GAO

United States General Accounting Office

Report to Congressional Requesters

November 2000 CENTERS FOR 

DISEASE CONTROL 

AND PREVENTION

Independent 

Accountants Identify 

Financial Management 

Weaknesses

GAO-01-40

Page 1 GAO-01-40 CDC Financial Management

United States General Accounting Office

Washington, D.C. 20548

Letr

November 15, 2000

The Honorable Arlen Specter

Chairman

The Honorable Tom Harkin

Ranking Minority Member

Subcommittee on Labor, Health

and Human Services and

Education

Committee on Appropriations

United States Senate

The Honorable Pete Domenici

United States Senate

The Honorable Jeff Bingaman

United States Senate 

On October 12, 2000, PricewaterhouseCoopers (PwC), an independent 

accounting firm, issued its report on the Centers for Disease Control and 

Prevention’s (CDC) financial management1

 operations. You asked us to 

monitor and report on that effort. This report documents our concurrence 

with the report’s findings, conclusions, and recommendations and provides 

our analysis regarding financial management deficiencies at CDC. 

In 1999, the Department of Health and Human Services’ Office of Inspector 

General reported that a component of the department, CDC, had redirected 

funds intended for the Chronic Fatigue Syndrome to other programs during 

fiscal years 1995 through 1998. Additional reports alleged that hantavirus 

funds had also been redirected. CDC has begun to scrutinize its financial 

management operations and has committed to Congress to take a series of 

corrective actions. These actions include (1) contracting with an outside 

1

In its report, PwC uses the term “fiscal management” to encompass budgeting, accounting, 

financing, and reporting functions, whereas, it uses the term “financial management” to 

refer solely to accounting and financing activities. GAO, CDC, and other federal agencies 

typically use the term “financial management” to encompass the same elements for which 

PwC uses “fiscal management”—budgeting, accounting, finance, and reporting. Therefore, 

throughout this report, we use the term “financial management” when PwC used the term 

“fiscal management” in its report.
Page 2 GAO-01-40 CDC Financial Management

firm to help CDC improve its system to allocate overhead costs, 

(2) working with a wide range of organizations, including congressional 

committees, to improve CDC’s budget presentation to the Congress,

(3) shortening the time for making tentative budget ceilings available to 

CDC managers, (4) increasing the number of accountants in its financial 

management organization, and (5) an external review of the agency’s 

financial management practices. To complete the external review of its 

financial management practices, CDC contracted with PwC. Specifically, 

CDC asked PwC to examine its financial management processes, systems, 

and human capital management. This work included a review of CDC’s 

budget allocation and budget execution processes, the skill levels and 

experience of staff involved in financial management activities, and related 

manuals. CDC also asked PwC to benchmark CDC’s financial management 

practices against those of other federal agencies’ and private sector 

organizations’ best practices. 

Results in Brief Overall, PwC found that CDC’s financial management capabilities have not 

kept pace with its expanding mission and funding growth. PwC found 

significant weaknesses in CDC’s financial management procedures, 

operations, systems, and staff. Collectively, these problems illustrate that 

CDC’s financial management practices are not working well. According to 

PwC, financial management has been a distant second priority in relation 

to CDC’s other functions. PwC makes numerous recommendations to 

correct these deficiencies and to build a sound financial management 

structure at CDC. 

We concur with both PwC’s conclusions and recommendations. 

Implementing PwC’s recommendations will require a long-term 

commitment and years of sustained effort throughout CDC. The problems 

PwC discusses in its report are not limited to CDC’s Financial Management 

Office (FMO). Correction of these deficiencies will require CDC to create 

plans for implementing and to subsequently follow through on a 

comprehensive financial management improvement strategy. An 

implementation strategy is particularly important because of the 

complexity of CDC’s operations and the extent of its recurring financial 

management weaknesses and problems. PwC has provided CDC a 

framework for creating its improvement plan, to which CDC can add 

additional details and milestones. 

The key to CDC’s success is (1) increasing the visibility of financial 

management by making it an agencywide priority and (2) increasing the 
Page 3 GAO-01-40 CDC Financial Management

accounting expertise of CDC’s financial management leadership and staff. 

Such actions will improve chances that CDC will stay the course in 

implementing PwC’s recommendations so that financial management will 

become a valued partner in enhancing CDC’s public health missions. We 

are recommending that CDC (1) implement a comprehensive financial 

management improvement plan and (2) implement changes to elevate 

financial management’s visibility and improve accounting expertise.

In commenting on a draft of this report, the Director of CDC stated that 

overall, CDC agreed with PwC’s findings and recommendations and our 

concurrence with those findings and recommendations. 

CDC’s Mission and 

Organization

CDC is the lead agency for promoting health and quality of life by working 

to develop technology and innovations for preventing and controlling 

infectious and chronic diseases, injuries, workplace hazards, and 

disabilities. Its mission puts CDC at the forefront of our nation’s efforts to 

improve the health and well being of the American public and covers a 

wide array of diseases, viruses, organisms, injuries, behaviors, and other 

public health risks. 

To accomplish its mission, CDC is organized into centers, institutes, and 

offices (referred to in this report as “centers”) with widely diverse 

mandates and scopes of work as CDC’s organization chart in figure 1 

illustrates.
Page 4 GAO-01-40 CDC Financial Management

Figure 1: CDC Organization Chart

Historically, the centers and their divisions have operated independently 

and have been given latitude in managing both their program and financial 

operations. The centers fund numerous public health projects undertaken 

by both domestic and international public health and community 

organizations. 

CDC’s mission and funding have expanded rapidly in the last decade. 

Commensurate with this growth and its mission and worldwide activities, 

CDC’s budget has grown from $1.1 billion in fiscal year 1990 to over

$3.7 billion in fiscal year 2000. CDC’s annual budget has grown to 19 

activities and over 130 subactivities. Responsibility for using budget 

authority for some of them has been shared by more than one center or 

division, which complicates the tracking of CDC’s budget allocations and 

the subsequent use of appropriated funds as well as establishing 

accountability. 

Source: CDC.

Centers

Chronic Disease Prevention

and Health Promotion

Environmental Health

Health Statistics

HIV, STD, and TB Prevention

Infectious Disease

Injury Prevention and Control

Institute

Occupational Safety and Health

Progam Offices

Epidemiology

National Immunization

Public Health Practice

Centers, Institutes, Offices

(centers)

Office of the Director

Director

Deputy Director for Program Management (CFO)

Associate Director for Management and Operations

Associate Director for Program Services

Director, Financial Management Office

Deputy Director for Policy and Legislation

Associate Directors

Deputy Director for Science and Public Health

Associate Directors
Page 5 GAO-01-40 CDC Financial Management

Scope and 

Methodology 

To effectively monitor and evaluate PwC’s work, we reviewed its 

methodology for conducting its work, its data collection techniques, 

resulting analysis, and the draft and final reports. PwC used six primary 

methods to complete its review, including interviews, facilitated group 

sessions, a risk culture survey, review of selected CDC documentation, 

benchmarking, and walk-throughs of system processes. 

To obtain assurance about PwC’s methodology, we reviewed and 

commented on its questionnaire used to interview employees; its questions 

and implementation methodology for a survey designed to assess the level 

of risk related to financial management practices at CDC—that is, a risk 

culture survey; and its objectives, agenda, and techniques used for the 

facilitated group sessions. The facilitated group sessions were a series of 

discussions among CDC staff that were led by a PwC representative who 

recorded participants’ responses to questions and shared the results with 

the group for further discussion. We also reviewed PwC’s approach for 

performing the benchmarking effort.

To gain assurance about PwC’s data collection efforts, we attended 

approximately 20 percent of its interviews with CDC personnel and 

reviewed PwC’s interview notes. We also attended interviews with 

congressional staff and Department of Health and Human Services 

officials. We reviewed the risk culture survey, facilitated group session, and 

benchmarking results, as well as documentation of CDC’s financial 

management processes and systems. We also attended PwC’s status 

meetings with CDC. 

To obtain comfort with PwC’s analysis, we compared our preliminary 

conclusions with its findings and recommendations. We also compared the 

findings, conclusions, and recommendations in PwC’s draft and final 

report. 

We performed our work from May through September 2000, at CDC 

headquarters in Atlanta, Georgia; at its remote location in Fort Collins, 

Colorado; at PwC’s Atlanta office; and at congressional offices in 

Washington, D. C. We conducted our work in accordance with generally 

accepted government auditing standards. We requested comments from the 

Director of CDC or his designee on a draft of this report. The Director 

provided us with written comments, which are discussed in the “Agency 

Comments and Our Evaluation” section, and reprinted in appendix I.
Page 6 GAO-01-40 CDC Financial Management

PwC’s Findings, 

Conclusions, and 

Recommendations

Overall, PwC found that CDC’s financial management processes, 

procedures, systems, and capabilities have not kept pace with its 

expanding mission and funding growth. PwC found significant weaknesses 

in CDC’s procedures, operations, systems, and staff skills sets. PwC also 

found that CDC’s problems have accumulated over several years, stating 

that financial management appears to be suffering from neglect and is a 

distant second priority to CDC’s other functions. PwC also reports that 

CDC has begun to correct some of its weaknesses. To describe the 

conditions at CDC, PwC grouped its findings into seven categories. 

Financial Management Culture: PwC’s report states that “science rules 

in CDC’s culture.” While the business of CDC is indeed science, this maxim 

has led to a culture that has not recognized the value of financial 

management. Specifically, PwC notes that CDC could benefit from 

recognizing the contribution that sound financial management operations 

can make in supporting CDC’s scientific mission. As evidence of CDC’s 

current culture, PwC reports that few center directors or associate 

directors for management and operations have financial management 

backgrounds or substantive financial management experience. Generally, 

the center associate directors are responsible for financial management 

activity at the center level. PwC also reports that center-level funding 

decisions have traditionally favored scientific over administrative positions 

to the detriment of CDC’s overall financial management capabilities. PwC 

notes that although many commercial enterprises have come to view weak 

financial management and inaccurate financial reporting as one of their 

biggest risks, CDC’s culture has not traditionally placed a high value on 

financial management.

PwC reports that CDC should elevate the value of financial management by 

making it an agencywide priority. To that end, PwC recommends that the 

CDC director continue his recent efforts to set a clear tone at the top by 

announcing that CDC will develop an agencywide financial management 

excellence initiative. According to PwC, this initiative should be designed 

to move from interim corrective action measures to a comprehensive, longterm improvement plan for all aspects of financial management: process, 

systems, and people. Because financial management operations are not 

confined to FMO, but are conducted in every center, PwC recommends that 

this initiative include incorporating a core set of financial management 

principles and responsibilities into the mission statement for FMO and 

financial management activities into the mission statement for other parts 

of the agency. PwC also recommends creating an agencywide financial 
Page 7 GAO-01-40 CDC Financial Management

management improvement plan with the participation of managers from 

across CDC. PwC notes that implementing many of its recommendations 

will require a significant commitment of resources, which requires 

cooperation between CDC management and its constituents. 

Financial Management Leadership: At the time PwC began its review, 

CDC had begun interim corrective actions for some of its problems, and 

PwC found that CDC’s senior leadership had begun to develop a sense of 

accountability and urgency in improving financial management practices. 

However, PwC also found that senior CDC officials in financial 

management leadership positions do not have extensive accounting 

expertise, nor do they have professional or technical accounting 

credentials. Also, PwC reports that FMO staff members are generally not 

viewed by the centers as having expertise in financial management or as 

having an internal customer focus. PwC concluded that CDC would have 

difficulty moving toward excellence in accounting practices without an 

experienced accounting professional in a leadership position who is vested 

with the requisite authority and resources to implement the 

recommendations in PwC’s report. 

To strengthen financial management leadership, PwC recommends that 

CDC make organizational changes to achieve an optimal financial 

management organizational structure. This restructuring should enhance 

the agency’s leadership and expertise in accounting. PwC emphasized that 

any organizational realignment must include the appointment of a 

champion for the Financial Management Excellence initiative—a person 

with accounting experience and credentials. 

PwC reports that CDC’s decisions about reorganizing and strengthening its 

financial management leadership will profoundly effect the success or 

failure of actions taken to implement PwC’s other recommendations. PwC 

notes that CDC’s decisions, therefore, must achieve three goals. First, CDC 

must be able to sustain improvement in its financial management 

leadership over the long run—beyond the time frame of the PwCrecommended improvement initiative. Second, CDC must enhance its 

accounting and financial management credibility with both its internal and 

external stakeholders. To assist in this process, PwC recommends that 

CDC establish an internal customer satisfaction measurement process. 

Third, CDC must select a champion for the improvement initiative who is 

an experienced accounting professional and vest that person with the 

authority and accountability necessary to succeed. 
Page 8 GAO-01-40 CDC Financial Management

Staff Competency Levels: PwC reports that financial management staff 

and competency levels should be strengthened. PwC found four conditions 

that have led to weaknesses in staff competencies. First, the current 

appraisal system is not providing the financial management-related 

feedback necessary to manage performance effectively. Second, the 

current financial management position structure is inconsistent across the 

agency. Current pay grades do not accurately reflect job complexity and 

workload volume, which is inhibiting CDC’s ability to attract and retain 

financial management staff. Third, current training and knowledge sharing 

is only marginally effective. Training content focuses on theory rather than 

practical application, and many of the available training courses are not 

taken. Fourth, CDC has no structured career path in financial management 

positions. Where career tracks are defined, they are not often followed 

because of constraints, such as CDC’s administrative-averse culture, grade 

limitations, and lack of incentive. PwC reports that, collectively, these 

conditions have led to deficiencies in financial management competency 

and an insufficient number of qualified staff and are adversely affecting 

operational effectiveness.

To build financial excellence into the agency at large, PwC recommends 

that CDC establish an integrated financial management workforce 

development program, including financial management certification. PwC 

provides CDC specific recommendations to address each of the conditions 

PwC describes. Its recommendations include designation of a financial 

management workforce resource and professional development manager. 

This person could work with CDC’s human resources group to develop 

training and to redesign CDC’s position descriptions, grade structure, and 

performance appraisals to more accurately reflect CDC’s current needs. 

Processes and Practices: PwC concluded that CDC’s current financial 

management processes could benefit from greater rigor and consistency. 

PwC reported that (1) procedural guidance and direction from FMO to the 

centers is not adequate, (2) fragmented and incompatible financial 

management systems are more damaging because of internal control 

weaknesses, and (3) the ad hoc manner in which CDC’s common account 

structure has evolved has resulted in a chart of accounts that is 

inconsistent in both content and use. PwC noted that CDC’s philosophy of 

providing maximum flexibility to the centers on financial management 

policy issues has led to a lack of practical “how to” instructions in some 

centers. For example, some centers have well-developed processes for 

budget projections and accounting reconciliations while others do not. 

Inadequate procedural guidance and insufficient understanding has turned 
Page 9 GAO-01-40 CDC Financial Management

what was intended to be flexibility into continued misunderstandings and 

requests for more guidance.

PwC noted that the centers need more guidance on financial management 

procedures and recommends that CDC create a plan to develop and 

communicate practical guidance in financial management processes and 

systems. PwC notes that this plan should specify modules to develop and 

disseminate in the immediate, short, and long term. PwC also recommends 

that CDC analyze and evaluate the entire common account structure in 

light of current and future information needs.

Information and Communication Gaps: PwC reported that numerous 

gaps in communicating financial management information exist throughout 

the organization and between FMO and the centers. PwC concluded that 

improvements in information flow and communication could significantly 

improve management effectiveness. CDC staff reported that the most 

significant financial management issue causing them frustration related to 

the untimely notification of final budget ceilings to the centers, divisions, 

and branches. CDC staff reported that they sometimes do not receive final 

budget ceilings until April or later, thus limiting their ability to effectively 

manage and obligate funds. PwC found that FMO needed to provide timely 

and periodic updates about financial management activity on procedures 

such as changes in the common account structure. PwC also found that in 

some instances center-level management rather than FMO was causing 

bottlenecks in communication to the divisions and branches about such 

things as congressional intent and changes in budget ceilings. 

PwC recommends that CDC establish fixed time frames for final budget 

ceiling notifications to all levels of CDC following receipt of its 

appropriation. PwC also recommends establishing a knowledge 

management and redesign plan for financial management processes. 

According to PwC, this plan should include (1) commitments to 

communicate important financial management information promptly and 

(2) a strategy for developing and publicizing a network of expert resources 

for key financial management areas that staff performing financial 

management tasks can go to for advice and practical “how to” instruction.

Financial Management Information Systems: PwC reports that 

systems supporting financial management must be understood better, used 

more fully, and applied more consistently. Currently, system capabilities are 

fragmented with no one system capable of satisfying all users’ needs. The 

overriding sentiment among CDC staff was one of “Which system should I 
Page 10 GAO-01-40 CDC Financial Management

use for what tasks?” followed by “Show me how to use it.” Because systems 

are fragmented, inconsistencies in output occur that lead to a lack of data 

integrity. PwC found that system problems exist because there is no central 

financial management systems owner, nor is there a network of 

applications subject matter experts to offer users practical advice and 

guidance.

PwC supports CDC’s efforts to move toward replacing its multiple systems 

with one integrated accounting system that meets its unique needs. PwC 

recommends that as CDC moves to an integrated system, it ensure that the 

system is user friendly and highly functional and that CDC establish a 

feedback process for users to report system capability shortfalls. In the 

meantime, PwC recommends development of an interim improvement plan 

to foster greater consistency, efficiency, and internal control in existing 

systems’ applications. This effort would include designating a systems 

owner to maintain and control all systems’ documentation, standard 

operating procedures, upgrades, user training documentation, and to be a 

repository of all user issues. The systems manager would also work with 

FMO to design and implement a financial management system expert user 

network that staff could go to for assistance. 

Budget Structure and Operating Environment: PwC reports that 

CDC’s budget structure and operating environment are very complex. PwC 

notes that the normal complexity of CDC’s programs has been 

compounded over the years by many factors, some of which were selfcreated. For example, the number of budget activity and subactivity line 

items has expanded over the years, in part, to represent program activities 

in a greater level of detail to appeal to CDC’s constituents and partners. 

CDC has over 130 subactivities displayed in its annual budget justification. 

PwC found that the accompanying accounting system has had nearly 

14,000 common account numbers, further complicating financial 

management. PwC further states that as the agency struggles to manage the 

structure that has evolved, inadvertent mistakes and omissions might 

occur that could be misinterpreted by constituents as willful neglect. PwC 

also states that this expansion has inadvertently reduced the amount of 

flexibility in funding program activities necessary to respond to changes in 

public health needs. 

PwC recommends that CDC continue its efforts to simplify and streamline 

its budget structure and presentation. PwC also recommends that CDC 

expand its limited review of a few common account numbers into a review 

of the entire structure. 
Page 11 GAO-01-40 CDC Financial Management

GAO Analysis We concur with PwC’s findings, conclusions, and recommendations. 

Collectively, the problems PwC identified describe a financial management 

operation that does not work well. They also depict an agency that has not 

developed the characteristics of organizations with world-class financial 

management operations that we discuss in our Executive Guide.2

 Those 

organizations (1) made financial management an entitywide priority 

through clear, strong executive leadership, (2) redirected financial 

management’s role toward meeting the organization’s mission and goals, 

(3) developed a customer-focused financial operation, incorporating both 

people and systems, that provided useful information to management, and 

(4) built a financial management team that had the right mix of skills and 

competencies to deliver results. 

Achieving world class status in financial management at CDC will require a 

sustained long-term effort. The key is leadership. CDC’s director and CFO 

must continue their efforts to (1) change CDC’s culture to one that values 

the contributions financial management can make to achieving CDC’s 

public health missions and (2) improve financial operations and their 

associated services. These objectives are interrelated. To achieve them, 

CDC must (1) place well-qualified individuals with experience and 

expertise in financial management, especially accounting, in senior 

financial management positions to effectively lead and implement change 

throughout the agency and (2) build a financial management team that has 

the right mix of skills to deliver results. 

To accomplish the first objective of changing CDC’s culture, PwC 

recommended that CDC elevate the status of financial management to a 

key priority for the agency. Specifically, PwC recommended that the CDC 

director (1) begin a financial management excellence initiative to improve 

CDC’s overall financial management capabilities and services and (2) make 

organizational changes to achieve an optimal financial management 

organizational structure that enhances financial management’s status 

within CDC and improves financial management leadership’s technical 

ability and credibility throughout CDC. These recommendations are critical 

for ensuring CDC’s success in permanently improving its financial 

management operations and changing its culture to value financial 

management. Cultural change is a difficult, long-term process. A crucial 

2

Executive Guide: Creating Value Through World-Class Financial Management

(GAO/AIMD-00-134, April 2000). 
Page 12 GAO-01-40 CDC Financial Management

element in achieving long-term success is having executive leadership that 

sets and maintains the appropriate tone at the top. This process has begun 

at CDC, but needs to be enhanced and carried through. The CDC Director’s 

personal leadership along with that of the Chief Financial Officer (CFO) in 

setting the tone should be visible and unambiguous. A financial 

management excellence initiative, as PwC recommends, with specific 

objectives and goals can become a cornerstone in setting the right tone. 

Realigning and restructuring CDC’s financial management leadership 

should become another cornerstone. This restructuring should emphasize 

the importance of financial management by increasing its visibility and by 

improving the accounting expertise and experience of senior FMO officials 

and by enhancing financial management’s status within CDC. As PwC 

reports, CDC’s decisions about organizational realignment to strengthen its 

financial management leadership will have a profound effect on the 

success or failure of actions taken to implement PwC’s other 

recommendations. PwC also reports that any realignment must (1) position 

CDC to be able to sustain improvement in its financial management 

leadership over the long run, (2) enhance CDC’s accounting and financial 

management credibility with both its internal and external stakeholders, 

and (3) include a financial management improvement champion who is an 

experienced accounting professional and who is vested with the authority 

and accountability necessary to succeed. 

Integral to achieving these goals is increasing CDC’s focus on financial 

management. CDC’s CFO, who reports directly to the CDC Director as the 

Deputy Director for Program Management, has significant responsibilities 

other than financial management. Therefore, until recently, the leadership 

for financial management has been provided primarily by the FMO director, 

who functions like a Deputy CFO. However, the FMO director also has 

significant responsibilities beyond his financial management role. He also 

has responsibility for legislative affairs. With these competing priorities, the 

FMO Director has focused much of his attention on legislative affairs. As a 

result, insufficient attention was provided to budgeting and accounting 

activities. This appears to have contributed, in part, to the financial 

management weaknesses PwC identified. 

In commenting previously on implementation of the CFO Act of 1990 

(Public Law 101-576), especially in the early years of the act, we expressed 

concern that some agencies had simply added the CFO responsibilities to 

existing positions that encompass other broad and significant management 

and administration responsibilities. We noted that this arrangement was 
Page 13 GAO-01-40 CDC Financial Management

basically the way financial management responsibilities were structured 

before passage of the CFO Act, and that approach did not work. We further 

noted that its continued use, in cases in which the CFO had a large number 

of responsibilities beyond financial management, could dilute the CFO’s 

role, rather than fostering needed urgency and undivided attention on 

financial management issues. Over the years, we have seen dramatic 

changes to address this issue across government. 

In addition to realigning and restructuring CDC’s financial management 

leadership, increasing the leadership’s expertise in accounting is also 

integral to achieving the goals set out above. The lack of accounting 

expertise among CDC’s senior managers may have also led to insufficient 

attention to critical financial management issues and activities. Neither the 

CFO nor the FMO Director has formal training or extensive expertise in 

accounting. Without such expertise, senior managers may not have the 

perspective necessary to provide the type of leadership needed to achieve a 

world-class financial management operation. As PwC observes, CDC will 

have difficulty moving toward excellence in financial accounting practices 

without a thoroughly experienced accounting professional in a leadership 

position who is vested with the requisite authority and resources to 

implement the recommendations in PwC’s report. As PwC notes, any 

restructuring of CDC’s financial management should enhance the agency’s 

leadership and expertise in accounting. PwC also emphasized that any 

organizational realignment must include the appointment of a champion 

for the financial management excellence initiative who has financial 

management experience and credentials. It is essential that this capacity be 

acquired at the CFO and Deputy CFO levels.

Filling senior financial management positions with experienced accounting 

professionals would align CDC’s financial management with the concepts 

envisioned in the CFO Act and associated Office of Management and 

Budget (OMB) guidelines.3

 Specifically, the CFO Act calls for the CFO to 

have, among other things, significant general managerial or other practical 

involvement relating to financial management. In addition, OMB’s 

guidelines call for the CFO to have direct knowledge of and experience 

with budget execution concepts, financial accounting and reporting 

concepts and issues, and internal management control processes. The CFO 

3

Memorandum for the Heads of Executive Branch Department and Agencies Subject to the 

Chief Financial Officers Act of 1990 from the Director, Office of Management and Budget, 

Executive Office of the President, February 9, 1993.
Page 14 GAO-01-40 CDC Financial Management

Act and OMB’s guidelines call for the Deputy CFO to have demonstrated 

ability and experience in accounting, budget execution, financial and 

management analysis, and systems development. OMB’s guidelines further 

call for the Deputy CFO to have in-depth experience in financial accounting 

and reporting concepts and principles as well as demonstrated ability to 

effectively implement financial management policies in complex 

organizations. CDC’s current CFO structure does not have the extensive 

accounting experience envisioned by the act and its implementing 

guidelines.

Achieving the appropriate level of expertise at senior financial 

management levels will require CDC to recruit executives with extensive 

accounting experience, which may be time-consuming for CDC and may 

not be achieved in the short term. However, beginning the process of 

cultural change, improving financial management services, and enhancing 

financial management leadership must begin now even if it means 

appointing someone on an interim basis to carry out these responsibilities. 

If CDC management chooses such an interim measure, it must keep 

focused on the ultimate goal of formally realigning CDC’s financial 

management to increase both its visibility and its accounting and financial 

management expertise. Only permanent change can ensure long-term 

success in improving CDC’s financial operations and services as well as 

changing its culture.

Also important to implementing cultural change is establishing 

accountability and reporting structures for financial management functions 

performed in the centers and their divisions and branches. PwC 

recommends realigning the reporting structure so that personnel in the 

centers report to the CFO for the financial management functions they 

perform. PwC’s recommendation is consistent with the requirements of the 

CFO Act and the findings of our Executive Guide. The CFO Act requires 

that the CFO have cognizance of and responsibility for all financial matters, 

including all financial management activities relating to programs and 

operations. Our Executive Guide also noted that world-class organizations’ 

financial managers have line responsibility over financial management 

operations throughout the organization for all aspects of financial 

reporting. With such changes at CDC, both center management and the 

CFO can share responsibility, accountability, and authority over the staff 

performing financial management activities in the centers, thus ensuring 

that CDC’s financial management leadership can influence change 

throughout CDC. 
Page 15 GAO-01-40 CDC Financial Management

To accomplish the second objective of improving financial operations and 

their associated services, CDC’s implementation of PwC’s 

recommendations to strengthen the skill sets of CDC staff performing 

financial management functions both within the formal financial 

management structure and within the centers are particularly important. 

These recommendations comport with our Executive Guide’s finding that 

world-class organizations place a priority on building a financial 

management team that delivers results in terms of providing line managers 

with meaningful information for decision-making. PwC’s report makes 

specific recommendations for improving staff expertise.

To assist in accomplishing the second objective, CDC must also improve 

financial management systems by integrating the operation of systems and 

managers’ needs. PwC’s report describes a financial management 

information system environment that does not work for the users and does 

not easily produce useful information for managers. In our Executive 

Guide, we point out that organizations with world class financial 

management have developed systems that support the partnership between 

finance and operations. One key characteristic of these organizations is 

that their automated systems are designed and employed to not only 

accurately measure the costs of activities, but to also provide line 

managers with timely, accurate financial and nonfinancial information on 

the quality and efficiency of business processes and performance. PwC 

recommends, among other things, that as CDC moves to an integrated 

system, it ensure that the system be user friendly and highly functional and 

that CDC establish a feedback process to allow users to report system 

capability shortfalls. Implementing PwC’s recommendations will move 

CDC closer to the goal of integrating its systems with its program needs.

Conclusions The problems and financial management weaknesses PwC discusses are 

not confined to FMO—they exist to varying degrees throughout CDC. 

These weaknesses did not develop overnight. They are the result of years 

of financial management neglect. Until recently, financial management has 

been a low priority in relation to other CDC activities and has not been a 

valued partner with CDC’s program managers. Consequently, correcting its 

weaknesses, building a strong financial management operation and sound 

financial controls, and changing CDC’s culture to value financial 

management will require top-level executive leadership and a concerted 

and consistent effort for several years. CDC’s Director and CFO should be 

personally involved in setting the tone and communicating that improving 

financial management is a key CDC priority. 
Page 16 GAO-01-40 CDC Financial Management

CDC’s Director can demonstrate the importance of financial management 

by realigning CDC’s financial management structure to increase the 

accounting expertise of the senior managers within the CFO structure and 

by elevating the visibility of financial management. Filling key financial 

management positions with highly qualified and experienced people with 

proven track records can enhance CDC’s ability to stay the course in 

building its own world-class financial management operation. 

The strengthening of financial management operations that can result from 

the organizational changes that PwC recommends and the implementation 

of a comprehensive improvement plan would be in keeping with the intent 

of the CFO Act. One underlying purpose of the act is to transform financial 

management into a strong support activity that provides federal managers 

information for achieving core agency missions. It would also be in keeping 

with our financial management Executive Guide, which emphasizes that 

agencies make financial management improvement an agencywide priority 

in order to build a foundation of control and accountability and make 

financial managers partners with program managers. As CDC invests time, 

effort, and resources in improving its financial management, CDC and its 

constituents should remain focused on the ultimate objectives: to improve 

accountability for public funds and to help program managers achieve their 

public health missions. 

As CDC engages in the process of upgrading its financial management 

operations, it can use PwC’s report as a guide. PwC has provided CDC with 

both a framework and critical steps for beginning a long-term upgrading 

effort. PwC recommends immediate-, short-, and longer-term steps that 

CDC needs to undertake. It will be important that CDC incorporate PwC 

recommendations into a comprehensive financial management 

improvement plan and develop a strategy for implementing it. Such a 

comprehensive plan would (1) include short- and long-range plans with 

clearly defined objectives and goals, (2) identify specific corrective actions 

with corresponding target dates and resources necessary to implement 

those actions, and (3) identify offices and staff responsible for 

implementing the corrective actions to establish accountability. 

Accountability is an important vehicle for increasing the chances of 

successful implementation outcomes. Although PwC has provided much 

content for a plan, CDC must now fill in the details and begin to 

expeditiously implement it. 
Page 17 GAO-01-40 CDC Financial Management

Recommendations To improve financial operations and to begin changing CDC’s culture to 

value financial management, we recommend that the CDC Director take 

the following actions:

• Prepare and expeditiously implement a comprehensive financial 

management improvement plan that incorporates the over 60 

recommendations in PwC’s October 12, 2000, report on its management 

review of CDC’s financial management practices.

• Implement changes to its CFO organization to enhance the skill sets of 

its financial management staff and increase the overall visibility of 

financial management. In implementing these changes, CDC should 

ensure that its CFO executives have expertise and proven track records 

in their respective areas, especially in accounting.

Agency Comments and 

Our Evaluation

In written comments (reprinted in appendix I) on a draft of this report, the 

Director of CDC said that CDC concurred overall, with PwC’s findings and 

recommendations and our concurrence with those findings and 

recommendations. He noted that PwC’s report identifies areas where 

improvements are necessary for CDC to achieve financial management 

excellence. He also stated that PwC’s report identifies a number of 

financial management strengths at CDC. In addition, the Director said that 

our report would be helpful as CDC addresses structural factors that led, in 

part, to financial management deficiencies. CDC also provided technical 

comments, which we have incorporated as appropriate.

As agreed with your offices, unless you publicly announce its contents 

earlier, we will not distribute this report until 30 days from its date. At that 

time, we will send copies to Representative John E. Porter, Chairman, and 

Representative David R. Obey, Ranking Minority Member, Subcommittee 

on Labor, Health and Human Services and Education, House Committee on 

Appropriations. We will also send copies to the Honorable Jacob J. Lew, 

Director of the Office of Management and Budget; the Honorable Donna 

Shalala, Secretary of Health and Human Services; and Dr. Jeffrey P. Koplan, 

Director, Centers for Disease Prevention and Control. Copies will be made 

available to others upon request.

This report was prepared under the direction of Gloria L. Jarmon, Director, 

who may be reached at (202) 512-4476 or by e-mail at 

jarmong.aimd@gao.gov, if you or your staffs have any questions, or you 

may contact Debra Sebastian at (202) 512-9385 or by e-mail at 
Page 18 GAO-01-40 CDC Financial Management

sebastiand.aimd@gao.gov. Ray Bush, Sharon Loftin, Meg Mills, Ruth 

Sessions, and Dave Shoemaker were key contributors to this report.

Jeffrey C. Steinhoff

Managing Director

Financial Management and Assurance
Page 19 GAO-01-40 CDC Financial Management
Page 20 GAO-01-40 CDC Financial Management

Appendix I

Comments From the Centers for Disease 

Control and Prevention ApendxiI
Appendix I

Comments From the Centers for Disease 

Control and Prevention

(916359) Letr Page 21 GAO-01-40 CDC Financial Management
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