussed in this report. We anticipate that a number of recommendations 

and action items will come from the initiatives contemplated by this group 

related to issues such as addressing impediments to an opinion on the U.S. 

government’s consolidated financial statements, defining success in 

financial management, and modernizing financial management systems. 

Conclusions Long-standing problems with agencies’ financial systems make it difficult 

for the agencies to produce reliable, useful, and timely financial 

information and hold managers accountable. Federal managers need this 

important information for developing and executing budgets, managing 

government programs based on results, and making difficult policy 

choices. The extraordinary efforts that many agencies go through to 
Page 55 GAO-02-29 FFMIA FY 2000 Results

produce auditable financial statements are not sustainable in the long term. 

These efforts use significant resources that could be used for other 

important financial-related work. 

For these reasons, the widespread systems problems facing the federal 

government need top management attention. Sustained management 

commitment at the highest levels of government is one of the most 

important factors in prompting attention and action on a widespread 

problem. In addition to top management commitment, additional 

refinements to OMB’s FFMIA implementation guidance are needed to 

assure consistent and effective implementation of FFMIA. OMB guidance 

should address the differing interpretations over (1) the meaning of 

substantial compliance, (2) the nature and extent of audit work necessary 

to assess compliance with FFMIA, and (3) whether to provide an opinion 

on agency’s systems FFMIA compliance. 

The size and complexity of many federal agencies and the discipline 

needed to overhaul or replace their financial management systems present 

a significant challenge—not simply a challenge to overcome a technical 

glitch, but a demanding management challenge that requires attention from 

the highest levels of government along with sufficient human capital 

resources to effect lasting change. We recognize that it will take time, 

investment, and sustained emphasis on correcting deficiencies to improve 

federal financial management systems to the level required by FFMIA and 

to effectively manage government funds. The significance of the issues 

facing agencies, now and in the future, emphasizes the need for detailed 

remediation plans. As envisioned by the act, these remediation plans 

would help agencies establish seamless systems and processes to routinely 

generate reliable, useful, and timely information that would improve 

agencies’ accountability. Our analysis has shown that many agencies’

remediation plans lack key elements that could preclude the achievement 

of establishing seamless systems. Therefore, we reaffirm the 

recommendation we made in our prior report that OMB continue to work 

with agencies to ensure that the remediation plans include all required 

elements and are not making new recommendations at this time related to 

remediation plans. 

Improvements in federal financial management systems are in some cases 

a long-term goal, but with sustained emphasis, the goals of the CFO Act and 

FFMIA can be achieved. As mentioned earlier, the heads of GAO, OMB, 

Treasury, and OPM recently met to discuss governmentwide financial 

management reform issues. The leadership commitment and spirit of 
Page 56 GAO-02-29 FFMIA FY 2000 Results

cooperation among these top officials can provide the needed impetus to 

accelerate financial management reform in the federal government.

Recommendations for 

Executive Action

Given the ongoing efforts of the JFMIP Principals to develop an action 

plan, we are making no specific recommendations at this time regarding 

OMB’s overall financial management systems strategy, other than to 

reiterate the importance of OMB’s continuing leadership in improving 

financial management systems. We do recommend that the Director of the 

Office of Management and Budget revise OMB’s current FFMIA audit 

guidance to 

• require agency auditors to provide a statement of positive assurance 

when reporting an agency’s systems to be in substantial compliance 

with FFMIA, which entails a more thorough examination of agencies’

systems and thus, amplifies financial managers’ awareness of the 

importance of an effective and efficient financial management system,

• develop additional guidance, in accordance with the FAM, to specify the 

expected procedures that auditors should perform when assessing 

FFMIA compliance, which clearly outlines (1) the minimum scope of 

work and (2) the procedures for auditors to perform in determining 

whether management has reliable, timely, and useful financial 

information for managing day-to-day operations.

We are also recommending that OMB work with the CFOs, the IGs, and 

GAO to 

• explore further clarification of the definition of “substantial 

compliance” to assist auditors and agency management to consistently 

apply and evaluate an agency’s systems’ FFMIA compliance, and 

• reiterate that the indicators of compliance in the January 4, 2001, FFMIA 

implementation guidance are not meant to be all inclusive. 

We further recommend that because of the importance of cost accounting 

to managers for measuring the results of program performance, that OMB 

request that as part of the FFMIA review, auditors pay special attention to 

agencies’ ability to meet the requirements of the Managerial Cost 

Accounting Concepts and Standards and to report as to whether agencies’

systems comply with the standards.
Page 57 GAO-02-29 FFMIA FY 2000 Results

Agency Comments and 

Our Evaluation 

In written comments (reprinted in appendix V) on a draft of this report, 

OMB agreed with our overall observations and conclusions concerning the 

financial management systems weaknesses faced by the federal 

government and the need for sustained management commitment at the 

highest levels in order to overcome them. OMB stated that good financial 

management systems enable managers to have the financial and 

performance information necessary to measure and effect current day-today operations while fully meeting federal reporting requirements. OMB 

also stated, as discussed in our report, that improving financial 

management is one of five governmentwide initiatives included in the 

President’s Management Agenda.

OMB stated that it has begun to reexamine its fundamental approach to 

systems development and implementation in the federal government, 

including its FFMIA implementation guidance, and believes that more 

emphasis should be placed on system performance and results. OMB 

welcomed our participation on this effort and we look forward to working 

with them. As we discuss in our report, management reform legislation 

including the CFO Act, GPRA, and FFMIA, if fully and effectively 

implemented, will collectively help achieve strong financial management 

that provides reliable, timely, and useful information for decisionmakers. 

In its comments, OMB expressed concern as to how our report 

characterized the level of testing currently contemplated by OMB Bulletin 

No. 01-02. This was not our intent, and we have clarified our report. OMB 

stated that required tests of FFMIA in OMB Bulletin No. 01-02, coupled with 

the requirement to test internal controls over significant systems, results in 

more than incidental testing. Our point is that under generally accepted 

government auditing standards, auditors need to perform only limited 

incidental testing to provide negative assurance. Our concern is that with 

negative assurance, the auditor is not saying that they determined the 

systems to be substantially compliant, but that the work performed did not 

identify instances of noncompliance. We view the law as requiring a 

definitive statement as to whether the systems susbstantially complied. It is 

important that readers of the audit report understand this distinction, or 

they may have a false impression that the auditor is stating that they found 

the systems to be substantially compliant. We will continue to work with 

OMB on this matter and recognize that we have differing views. 

We agree with OMB that reorienting remediation plans towards measurable 

performance would force a more integrated enterprisewide approach that 
Page 58 GAO-02-29 FFMIA FY 2000 Results

considers both financial and nonfinancial systems that support agency 

missions. This provides a needed perspective and helps agencies to adopt 

an information technology architecture that includes a well-defined 

blueprint for operational and technological change. The Clinger-Cohen Act 

provides a foundation that can be followed by agencies as they implement 

these important systems initiatives. Remediation plans with sufficient 

detail, that are linked to and support as agency’s strategic business plan, 

provide a “road map” for management and staff to resolve financial 

management problems and hold managers accountable for needed 

improvements. We reiterate the importance of OMB’s leadership as it 

moves towards bringing about needed changes in the federal financial 

management environment. 

We also provided excerpts from a draft of this report to cognizant officials 

at the 24 CFO Act agencies to obtain oral comments. Officials from DOT, 

AID, and Interior expressed concern that the report did not fully recognize 

their efforts to address the systems weaknesses discussed in various parts 

of our report. In these instances, these corrective actions occurred after 

fiscal year 2000, which is subsequent to the timeframe covered by our 

report. Also, it was not our objective to independently assess specific 

management actions for the 24 CFO Act agencies. However, in our report 

we have acknowledged actions that have been taken throughout 

government and are underway to address systems weaknesses. 

Interior officials suggested we acknowledge that the weak information 

security controls that were used as an example in the draft report have not 

compromised financial or personnel data. In this regard, we previously 

reported80 that the Interior’s National Business Center had not fully 

established a comprehensive program to routinely monitor access to its 

computer facilities and data and to identify and investigate unusual or 

suspicious access patterns that could indicate unauthorized access.

EPA officials were concerned that the example in the report related to 

EPA's backlog of unliquidated obligations was (1) not reported by EPA’s IG 

as an instance of noncompliance with FFMIA, and (2) not an example of 

the lack of accurate or timely recording of financial information as 

portrayed in the report. Regarding the first concern, as we state in the 

report, we included all weaknesses relevant to FFMIA identified by the 

80Information Security: Weak Controls Place Interior’s Financial and other Data at Risk

(GAO-01-615, July 2001).
Page 59 GAO-02-29 FFMIA FY 2000 Results

auditors because such problems must be resolved in order for the agencies' 

systems to have the data to generate the reliable, useful, and timely 

information needed for decision-making. Regarding the second concern, 

EPA officials stated that the example in our report illustrates the lack of 

timely processing of the deobligation actions and is not an example of the 

lack of timely recording of a financial transaction. According to EPA 

officials, the deobligation can only take place after an authorizing official 

closes the obligating document. EPA officials stated that the closeout 

usually occurs after audits and other administrative requirements are 

satisfied. As a result, a large backlog of grants has been awaiting closeout. 

In our view, this example illustrates that the lack of timely deobligations, 

which trigger the final transactions, can result in misleading financial 

information, both at year-end and throughout the year. 

NASA officials disagreed with our questioning of its compliance with 

FFMIA because of issues related to cost accounting and the lack of an 

integrated financial management system. NASA stated that contract cost 

reports provided to the agency by its contractors, combined with cost 

finding techniques that are permitted under Managerial Cost Accounting 

Concepts and Standards, allow NASA to capture all costs related to the 

multibillion dollar international space station program. However, as we 

highlight and discuss in more detail in our August 31, 2001 report,81 NASA's 

systems do not track the cost of individual space station subsystems or 

elements. According to agency officials, NASA manages and tracks space 

station costs by contract and does not need to know the cost of individual 

subsystems or elements to effectively manage the program. However, our 

work in this area found that NASA assigns potential and probable future 

costs in order to estimate the impact of canceling, deferring, or adding 

space station content. 

These cost estimates often assign the cost of specific space station 

subsystems. However, because NASA does not attempt to track costs by 

element or subsystem, the agency does not know the actual cost of 

completed space station components and is not able to re-examine its cost 

estimates for validity once costs have been realized. Further, in the event 

of a cost overrun, it would be very difficult to identify which component 

prompted the overrun, thus hampering management's ability to make 

informed decisions. While cost finding techniques when clearly assigned to 

81NASA: International Space Station and Shuttle Support Cost Limits (GAO-01-1000R, 

August 31, 2001).
Page 60 GAO-02-29 FFMIA FY 2000 Results

outputs are permitted under the Managerial Cost Accounting Concepts 

and Standards, NASA appears to not have clearly defined the outputs—in 

this case the space station components—to permit recognition and 

measurement of costs appropriate for intended purposes, such as holding 

managers accountable for differences between budgeted and actual costs. 

Therefore, it remains unclear how NASA can conclude it is in compliance 

with cost accounting standards. 

NASA officials also stated that the fact that NASA does not have an 

integrated financial management system does not preclude substantial 

compliance with FFMIA. Specifically, they state that NASA's systems taken 

as a whole, meet the objectives of FFMIA and the supplemental, 

compensating procedures and practices employed by NASA substantially 

and materially achieve federal requirements. Nonetheless, NASA reports 

its financial management systems as a nonconforming significant area of 

management concern because the systems are not fully automated and not 

fully integrated. NASA’s labor-intensive, reconciliation/compilation 

processes are due to the fact that it has nonstandard systems that are not 

integrated and were not designed to include the SGL accounts. In our view, 

systems that are prone to errors and do not adhere to OMB's requirements 

for an integrated financial management system as outlined in OMB Circular 

A-127, preclude compliance with the goals and requirements of FFMIA. To 

illustrate the challenges faced by NASA in trying to provide relatively 

straightforward information, as we recently reported, for over 5 months 

NASA has been unable to provide us with detailed transaction-based 

support for amounts obligated against the space station and shuttle 

because it maintains a separate accounting system at each of its nine field 

centers and headquarters and cannot readily pull the information together. 

NASA also took exception with the way the draft characterizes the centers' 

financial/accounting policies, procedures, and practices as unique. NASA 

stated that its Financial Management Manual prescribes standard financial 

policies, procedures and practices and ensures the centers comply with 

those through various quality assessment processes. NASA also added that 

the field centers have lower level policies, practices, and procedures 

unique to each center based on a center's mission and organization 

structure. We agree that NASA's Financial Management Manual prescribes 

standard financial policies, procedures, and practices, but our intent in the 

report is to convey that each center has a unique operating environment. 

This has permitted nonstandardized data formats, and nonintegrated 

systems, thus prohibiting the access to readily available reliable, useful, 

and timely financial information.
Page 61 GAO-02-29 FFMIA FY 2000 Results

Several agencies also provided technical comments that we incorporated 

where appropriate.

We are sending copies of this report to the Chairman, and Ranking Minority 

Member, Subcommittee on Oversight of Government Management, 

Restructuring, and the District of Columbia, Senate Committee on 

Governmental Affairs; and to the Chairman, and Ranking Minority Member, 

Subcommittee on Government Efficiency, Financial Management, and 

Intergovernmental Relations, House Committee on Government Reform. 

We also sending copies to the Director of the Office of Management and 

Budget; the Secretary of the Treasury; the heads of the 24 CFO Act 

agencies; and agency CFOs and IGs. Copies will also be made available to 

others upon request.

This report was prepared under the direction of Sally E. Thompson, 

Director, Financial Management and Assurance, who may be reached at 

(202) 512-9450 or by e-mail at thompsons@gao.gov if you have any 

questions. Staff contacts and other key contributors to this report are 

listed in appendix VI.

David M. Walker 

Comptroller General

Of the United States 
Page 62 GAO-02-29 FFMIA FY 2000 Results

Appendix I

Publications in the Federal Financial Apendxies

Management Systems Requirements Series ApendxiI

FFMSR document Issue date

FFMSR-0 Framework for Federal Financial Management Systems January 1995

FFMSR-7 Inventory System Requirements June 1995

FFMSR-8 Managerial Cost Accounting System Requirements February 1998

JFMIP-SR-01-02 Core Financial System Requirements February 1999

JFMIP-SR-99-5 Human Resources & Payroll Systems Requirements April 1999

JFMIP-SR-99-8 Direct Loan System Requirements June 1999

JFMIP-SR-99-9 Travel System Requirements July 1999

JFMIP-SR-99-14 Seized Property and Forfeited Asset Systems Requirements December 1999

JFMIP-SR-00-01 Guaranteed Loan System Requirements March 2000

JFMIP-SR-00-3 Grant Financial System Requirements June 2000

JFMIP-SR-00-4 Property Management Systems Requirements October 2000
Page 63 GAO-02-29 FFMIA FY 2000 Results

Appendix II

Statements of Federal Financial Accounting 

Concepts, Statements of Federal Financial 

Accounting Standards, and Interpretations ApendxiI

a

Effective dates do not apply to Statements of Federal Financial Accounting Concepts and 

Interpretations.

Concepts

SFFAC No. 1 Objectives of Federal Financial Reporting

SFFAC No. 2 Entity and Display

SFFAC No. 3 Management’s Discussion and Analysis

Standards

Effective for fiscal 

yeara

SFFAS No. 1 Accounting for Selected Assets and Liabilities 1994

SFFAS No. 2 Accounting for Direct Loans and Loan Guarantees 1994

SFFAS No. 3 Accounting for Inventory and Related Property 1994

SFFAS No. 4 Managerial Cost Accounting Concepts and Standards 1998

SFFAS No. 5 Accounting for Liabilities of the Federal Government 1997

SFFAS No. 6 Accounting for Property, Plant, and Equipment 1998

SFFAS No. 7 Accounting for Revenue and Other Financing Sources 1998

SFFAS No. 8 Supplementary Stewardship Reporting 1998

SFFAS No. 9 Deferral of the Effective Date of Managerial Cost Accounting Standards for the Federal 

Government in SFFAS No. 4

1998

SFFAS No. 10 Accounting for Internal Use Software 2001

SFFAS No. 11 Amendments to Accounting for Property, Plant, and Equipment—Definitional Changes 1999

SFFAS No. 12 Recognition of Contingent Liabilities Arising from Litigation: An Amendment of SFFAS No. 5, 

Accounting for Liabilities of the Federal Government

1998

SFFAS No. 13 Deferral of Paragraph 65-2—Material Revenue-Related Transactions Disclosures 1999

SFFAS No. 14 Amendments to Deferred Maintenance Reporting 1999

SFFAS No. 15 Management’s Discussion and Analysis 2000

SFFAS No. 16 Amendments to Accounting for Property, Plant, and Equipment 2000

SFFAS No. 17 Accounting for Social Insurance 2000

SFFAS No. 18 Amendments to Accounting Standards for Direct Loans and Loan Guarantees in SFFAS No. 2 2001

SFFAS No. 19 Technical Amendments to Accounting Standards for Direct Loans and Loan Guarantees in 

SFFAS No. 2

2003

Interpretations

No. 1 Reporting on Indian Trust Funds

No. 2 Accounting for Treasury Judgment Fund Transactions

No. 3 Measurement Date for Pension and Retirement Health Care Liabilities

No. 4 Accounting for Pension Payments in Excess of Pension Expense

No. 5 Recognition by Recipient Entities of Receivable Nonexchange Revenue
Page 64 GAO-02-29 FFMIA FY 2000 Results

Appendix III

AAPC Technical Releases ApendxiI

Technical release AAPC release date

TR-1 Audit Legal Letter Guidance March 1, 1998

TR-2 Environmental Liabilities Guidance March 15, 1998

TR-3 Preparing and Auditing Direct Loan and Loan Guarantee Subsidies Under the Federal 

Credit Reform Act

July 31, 1999

TR-4 Reporting on Non-Valued Seized and Forfeited Property July 31, 1999

TR-5 Implementation Guidance on SFFAS No. 10: Accounting for Internal Use Software May 14, 2001
Page 65 GAO-02-29 FFMIA FY 2000 Results

Appendix IV

Checklists for Reviewing Systems Under the 

Federal Financial Management Improvement 

Act ApendxiIV

Checklist Issue date

GAO/AIMD-98-21.2.1 Framework for Federal Financial Management System Checklist May 1998

GAO/AIMD-00-21.2.2 Core Financial System Requirements Checklist February 2000

GAO/AIMD-00-21.2.3 Human Resources and Payroll Systems Requirements Checklist March 2000

GAO/AIMD-98-21.2.4 Inventory System Checklist May 1998

GAO/01-99G Seized Property and Forfeited Assets Systems Requirements Checklist October 2000

GAO/AIMD-21-2.6 Direct Loan System Requirements Checklist April 2000

GAO/AIMD-21.2.8 Travel System Requirements Checklist May 2000

GAO/AIMD-99-21.2.9 System Requirements for Managerial Cost Accounting Checklist January 1999

GAO-01-371G Guaranteed Loan System Requirements Checklist March 2001

GAO-01-911G Grant Financial System Requirements Checklist September 2001
Page 66 GAO-02-29 FFMIA FY 2000 Results

Appendix V

Comments From the Office of Management 

and Budget ApendxiV
Appendix V

Comments From the Office of Management 

and Budget

Page 67 GAO-02-29 FFMIA FY 2000 Results
Page 68 GAO-02-29 FFMIA FY 2000 Results

Appendix VI

GAO Contacts and Staff Acknowledgements ApendxiVI

GAO Contacts Sally E. Thompson, (202) 512-9450

Kay L. Daly, (202) 512-9312

Acknowledgements In addition to those named above, Lee Carroll, Cary Chappell, Richard 

Harada, Rosa R. Harris, Lisa Knight, Steve Lowrey, Meg Mills, Karlin 

Richardson, and Sandra S. Silzer made key contributions to this report.

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