Financial Management: Persistent Financial Management Systems Issues Remain for Many CFO Act Agencies
Published: 2008-09-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The ability to produce the financial information needed to efficiently and effectively manage the day-today operations of the federal government and provide accountability to taxpayers continues to be a challenge for many federal agencies. To help address this challenge, the Federal Financial Management Improvement Act of 1996 (FFMIA) requires the 24 Chief Financial Officers (CFO) Act agencies to implement and maintain financial management systems that comply substantially with (1) federal financial management systems requirements, (2) federal accounting standards, and (3) the U.S. Government Standard General Ledger (SGL). FFMIA also requires GAO to report annually on the implementation of the act. This report, primarily based on GAO and inspectors general reports and agencies' performance and accountability reports, discusses (1) the reported status of agencies' systems compliance with FFMIA and overall federal financial management improvement efforts and (2) the remaining challenges to achieving the goals of FFMIA.
section_title: What GAO Found
paragraphs: For fiscal year 2007, auditors reported 13 of 24 CFO Act agencies' financial management systems were not in substantial compliance with FFMIA requirements. For these 13 agencies, auditors reported a number of problems, as shown below, that illustrate how agency financial management systems-- including processes, procedures, and controls--are not providing reliable, useful, and timely information to help manage agency programs more effectively. As discussed in prior FFMIA reports, GAO remains concerned that the criteria for assessing substantial compliance with FFMIA are not well defined or consistently implemented across agencies. In addition, the majority of participants at a Comptroller General's forum on improving federal financial management systems said there is little agreement on the definition of "substantial compliance." To address GAO's prior recommendation, OMB is in the process of revising its guidance, and GAO has reemphasized its concerns with the need for an appropriate definition of substantial compliance that focuses on financial management systems' capabilities beyond financial statement preparation. Agencies' efforts to implement new systems far too often result in systems that do not meet cost, schedule, and performance goals. Recent modernization efforts by some agencies have been hampered by not following disciplined processes. To help avoid implementation problems, OMB continues to make progress on its financial management line of business initiative, which promotes business-driven, common solutions for agencies to enhance federal financial management, but additional efforts are needed.

section_title: Letter
paragraphs: Reliable, useful, and timely financial data are needed to efficiently and  effectively manage the day-to-day operations of the federal government  and ultimately provide accountability to taxpayers and the Congress. The  value of reliable financial information for prudent and forward-thinking  decision making cannot be overstated, especially given our nation’s  current fiscal environment. As we have reported for a number of years,  the federal government faces large and growing structural deficits  primarily because of known demographic trends and rising health care  costs. These long-term challenges have profound implications for our  future economic growth, standard of living, and national security.  Significant resources will be needed to address many of these areas, and  difficult choices and trade-offs are unavoidable. It is within this scenario  that the implications of ongoing weaknesses in agencies’ ability to produce  reliable and timely financial information become clear. Accurate data on  which to base crucial program and resource decisions are critical to  meeting the challenges our nation faces in the 21st century.
To address these long-standing weaknesses, the Congress mandated  financial management systems reform within the federal government by  enacting the Federal Financial Management Improvement Act of 1996  (FFMIA). FFMIA requires the departments and agencies covered by the  Chief Financial Officers (CFO) Act of 1990 to implement and maintain  financial management systems, that comply substantially with (1) federal  financial management systems requirements, (2) applicable federal  accounting standards, and (3) the U.S. Government Standard General  Ledger (SGL) at the transaction level. FFMIA builds on the foundation laid  by the CFO Act, which has the goal of modern financial management  systems that enable the systematic measurement of performance; the  development of cost information; and the integration of program, budget,  and financial information for management reporting. FFMIA also requires  auditors to state in their audit reports whether the agencies’ financial  management systems comply with the act’s requirements. In addition, we  are required to report annually on the implementation status of the act.  (See the Related GAO Products list at the end of this report for our prior  reports and testimonies under this mandate.)
This report discusses (1) the reported status of agencies’ systems  compliance with FFMIA and overall federal financial management  improvement efforts and (2) the remaining challenges to achieving the  goals of FFMIA. This report incorporates historical information from our  prior FFMIA reports, as well as financial management systems issues from  other GAO reports, agency inspectors general (IG) reports, and agencies’  performance and accountability reports for fiscal year 2007. We analyzed  and compiled data from these reports; conducted interviews of agency  officials, IG officials, and agency auditors; and obtained selected  documentation. To assess data reliability for the purposes of this report,  we performed procedures to assure ourselves of the independence and  qualifications of the auditors for the 24 CFO Act agencies. We did not re- perform the auditors’ work as it was beyond the scope of this engagement.  We analyzed applicable results from a Comptroller General’s forum held  in December 2007 on improving the federal government’s financial  management systems. We also met with Office of Management and Budget  (OMB) officials to discuss their current efforts to improve federal financial  management and address our prior recommendations related to FFMIA.
We conducted this performance audit from December 2007 to September  2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. Details on our scope and  methodology are included in appendix I.
subsections: section_title: Background
paragraphs: FFMIA is part of a series of financial management reform legislation  enacted since the early 1980s. This series of legislation started with the  Federal Managers’ Financial Integrity Act of 1982 (FMFIA), which the  Congress passed to strengthen internal controls and accounting systems  throughout the federal government, among other purposes. Issued  pursuant to FMFIA, the Comptroller General’s Standards for Internal  Control in the Federal Government provides the standards that are  directed at helping agency managers implement effective internal control,  an integral part of improving financial management systems. Internal  control plays a major role in managing an organization and comprises the  plans, methods, and procedures used to meet missions, goals, and  objectives. In summary, internal control helps government program  managers achieve desired results through effective management of public  resources.
Effective internal control also helps in managing change to cope with  shifting environments and evolving demands and priorities. As programs  change and agencies strive to enhance operational processes and  implement new technological developments, management must  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 early success in identifying and  correcting material internal control and accounting system weaknesses,  their efforts to implement FMFIA had not produced the results intended  by the Congress and sufficiently improved general and financial  management in the federal government.
Therefore, beginning in the 1990s, the Congress passed additional  management reform legislation to achieve these management  improvements in the federal government. This legislation includes the     (1) CFO Act of 1990, (2) Government Performance and Results Act of  1993, (3) Government Management Reform Act of 1994, (4) FFMIA,      (5) Clinger-Cohen Act of 1996, (6) Accountability of Tax Dollars Act of  2002, (7) Improper Payments Information Act of 2002, (8) Federal  Information Security Management Act of 2002 (FISMA), and                    (9) Department of Homeland Security Financial Accountability Act of  2004. The combination of reforms ushered in by these laws, if  successfully implemented, provides a solid foundation to improve the  accountability of government programs and operations as well as to  routinely produce valuable cost and operating performance information.  These financial management reform laws reflect the importance of  improving financial management of the federal government. Appendixes II  through VI include details on the various requirements, guidance,  standards, and checklists that support federal financial management.
subsections: section_title: Guidance Related to FFMIA
paragraphs: OMB sets governmentwide financial management policies and  requirements, as well as guidance related to FFMIA. OMB Circular          No. A-127, Financial Management Systems, defines the policies and  standards prescribed for executive agencies to follow in developing,  operating, evaluating, and reporting on financial management systems.  OMB Circular No. A-127 references the series of publications entitled  federal financial management systems requirements, issued by the Joint  Financial Management Improvement Program (JFMIP) as the primary  source of governmentwide requirements for financial management  systems. Federal financial management systems requirements, among  other things, provide a framework for establishing integrated financial  management systems to support program and financial managers.  Appendix III lists the series of federal financial management systems  requirements published to date.
In a January 4, 2001, memorandum, Revised Implementation Guidance  for the Federal Financial Management Improvement Act, OMB provided  guidance for agencies and auditors to use in assessing substantial  compliance. The guidance describes the factors that should be considered  in determining whether an agency’s systems substantially comply with  FFMIA’s three requirements and provides guidance to agency heads to  assist in developing corrective action plans for bringing their systems into  compliance with FFMIA. There are examples included in the guidance on  the types of indicators that should be used as a basis in assessing whether  an agency’s systems are in substantial compliance with FFMIA  requirements.
In addition, we have worked in partnership with the President’s Council  on Integrity and Efficiency (PCIE) to develop and maintain the joint  GAO/PCIE Financial Audit Manual (FAM). The FAM presents a  methodology that auditors may, but are not required to, use to perform  financial statement audits of federal entities in accordance with  professional standards and includes sections that provide specific  procedures auditors should perform when assessing FFMIA compliance.
These sections include guidance and detailed audit steps for testing  agency financial management systems’ substantial compliance with the  requirements of FFMIA. The FAM guidance on FFMIA assessments  recognizes that while financial statement audits offer some assurance on  FFMIA compliance, auditors should design and implement additional  testing to satisfy FFMIA criteria. Testing for compliance with FFMIA is  efficiently accomplished, for the most part, as part of the work done in  understanding agency systems in the internal control phase of the audit,  and the FAM provides specific guidance on what additional testing should  be performed, such as tests of information system controls and  nonsampling control tests.
section_title: Continued Emphasis Needed on Federal Financial Management and FFMIA Compliance
paragraphs: The purpose of financial management systems goes beyond providing the  data necessary to comply with various financial reporting requirements to  focus on routinely producing reliable, useful, and timely financial  information that federal managers can use for day-to-day decision-making  purposes. Recognizing that decision makers can benefit from a better  understanding of the challenges and opportunities associated with federal  financial management systems, the Comptroller General convened a  forum on improving federal financial management systems in December  2007. According to several participants, producing accurate financial  statements should be viewed as a by-product of effective business  processes and financial management systems. We have consistently  provided this perspective for a number of years in our prior reports. As in  prior years, the auditors’ fiscal year 2007 FFMIA assessments for the 24  CFO Act agencies illustrate that many agencies still do not have effective  financial management systems, including processes, procedures, and  controls in place that can produce reliable, useful, and timely financial  information with which to make informed decisions on an ongoing basis.  The primary goal of FFMIA is for agencies to improve financial  management systems so that financial information from these systems can  be used to help manage agency programs more effectively and enhance  the ability to prepare auditable financial statements. Auditors reported a  change in their FFMIA assessment for five agencies’ systems that they  determined are no longer in substantial noncompliance for fiscal year  2007. The auditors noted these agencies took corrective action in the areas  of compliance with federal accounting standards and federal financial  management systems requirements. However, in light of the significant  deficiencies and problems that auditors are still reporting, we remain  concerned that criteria for substantial compliance with FFMIA  requirements are not well defined or consistently implemented across the  24 CFO Act agencies.
subsections: section_title: Comptroller General’s Forum Provides Useful Insight to FFMIA Implementation
paragraphs: Recognizing that decision makers can benefit from a better understanding  of the challenges and opportunities associated with federal financial  management systems, the Comptroller General convened a forum on  December 11, 2007. The forum brought together knowledgeable and  recognized financial management leaders from the federal government,  including the CFO, Chief Information Officer, and IG communities, and  selected other officials with extensive experience in financial management  from both the public and private sectors. One of the themes from the  forum was that federal financial management leaders should refocus their  efforts on comprehending and meeting program managers’ financial  information requirements and not simply on meeting financial reporting  compliance requirements. Despite agencies’ emphasis on meeting financial  reporting compliance requirements, about two thirds of forum participants  (21 of 33 respondents) agreed that financial management systems are not  able to provide or provide little information that is reliable, useful, and  timely to assist managers in their day-to-day decision-making, which is the  ultimate goal of FFMIA. Figure 1 shows 19 of the 24 CFO Act agencies  received an unqualified opinion on their financial statements in fiscal year  2007. However, for 8 of these 19 agencies, auditors reported that systems  did not substantially comply with one or more of the three FFMIA  requirements and that significant problems exist, as discussed later.
According to auditors, some of these 8 agencies have been able to obtain  unqualified audit opinions through extensive labor-intensive efforts, which  include using ad hoc procedures, expending significant resources, 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. These time-consuming procedures  must be combined with sustained efforts to improve agencies’ underlying  financial management systems and controls. Forum participants said that  producing accurate financial statements should be viewed as a byproduct  of effective business processes and financial management systems. We  have expressed a similar viewpoint in the past. If agencies continue year  after year to rely on costly and time-intensive manual efforts to achieve or  maintain unqualified opinions, the Congress and others may be misled as  to the true status of agencies’ financial management systems capabilities.
While work performed in auditing financial statements would naturally  offer some perspective regarding FFMIA compliance, the work necessary  to assess substantial compliance of systems with the FFMIA requirements  has a complementary but broader focus than that performed for purposes  of rendering an opinion on the financial statements. In performing  financial statement audits, auditors generally focus on the capability of the  financial management systems to process and summarize financial  information that flows into the financial statements. For purposes of  FFMIA, financial management systems include systems, processes,  procedures, and controls that produce the information management uses  day to day, not just systems that produce annual financial statements.  Thus, according to the FAM, to report on system compliance with FFMIA,  the auditor should understand the design of and test, as needed, the  financial management systems (including the financial portion of any  mixed systems) used for managing financial operations, supporting  financial planning, management reporting, budgeting activities, and  systems accumulating and reporting cost information. Several forum  participants expressed concern that because of the efforts devoted to  preparing financial reports and meeting financial reporting compliance  requirements, finance organizations have not focused sufficient attention  on understanding and meeting the financial management needs of their  own program managers. FFMIA was designed to lead to system  improvements that would result in agency managers routinely having  access to reliable, useful, and timely financial-related information to  measure performance and increase accountability throughout the year. If  significant adjustments are made at year end for financial statement  reporting purposes, then management has more than likely been operating  with inaccurate data throughout the year.
section_title: FFMIA Assessments Disclose Continued Noncompliance and System Weaknesses
paragraphs: According to auditors, the majority of federal agencies’ financial  management systems are still not in substantial compliance with FFMIA  requirements. As shown in figure 2, auditors reported that 13 of the 24  CFO Act agencies’ systems did not substantially comply with one or more  of the three FFMIA requirements for fiscal year 2007. This compares with  17 agencies whose systems were reported as not substantially compliant  with FFMIA requirements for fiscal year 2006. Based on our review of the  fiscal year 2007 audit reports for the 13 agencies reported to have systems  not in substantial compliance with one or more of FFMIA’s three  requirements, noncompliance with federal financial management systems  requirements was the most frequently auditor-cited deficiency of the three  FFMIA requirements.
Auditors for six CFO Act agencies reported a change in the FFMIA  assessment for fiscal year 2007. The auditor for one agency, EPA, changed  its FFMIA assessment from no instances of substantial noncompliance in  fiscal year 2006, to not being in substantial compliance with FFMIA  requirements for fiscal year 2007 because of problems related to security  over certain information systems. The auditors for five agencies reported  agencies’ financial management systems were no longer in substantial  noncompliance. As discussed later, auditors for these five agencies noted  that the agencies took corrective action in the areas of federal accounting  standards and federal financial management systems requirements.  However, as we have previously reported, we are still concerned that  criteria for substantial compliance are not well defined or consistently  implemented across the 24 CFO Act agencies. In light of the significant  deficiencies and problems that auditors are still reporting, it appears that  agencies and auditors may be interpreting OMB’s January 4, 2001, FFMIA  guidance to mean that if an agency has no material weaknesses, it is in  substantial compliance with the three FFMIA requirements. Further, we  caution that the number of agencies reported as noncompliant may be  even greater because all but one auditor provided negative assurance. As  we have previously reported, when auditors express negative assurance,  the auditors are not saying that they determined the systems to be  substantially compliant, but that the work performed did not identify  instances of noncompliance. Therefore, the auditors may not have  identified all instances of noncompliance with FFMIA requirements and  included all problems in their reports.
Based on our review of the fiscal year 2007 audit reports for the 13  agencies reported to have systems not in substantial compliance with one  or more of FFMIA’s three requirements, noncompliance with federal  financial management systems requirements was the deficiency auditors  most frequently cited of the three FFMIA requirements. To better  understand the underlying issues regarding agencies’ noncompliance with  federal financial management systems requirements, we divided this  requirement into four problem areas including nonintegrated systems,  inadequate reconciliation procedures, lack of accurate and timely  recording, and weak security over information systems. These four  problem areas related to federal financial management systems  requirements, plus the two areas related to noncompliance with the SGL  and lack of adherence to federal accounting standards result in six  problem areas. Figure 3 shows the number of agencies with problems  reported in each of the six areas for fiscal year 2007.
The weaknesses reported by the auditors ranged from serious, pervasive  systems problems to less serious problems that may affect only one aspect  of an agency’s accounting operation. While at some agencies, the problems  were so serious that they affected the auditor’s opinion on the agency’s  financial statements, at other agencies, the auditors cited problems that  represented significant deficiencies in the design or operation of internal  control, but were determined not to be material to the financial statements  taken as a whole.
Table 1 illustrates the potential effect these six types of problems can have  on an agency’s financial management. For example, the auditor for the  Department of the Treasury reported that IRS personnel rely on resource- intensive compensating procedures to prepare its financial statements in a  timely manner because of serious internal control and financial  management systems deficiencies. These challenges affect IRS’s ability to  fulfill its responsibilities as the nation’s tax collector because its managers  lack accurate, useful, and timely financial information and sound controls  with which to make fully informed decisions day-to-day and to ensure  ongoing accountability.
section_title: Although Improvements Reported in FFMIA Compliance, Concerns Remain with FFMIA Guidance
paragraphs: For fiscal year 2007, auditors for five agencies no longer reported a lack of  substantial compliance with FFMIA requirements. While auditors reported  that improvements at those five agencies were because of agency- implemented corrective actions, in some cases, it appears that varying  interpretations of OMB’s FFMIA guidance on the definition of “substantial  compliance” may have played a role. The implementation guidance  provides indicators of substantial compliance, such as whether an  agency’s “audit disclosed no material weaknesses in internal control that  affect the agency’s ability to prepare financial statements and related  disclosures.” However, this indicator only addresses the federal  accounting standards requirement of FFMIA, not the federal financial  management systems or the SGL requirement.
We are concerned that auditors are interpreting OMB’s FFMIA  implementation guidance to mean that if an agency has no material  weaknesses in controls over the area of financial reporting, it is compliant  with FFMIA. For example, the auditor for Justice told us that the reduction  of certain material weaknesses to significant deficiencies was a factor for  the change in its FFMIA assessment of substantial compliance. Based  primarily on the information contained in the agencies’ performance and  accountability reports, the following summarizes how auditors determined  that five agencies were no longer substantially noncompliant in fiscal year  2007.
Department of Energy—The Department of Energy’s auditor  reported one material weakness related to FFMIA noncompliance in  the area of federal accounting standards at the end of fiscal year 2006.  For 2006, the auditor reported that the department did not properly  account for obligations and undelivered orders, which affected the  accuracy, validity, and completeness of these account balances. During  fiscal year 2007, the department reported it took corrective actions  including, but not limited to, improving several reports and related  reconciliation processes. Because of these efforts, the auditor reported  that the corrective actions related to the material weakness on  obligations and undelivered orders were fully implemented and  considered the finding closed in fiscal year 2007. In fiscal year 2007,  Energy had a significant deficiency related to network vulnerabilities  and weaknesses in access and other security controls in the  department’s unclassified computer information systems. The auditor  concluded that its tests disclosed no instances in which the  department’s financial management systems did not substantially  comply with the three FFMIA requirements for fiscal year 2007.
Department of the Interior—At the end of fiscal year 2006, the  Department of the Interior’s auditor reported FFMIA-related findings in  the area of federal accounting standards, that resulted in the  department not being in substantial compliance with FFMIA  requirements. The findings included a material weakness related to  controls over Indian Trust Funds and a reportable condition on the  improper disclosure of the condition of museum collections. According  to management, Interior implemented corrective actions during fiscal  year 2007, including closing 9,400 probate cases and deploying the  Trust Asset and Accounting Management System. As a result, the  auditor reduced the Indian Trust Fund finding to a significant  deficiency and closed the museum collection finding entirely in fiscal  year 2007. While the department invested a significant amount of  resources to improve its controls over Indian Trust Funds, the auditor  noted that Interior needs to continue its efforts to resolve historical  differences and to improve procedures and internal controls for  entering and maintaining Trust Fund information. In addition, a repeat  significant deficiency was reported by the auditor on general and  application controls over financial management systems. The auditor  stated that the previously mentioned findings were not significant  enough to warrant concluding that the department was substantially  noncompliant with FFMIA requirements for fiscal year 2007.
Department of Justice—Justice’s auditor reported FFMIA-related  findings in the area of federal financial management systems  requirements that resulted in the department not being in substantial  compliance with FFMIA requirements at the end of fiscal year 2006.  One of these findings was a repeat material weakness related to the  department’s financial management systems’ general and application  controls. According to the auditor, during fiscal year 2007, three out of  the four components that had long-standing material weaknesses in  this area—United States Marshals Service, Office of Justice Programs,  and the Bureau of Alcohol, Tobacco, Firearms and Explosives—made  enough improvements to internal controls over their information  system environment to reduce the finding from a material weakness to  a significant deficiency. Some of the reported corrective actions  included increasing security awareness and training, and implementing  stronger password setting policy. In its commentary and summary of  Justice’s annual financial statement for fiscal year 2007, the Justice IG  made the following comment about Justice’s financial system  environment: “Inadequate, outdated, and in some cases non-integrated  financial management systems do not provide certain automated  financial transaction processing activities that are necessary to support  management’s need for timely and accurate financial information  throughout the year.”
In the IG’s 2007 list of top management and performance challenges  facing Justice, the IG also reported that “the Department’s efforts over  the past few years to implement the Unified Financial Management  System (UFMS) to replace the seven major accounting systems  currently used throughout the Department have been subject to fits and  starts. Three years after the Department selected a vendor for the  unified system it has made little progress in deploying the UFMS. The  Department notes that problems with funding, staff turnover, and other  competing priorities have caused the delays in implementing the  UFMS. Until that time, Department-wide accounting information will  have to continue to be produced manually, a costly process that  undermines the Department’s ability to prepare financial statements  that are timely and in accordance with generally accepted accounting  principles. Furthermore, the Federal Bureau of Investigation and  United States Marshals Service will not be able to achieve compliance  with the FFMIA requirement to record all activity at the United States  Standard General Ledger transaction level until the UFMS has been  fully implemented.” We also noted that all nine of Justice’s components  still had at least one significant deficiency or material weakness related  to general and application controls, and five out of the nine  components had findings related to a second significant deficiency on  improving internal controls to ensure that transactions are properly  recorded, processed, and summarized to permit the preparation of  financial statements in accordance with generally accepted accounting  principles. Justice’s auditor concluded that its tests disclosed no  instances in which the department’s financial management systems did  not substantially comply with the three requirements of FFMIA for  fiscal year 2007.
Department of Labor—Labor’s auditor reported FFMIA-related  reportable conditions in the area of federal financial management  systems requirements, which resulted in the department not being in  substantial compliance with FFMIA requirements at the end of fiscal  year 2006. These reportable conditions related to lack of strong  application controls over access to and protection of financial  information, lack of strong logical security controls to secure Labor’s  networks and information, and weaknesses noted in the change control  process for a benefits system. In addition, Labor’s fiscal year 2006  FISMA report identified a significant deficiency related to a mixed  system. According to management, Labor pursued an aggressive  remediation process during fiscal year 2007 by revising computer  security guidance and performing access controls testing and  evaluation for all major information systems. Labor’s auditors noted  improvements in the areas of general computer controls related to a  Labor benefits system, controls over the mixed system cited in the  fiscal year 2006 FISMA report, and updated policies and procedures.
For fiscal year 2007, auditors for Labor reported 2 prior year reportable  conditions as one significant deficiency related to the lack of adequate  controls over access to key financial and support systems. Specifically,  the auditor noted issues that were present in multiple financial systems  across the department such as inactive accounts were not disabled or  deleted in a timely manner; generic accounts existed on systems; and  access to sensitive files, directories, or software was not restricted.  According to the auditor, each access control issue mentioned  presented a reasonably possible chance to adversely affect Labor’s  ability to initiate, authorize, record, process, or report financial data.  The auditor also reported that these access control weaknesses could  lead to users with inappropriate access to financial systems; inefficient  processes, lack of completeness, accuracy, or integrity of financial  data; and/or the lack of detection of unusual activity within financial  systems.
As a result of the access control weaknesses identified, the IG reported  an access control significant deficiency in conjunction with its testing  of compliance with FISMA for fiscal year 2007. However, the IG’s fiscal  year 2007 FISMA report did not communicate significant deficiencies  for specific systems; instead, it reported significant deficiencies by  control type, grouping all impacted systems together in each  deficiency. Labor’s auditors stated, as a result, they could not  determine the severity of deficiencies for any individual financial or  mixed system. Labor’s auditor concluded that the department  complied, in all material respects, with the requirements of FFMIA as  of September 30, 2007.
Small Business Administration (SBA)—At the end of fiscal year  2006, auditors reported that SBA was not substantially compliant with  FFMIA requirements in the area of federal financial management  systems requirements. The related finding involving weak information  technology security controls was characterized as a reportable  condition. During fiscal year 2007, the auditor noted improvements in  formalizing policies and procedures over granting users emergency  access, documenting reviews of remote users, and formalizing  continuity of operations plans. Despite the identified improvements,  the auditors continued to report issues in the areas of security access  controls, software program changes, and end-user computing and  reported the condition as a significant deficiency. For fiscal year 2007,  the auditor reported no instances in which the department’s financial  management systems did not substantially comply with the three  requirements of FFMIA.
We have previously reported that auditors have expressed a need for  clarification on the definition of “substantial compliance” with FFMIA.  Further, when asked to what extent agreement exists on the definition of  substantial compliance with FFMIA, 20 of 35 participants at the December  2007 Comptroller General forum stated that agreement exists to little or no  extent while the other 15 of 35 believed agreement exists to a moderate  extent. We initially recommended that OMB clarify its guidance on the  meaning of substantial compliance in our report covering FFMIA fiscal  year 2000 results and have reiterated this recommendation thereafter with  OMB action starting this year. In prior years, OMB has responded that it  has been focusing on various initiatives, and it agreed to consider  clarifying the definition of “substantial compliance” in future policy and  guidance updates. Last year OMB stated that in its update to Circular No.  A-127, Financial Management Systems, its goal would be to simplify  FFMIA compliance requirements as well as to better balance the FFMIA  objectives of generating audited financial statements and providing  meaningful information for decision makers. Accordingly, OMB agreed to  take this recommendation under advisement and is currently revising its  guidance. As we have previously reported, without a consistent  agreement and application of a common definition of substantial  compliance, the status of agency financial management systems’  compliance remains uncertain.
Although OMB’s January 4, 2001, FFMIA implementation guidance  includes examples of compliance indicators, we found in the past that  several agency auditors used the indicators as a checklist for determining  an agency’s systems compliance. In our view, a checklist approach is  inappropriate for assessing the substantial compliance of agency systems,  including processes, procedures, and controls with FFMIA. This approach  also does not meet the expectations of the Congress in requiring the  auditor to insist on rigorous adherence to the accounting standards in  reporting whether the agency’s financial management systems  substantially comply with the three requirements of FFMIA. Congress also  expected that the audit community would discharge this compliance  function consistent with established practices of the profession and the  exercise of sound professional judgment. A comprehensive approach that  considers key systems’ functionalities, such as tests of information system  controls and nonsampling control tests, is essential for auditors to obtain  assurance that the agencies’ systems provide reliable, useful, and timely  information for decision makers on an ongoing basis throughout the year  and not just for preparing year-end financial statements.
OMB’s guidance lays out the key factors that auditors should consider  when assessing whether an agency’s systems are substantially compliant.  OMB’s guidance calls for auditors to use their professional judgment when  considering factors such as providing reliable and timely information for  managing current operations; accounting for assets so they can be  properly protected from loss, misappropriation, or destruction; and  whether a system’s performance prevents an agency from meeting specific  FFMIA requirements. Nonetheless, because auditors have focused their  consideration of FFMIA substantial compliance on issues related to the  financial statement audit, it is important that the meaning of substantial  compliance be clarified and refocused to include other aspects in addition  to financial statement audit results. While we agree that the use of  professional judgment is critical, we continue to believe that a consensus  is needed on what constitutes substantial compliance.
In regard to our previous recommendation that OMB explore further  clarification of the definition of “substantial compliance,” OMB is in the  process of revising OMB Circular No. A-127 and its FFMIA implementation  guidance. In May 2008, OMB issued a draft Circular No. A-127 for CFO  Council review and comment. In our comments on the draft Circular No.  A-127, we reemphasized our concerns with, among other things, the need  for an appropriate definition of substantial compliance that focuses on  financial management systems’ capabilities beyond financial statement  preparation. OMB is considering the comments received and had not  issued a public draft as of August 2008, but is planning to finalize the  guidance in October 2008.
section_title: Challenges Remain to Achieve Goals of FFMIA
paragraphs: Auditors’ FFMIA assessments pointed out that many of the CFO Act  agencies have significant problems with the financial management systems  in use today. For agencies to achieve FFMIA compliance, they need to  implement systems that give them reliable, useful, and timely information  and do so using disciplined processes. The modernization of federal  financial management systems has been a long-standing challenge at many  federal agencies. Past systems implementation attempts have failed to  deliver the promised capability on time and within budget. For example,  we reported in September 2004 that HHS did not effectively implement  the best practices needed to reduce the risks associated with the  implementation of a new system. Three years later, auditors report HHS  continues to experience problems converting to the system.
In part, to combat the past failures of individual agencies’ efforts, OMB  developed the FMLOB initiative, which involves standardizing business  processes and data elements governmentwide, and leveraging common  solutions through a competitive environment of shared service providers  to which agency financial management systems can be migrated. The  initiative is intended to enable seamless data integration across agencies  and avoid costly and redundant investment in “in-house” financial  management system solutions. Although OMB continues to make progress  on this initiative and priorities have been developed to focus efforts  through December 2009, some aspects of the initiative have taken longer  than OMB expected. We have previously reported concerns with this  initiative, such as the lack of a concept of operations and need for a clear  plan for migrating agencies to shared service providers. Similarly,  participants at the forum expressed uncertainties about the previous goal  for migrating the majority of agencies to a shared service provider by 2011.
subsections: section_title: System Implementation Problems Plague Agencies
paragraphs: One of our ongoing and consistent reporting themes has been that the  modernization of federal financial management systems has been a long- standing challenge at many federal agencies across the government. While  the development of a financial management system can never be risk free,  effective implementation of best practices in systems development and  implementation efforts (commonly referred to as disciplined processes)  can reduce those risks to acceptable levels. Nevertheless, agency efforts  far too often result in systems that do not meet their cost, schedule, and  performance goals. While agencies anticipate that the new systems will  provide reliable, useful, and timely data to support managerial decision  making, our work and that of others has shown that has often not been the  case. For example, modernization efforts at DOD, HHS, and DHS have  been hampered by agencies not following disciplined processes.
As we reported in July 2007, the Army’s approach for investing about  $5 billion over the next several years in its General Fund Enterprise  Business System, Global Combat Support System-Army Field/Tactical,  and Logistics Modernization Program did not include alignment with  the Army enterprise architecture or use of a portfolio-based business  system investment review process. Moreover, we reported that the  Army’s lack of a concept of operations has contributed to its failure to  take full advantage of business process reengineering opportunities  that are available when using an enterprise resource planning solution.  Further, the Army did not have reliable processes—such as an  independent verification and validation function, or analyses, such as  economic analyses—to support its management of these programs. We  concluded that until the Army adopts a business system investment  management approach that provides for reviewing groups of systems  and making enterprise decisions on how these groups will collectively  interoperate to provide a desired capability, it runs the risk of investing  significant resources in business systems that do not provide the  desired functionality and efficiency.
As we previously reported in September 2004, HHS did not follow key  disciplined processes necessary to reduce the risks associated with  implementing the Unified Financial Management System (UFMS) to  acceptable levels. We identified problems in such key areas as  requirements management, including developing a concept of  operations, data conversion, and risk management. Three years later, in  fiscal year 2007, HHS’s auditors reported that serious financial system  issues continue as a result of conversion problems. For example, over  800 entries, exceeding $170 billion, had to be manually recorded into  the UFMS system; more than $1 billion in transactions were  inappropriately posted; and a cumbersome, manual process is used to  compile its financial statements. Sustained efforts will be necessary to  overcome these continuing serious weaknesses.
In June 2007, we reported that DHS lacked a financial management  strategy that included a formal strategic financial management plan to  implement or migrate to an integrated system. In addition, DHS’s  concept of operations did not contain an adequate description of the  legacy systems and a clear articulation of the vision that should guide  the department’s improvement efforts, and key requirements developed  for the project were unclear and incomplete. Since then, DHS has  developed a strategy to consolidate the department’s financial systems  down to two platforms—SAP and Oracle. However, according to a  recent DHS IG report, DHS did not perform a complete analysis of all  potential systems and service providers as part of its process to select a  financial systems solution. As a result of a bid protest, in a March 17,  2008, ruling, the United States Court of Federal Claims held that DHS’s  sole source procurement for financial systems application software had  violated a provision in the Competition in Contracting Act requiring full  and open competition using competitive procedures and required DHS  to conduct a competitive procurement. In response to this decision,  DHS is revisiting its financial systems consolidation strategy.
As illustrated by these examples, more discipline is needed in  implementation efforts to avoid the problems that can occur when best  practices are not followed. Similarly, participants at the forum stated that  it is time to start putting into practice the lessons learned from previous  implementation efforts. As part of an effort to begin confronting these  challenges, forum participants offered a range of perspectives, insights,  and examples. Experience related to financial management, human capital  management, systems ownership, customization of commercial off-the- shelf software, and the purchase of shared services has provided useful  insights that should help financial managers avoid some of the obstacles  that impeded past projects. Consistent with our long-held views, financial  managers at the forum also identified various useful system  implementation practices, including conducting independent verification  and validation, and periodically reevaluating system implementation  projects.
section_title: Financial Management Line of Business Initiative Continues to Evolve
paragraphs: In March 2004, OMB launched the FMLOB initiative, in part, to improve  the outcome of financial management system implementations so that  agencies have systems that ensure ongoing accountability and generate  reliable, useful, and timely information for decision-making purposes  emphasized by FFMIA. Since then, OMB and FSIO have continued to make  gradual progress toward achieving FMLOB goals by issuing a common  governmentwide accounting classification structure, a financial services  assessment guide, and standard business processes for funds and payment  management, as well as developing other planning tools designed to  leverage these standards and shared solutions.
However, additional efforts are needed to address recommendations  included in our March 2006 report regarding key aspects of this initiative,  such as developing an overall concept of operations, identifying and  defining additional standard business processes, and ensuring that  agencies do not continue to develop and implement their own stove-piped  systems. We are currently working with OMB to gain a more in-depth  understanding of FMLOB-related efforts and progress toward addressing  these recommendations. The following provides an overview of the status  of OMB’s efforts and concerns identified in these areas.
Developing a concept of operations. A concept of operations would  provide a useful tool to explain how financial management systems can  operate cohesively in conjunction with other related systems and to  help minimize an agency’s individualized, stove-piped efforts.  Participants attending the forum confirmed our concerns regarding the  need for this important tool, pointing out that OMB’s various lines of  business initiatives are serving to preserve existing stovepipes. For  example, participants said it is unclear why separate lines of business  are needed for budget and financial management. Although OMB  officials told us that a draft concept of operations document is  currently under review, the extent to which these concerns will be  addressed is unclear.
Identifying and implementing standard business processes. In a  January 2008 memo summarizing FMLOB efforts and priorities, OMB  recognized the risk associated with implementing business processes  that are not standardized across government as well as the need to  develop additional guidance and other tools. Specifically, the memo  states that once business standards have been completed, incorporated  into core financial system requirements, and tested during the FSIO  software qualification and certification process, shared service  providers will only be permitted to utilize the certified products as  configured. To date, two standard business processes have been  issued, and OMB expects three additional standard business processes  to be finalized in December 2008. Recognizing the need to further  develop FMLOB guidance and tools, OMB identified priorities for the  remainder of 2008 and 2009, which include identifying and developing  additional business standards (e.g., interface data elements), expanding  migration planning guidance, finalizing and developing cost and  performance measurements related to FMLOB business standards,  incorporating these standards into core financial systems requirements  and software, and updating related testing methodology and scenarios.
Establishing a clear migration path. To ensure that agencies  migrate to a shared service provider in accordance with OMB’s stated  approach rather than attempt to develop and implement their own  stove-piped business systems, we previously recommended that OMB  establish a clear migration path or timetable for future migrations.  OMB estimates for when migrations will be completed are evolving and  no firm timeframes have been set. OMB’s general guidance is that  agencies should migrate to a shared service provider when it is cost  effective to do so and they have maximized the return on investment in  the current system. Although OMB previously established a goal of  migrating the majority of agencies toward the use of shared service  providers by 2011, more recent information indicates that agency  migrations will take longer than OMB expected. For example,  participants attending the forum appeared uncertain regarding the  ability of their respective organizations to reach this goal by 2011.  OMB’s more recent estimate indicates that many migrations are  scheduled through fiscal year 2015 and that some agency migrations  have not yet been scheduled. Agency migrations to a shared service  provider are an important aspect to achieving FMLOB goals. Even  without a clear migration path, some agencies may readily migrate to a  shared service provider to minimize the tremendous undertaking of  implementing or significantly upgrading a financial system. However,  other agencies may continue efforts to implement stand-alone systems  that place additional resources at risk because of potential financial  system implementation failures.
Further, other concerns that exist within the federal financial management  community include the availability of sufficient resources, the viability of  the initiative on a governmentwide basis, and the potential loss of control  of critical financial functions. For example, none of the forum participants  believed the resources available to implement the initiative are fully  adequate. Some participants also indicated that some financial leaders  may be reluctant to transition their agencies’ financial management  activities on a wholesale basis because of their fear of losing control of  critical functions and lack of trust in a shared service providers’ ability to  effectively meet their needs.
section_title: Conclusion
paragraphs: Shifting financial management leaders’ focus from meeting financial  reporting compliance requirements to comprehending and meeting  program managers’ financial information requirements is key to more  meaningful, value-added financial management. Given our nation’s current  fiscal environment, reliable financial information for prudent and forward- thinking decision making is imperative. If properly developed,  implemented, and managed, financial management systems can provide  essential financial data in support of day-to-day managerial decision  making—the ultimate goal of FFMIA. To accomplish this goal, CFO Act  agencies must continue to strive toward routinely producing not only  annual financial statements that can pass the scrutiny of a financial audit,  but also other meaningful financial and performance data. Over a decade  has passed since the enactment of FFMIA, and the majority of agencies  continue to lack financial management systems—including processes,  procedures, and controls—that substantially comply with the  requirements of the act, even though the majority of agencies are  achieving “clean” audit opinions. Consistent and diligent OMB  commitment and oversight toward achieving financial management system  capabilities and the common goals of the FMLOB initiative and FFMIA are  essential. In our view, the indicators included in OMB’s guidance are not a  substitute for the rigorous criteria needed for assessing substantial  compliance with FFMIA. While we are not making any new  recommendations in this report, we will continue to work with OMB to  help ensure that it provides agency management and auditors with the  guidance needed to bring about reliable and consistent assessments of,  and meaningful improvements in, financial management systems as  envisioned by FFMIA. Accordingly, we reiterate our prior  recommendation for OMB to clarify its guidance on the meaning of  “substantial compliance” with FFMIA. Significant and long-standing  obstacles remain for developing and implementing effective financial  management systems, including processes, procedures, and controls. It is  important that emphasis on correcting these deficiencies be sustained by  the current administration as well as the new administration that will be  taking office next year. Continued congressional oversight will also be  crucial in transforming federal financial management systems.
section_title: Agency Comments and Our Evaluation
paragraphs: We received written comments (reprinted in app. VII) from the Deputy  Controller, Office of Federal Financial Management, Office of Management  and Budget on a draft of this report. In its comments, OMB agreed with  our assessment that federal agencies still need to improve their financial  systems so that reliable, useful, and timely financial management  information is available for decision making. OMB stated that it was  working aggressively to assist agencies in building a strong foundation of  financial management practices through OMB’s financial management and  systems oversight and under the FMLOB initiative. According to OMB,  both efforts support the goals of FFMIA to improve governmentwide  financial management and to facilitate timely and reliable information for  day-to-day management. While OMB stated that the number of  noncompliances with FFMIA was reduced to 10, compared to 12 for the  previous year, that number differed from our report findings due to the  fact that OMB’s number was based on the assessments made by the 24  CFO Act agency heads rather than by the independent auditors as we  reported.
With regard to our prior recommendation for guidance that clarifies the  definition of substantial compliance, OMB has begun a significant re-write  of OMB Circular No. A-127, Financial Management Systems, as well as an  update to OMB’s implementation guidance for FFMIA. OMB stated the re- write of OMB Circular No. A-127 will clarify the definition of substantial  compliance so that auditors and agency heads interpret the guidance more  consistently. We will continue to work with OMB by providing comments  and recommendations on the draft so that a clear definition of substantial  compliance with FFMIA is developed and to address other concerns. OMB  also provided technical comments on a draft of this report that we  incorporated as appropriate. In addition, we also received technical  comments from several agencies cited in the report and incorporated them  as appropriate.
We are sending copies of this report to the Chairman and Ranking  Member, Subcommittee on Federal Financial Management, Government  Information, Federal Services, and International Security, Senate  Committee on Homeland Security and Governmental Affairs, and to the  Chairman and Ranking Member, Subcommittee on Government  Management, Organization, and Procurement, House Committee on  Oversight and Government Reform. We are also sending copies to the  Director, Office of Management and Budget; the heads of the 24 CFO Act  agencies in our review; and agency CFOs and Inspectors General. Copies  will be made available to others upon request. In addition, this report will  be available at no charge on the GAO web site at http://www.gao.gov.
This report was prepared under the direction of Kay L. Daly, Acting  Director, Financial Management and Assurance, who may be reached at  (202) 512-9095 or dalykl@gao.gov if you have any questions. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff that made key  contributions to this report are listed in appendix VIII.
section_title: Appendix I: Scope and Methodology
paragraphs: We reviewed the fiscal year 2007 financial statement audit reports for the  24 Chief Financial Officer (CFO) Act agencies contained in their  performance and accountability reports. We further analyzed and  compiled the auditors’ assessments of agency financial systems’  compliance and the problems that affect Federal Financial Management  Improvement Act (FFMIA) compliance. We did not re-perform the  auditors’ work as it was beyond the scope of this engagement. To  determine whether the data were sufficiently reliable, we performed the  following procedures. We gained an understanding of the independence  and quality control environments at the respective auditors that made the  agencies’ FFMIA assessment; leveraged our understanding of the  methodology used by the inspectors general (IG) and their contract  auditors in past years to reach conclusions on FFMIA compliance at the  respective agencies; considered management responses to the auditor’s  findings and conclusions; and conducted interviews to improve our  understanding of the procedures applied and/or conclusions drawn, where  appropriate. We also reviewed the data for obvious inconsistencies or  errors, completeness, and changes from the prior year. When we found  data which were inconsistent or incomplete we brought them to the  attention of the cognizant IG staff or contract auditor and worked with  them to resolve any issues before using the data as a basis for this report.  When we encountered data that varied from the prior year, we reviewed  the performance and accountability report and auditor’s report to  determine the reason for the change. We conducted interviews with the  auditors and IG staffs, and obtained selected supporting documentation.  Based on these actions, we determined that the data from these reports  were sufficiently reliable for the purposes of using the work of other  auditors in our report.
Using the auditors’ reports for 13 of the 24 CFO Act agencies that auditors  reported as noncompliant with FFMIA for fiscal year 2007, we identified  problems reported by the auditors that affected agency systems’  compliance with FFMIA. The problems identified in these reports are  consistent with long-standing financial management weaknesses we have  reported based on our work at a number of agencies. Further, we  identified other GAO and IG reports that discussed financial management  systems issues and analyzed and summarized the reports. In addition, we  analyzed the results and information obtained from the recent Comptroller  General’s forum on improving the federal government’s financial  management systems. We also met with the Office of Management and  Budget (OMB) officials to discuss their current efforts to improve federal  financial management and address our prior recommendations related to  FFMIA. In addition, we reviewed documentation provided by OMB  regarding its current initiatives.
We conducted this performance audit from December 2007 to September  2008, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
We requested comments on a draft of this report from the Director, Office  of Management and Budget, or his designee. We received written  comments from the Deputy Controller. OMB’s comments are discussed in  the Agency Comments and Our Evaluation section and reprinted in  appendix VII. We also received technical comments from OMB, which we  incorporated as appropriate. In addition, we provided relevant excerpts  from a draft of this report to agencies specifically cited in the report.  Several agencies provided technical comments which we incorporated as  appropriate.
section_title: Appendix II: Requirements and Standards Supporting Federal Financial Management
paragraphs: Congress enacted the Federal Financial Management Improvement Act  (FFMIA) in 1996 to obtain the benefits of effective financial management  of the federal government that would flow from enforced implementation  of three earlier 1990s financial management developments. First, the Chief  Financial Officers (CFO) Act of 1990 (CFO Act), as expanded by the  Government Management Reform Act of 1994, initiated significant  financial management reform at 24 major agencies by establishing a  centralized agency financial management leadership structure and  imposing financial discipline through required annual agencywide audited  financial statements. Second, the Joint Financial Management  Improvement Program (JFMIP) in 1995 issued revised Core Financial  System Requirements, which set out the functional and technical  requirements for an agency’s core financial system. Third, the Federal  Accounting Standards Advisory Board (FASAB), which was established in  1990, had made significant progress after 6 years of work in developing the  federal government’s first set of comprehensive financial accounting  standards and concepts designed to meet the needs of federal agencies  and users of federal financial information. Moreover, FFMIA requires  implementation of the U.S. Government Standard General Ledger (SGL).  The SGL is intended to improve data stewardship throughout the federal  government enabling consistent reporting at all levels within the agencies  and providing comparable data and financial analysis governmentwide.  Even with these improvements, the Senate Committee on Governmental  Affairs, which considered the legislation resulting in FFMIA, stated that  federal agencies’ financial management systems were inadequate and  could be improved by creating a means to use the audit process  established by the CFO Act to assure that federal agencies would  implement and maintain financial management systems that use the  applicable federal financial management systems requirements and federal  accounting standards.
subsections: section_title: Federal Financial Management Systems Requirements
paragraphs: The policies and standards prescribed for executive agencies to follow in  developing, operating, evaluating, and reporting on financial management  systems are defined in the OMB Circular No. A-127, Financial  Management Systems. The components of an integrated financial  management system include the core financial system, managerial cost  accounting system, administrative systems, and certain programmatic  systems. Administrative systems are those that are common to all federal  agency operations, and programmatic systems are those needed to fulfill  an agency’s mission. OMB Circular No. A-127 refers to the series of  publications entitled federal financial management systems requirements,  initially issued by the Joint Financial Management Improvement Program’s  (JFMIP) Program Management Office as the primary source of  governmentwide requirements for financial management systems.  However, as of December 2004, the Financial Systems Integration Office  (FSIO) assumed responsibility for coordinating the work related to federal  financial management systems requirements and OMB’s Office of Federal  Financial Management (OFFM) is responsible for issuing the new or  revised regulations. In December 2004, the JFMIP Principals—the  Comptroller General of the United States, the Secretary of the Treasury,  and the Directors of OMB and the Office of Personnel Management—voted  to modify the roles and responsibilities of JFMIP, resulting in the creation  of FSIO. Appendix III lists the federal financial management systems  requirements published to date. Figure 4 is the current model that  illustrates how these systems interrelate in an agency’s overall systems  architecture.
section_title: Federal Accounting Standards
paragraphs: FASAB promulgates federal accounting standards and concepts that  agency chief financial officers use in developing financial management  systems and preparing financial statements. FASAB develops the  appropriate federal accounting standards and concepts 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 and concepts to the  Comptroller General, the Director of OMB, the Secretary of the Treasury,  and the Director of the Congressional Budget Office for a 90-day review. If,  within 90 days, neither the Comptroller General nor the Director of OMB  objects to the standard or concept, then it is issued and becomes final.  FASAB announces finalized concepts and standards in The Federal  Register.
The American Institute of Certified Public Accountants designated 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 32 Statements of Federal Financial Accounting Standards  (SFFAS) and 5 Statements of Federal Financial Accounting Concepts  (SFFAC). The concepts and standards are the basis for OMB’s guidance  to agencies on the form and content of their financial statements and for  the government’s consolidated financial statements. Appendix IV lists the  concepts, standards, interpretations, and technical bulletins, along with  their respective effective dates.
FASAB’s Accounting and Auditing Policy Committee (AAPC) assists in  resolving issues related to the implementation of federal accounting  standards. AAPC’s efforts result in guidance for preparers and auditors of  federal financial statements in connection with implementation of federal  accounting standards. To date, AAPC has issued nine technical releases,  which are listed in appendix V along with their release dates.
section_title: U.S. Government Standard General Ledger (SGL)
paragraphs: The SGL was established by an interagency task force under 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 throughout the year, enhance  financial control, and support budget and external reporting, including  financial statement preparation. The SGL is intended to improve data  stewardship throughout the federal government, enabling consistent  reporting at all levels within the agencies and providing comparable data  and financial analysis governmentwide.
section_title: Appendix III: Publications in the Federal Financial Management Systems Requirements Series
subsections: section_title: OFFM-NO-0106 Core Financial System Requirements
section_title: Appendix IV: Statements of Federal Financial Accounting Concepts, Standards, Interpretations, and Technical Bulletins
subsections: section_title: SFFAC No. 1 Objectives of Federal Financial Reporting
paragraphs: SFFAS No. 21 Reporting Corrections of Errors and Changes in Accounting Principles, Amendment of SFFAS 7,  Accounting for Revenue and Other Financing Sources   SFFAS No. 22 Change in Certain Requirements for Reconciling Obligations and Net Cost of Operations,  Amendment of SFFAS 7, Accounting for Revenue and Other Financing Sources     SFFAS No. 23 Eliminating the Category National Defense Property, Plant, and Equipment   SFFAS No. 24 Selected Standards for the Consolidated Financial Report of the United States Government     SFFAS No. 25 Reclassification of Stewardship Responsibilities and Eliminating the Current Services  Assessment    SFFAS No. 26 Presentation of Significant Assumptions for the Statement of Social Insurance: Amending  SFFAS 25    SFFAS No. 27 Identifying and Reporting Earmarked Funds    SFFAS No. 28 Deferral of the Effective Date of Reclassification of the Statement of Social Insurance: Amending  SFFAS 25 and 26   SFFAS No. 29 Heritage Assets and Stewardship Land  SFFAS No. 30 Inter-Entity Cost Implementation Amending SFFAS 4, Managerial Cost Accounting Standards  and Concepts  SFFAS No. 31 Accounting for Fiduciary Activities   SFFAS No. 32 Consolidated Financial Report of the United States Government Requirements: Implementing  Statement of Federal Financial Accounting Concepts 4 “Intended Audience and Qualitative Characteristics for  the Consolidated Financial Report of the United States Government”
section_title: Appendix V: Accounting and Auditing Policy Committee Technical Releases
subsections: section_title: TR-9 Implementation Guide for Statement of Federal Financial Accounting Standards 29: Heritage Assets and Stewardship Land
section_title: Appendix VI: Checklists for Reviewing Systems under the Federal Financial Management Improvement Act
subsections: section_title: GAO-05-225G Core Financial System Requirements
section_title: Appendix VII: Comments from the Office of Management and Budget
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact named above, Michael S. LaForge, Assistant  Director; F. Abe Dymond, Assistant General Counsel; Rosalinda  Cobarrubias; Francine DelVecchio; Tiffany Epperson; Lauren S. Fassler;  Jim Kernen; Sheila D. Miller; and Patrick Tobo made key contributions to  this report.
section_title: Related GAO Products
paragraphs: Financial Management: Long-standing Financial Systems Weaknesses  Present a Formidable Challenge. GAO-07-914. Washington, D.C.: August 3,  2007.
Federal Financial Management: Critical Accountability and Fiscal  Stewardship Challenges Facing Our Nation. GAO-07-542T. Washington,  D.C.: March 1, 2007.
Financial Management: Improvements Under Way but Serious  Financial Systems Problems Persist. GAO-06-970. Washington, D.C.:  September 26, 2006.
Financial Management: Achieving FFMIA Compliance Continues to  Challenge Agencies. GAO-05-881. Washington, D.C.: September 20, 2005.
Financial Management: Improved Financial Systems Are Key to FFMIA  Compliance. GAO-05-20. Washington, D.C.: October 1, 2004.
Financial Management: Recurring Financial Systems Problems Hinder  FFMIA Compliance. GAO-04-209T. Washington, D.C.: October 29, 2003.
Financial Management: Sustained Efforts Needed to Achieve FFMIA  Accountability. GAO-03-1062. Washington, D.C.: September 30, 2003.
Financial Management: FFMIA Implementation Necessary to Achieve  Accountability. GAO-03-31. Washington, D.C.: October 1, 2002.
Financial Management: Effective Implementation of FFMIA Is Key to  Providing Reliable, Useful, and Timely Data. GAO-02-791T. Washington,  D.C.: June 6, 2002.
Financial Management: FFMIA Implementation Critical for Federal  Accountability. GAO-02-29. Washington, D.C.: October 1, 2001.
Financial Management: Federal Financial Management Improvement  Act Results for Fiscal Year 1999. GAO/AIMD-00-307. Washington, D.C.:  September 29, 2000.
Financial Management: Federal Financial Management Improvement  Act Results for Fiscal Year 1998. GAO/AIMD-00-3. Washington, D.C.:  October 1, 1999.
Financial Management: Federal Financial Management Improvement  Act Results for Fiscal Year 1997. GAO/AIMD-98-268. Washington, D.C.:  September 30, 1998.
Financial Management: Implementation of the Federal Financial  Management Improvement Act of 1996. GAO/AIMD-98-1. Washington,  D.C.: October 1, 1997.