The Chief Financial Officers (CFO) Act of 1990 requires the DoD to produce private sector-style financial statements that can win unqualified opinions from auditors. After many years of effort to comply, the department is now projecting that its balance sheets will not be ready until 2017 and is unable to predict when its income statements will be ready. Given that discouraging situation, combined with the increasingly widespread realization that external financial statements are of no practical use for internal management, the question arises whether it makes sense for the DoD to continue its pursuit of “CFO compliance.”
The Financial Systems Integration Office, the federal office that manages the Financial Management Line of Business, will stop testing and certifying federal financial systems on March 31.
In a letter posted to the Office of Management and Budget website March 16 OMB controller Danny Werfel said OMB will “develop the new path for financial systems in the Federal government.”
With a planned March 31 update to core financial systems requirements, “we believe that FISO has finished developing FMLoB business process and data standards as it related to its mission,” Werfel wrote. “In response to these challenges, we have reassessed the need for the core financial systems testing and product certification program and will be discontinuing this function,” he added.
The FMLoB has been an effort to consolidate financial systems within the government, with four federal agencies and private sector organizations acting as centralized service centers to other agencies.
For example, the Interior Department’s National Business Center hosts financial systems and business operations for external executive branch organizations, and a few legislative branch organizations.
A funny thing happened when Congress approved the American Recovery and Reinvestment Act in February 2009.
-Michael O’Connell, FederalNewsRadio.com
The White House tapped two veteran staffers to lead the government reorganization project.
Office of Management and Budget deputy director for management and chief performance officer Jeffrey Zients and Lisa Brown, currently assistant to the President and staff secretary, will take on what could be the biggest restructuring effort in half a century.
Dan Pfeiffer, the White House communications director, wrote in a administration’sthat Zients and Brown, previously served as co-chairwoman of the Agency Review Working Group for the Obama-Biden Transition Project, will initially focus on “trade and exports to see how we can better reform these functions to give American companies a leg up in the global economy.”
President Obama called for ais last week’s State of the Union. It would be the first major reorganization of government in more than 50 years.
The administration is looking to Zients and Brown to usher the reorganization through Congress and the federal employee unions. Lawmakers took away the ability of the President to reorganize government without congressional approval in the 1980s.
-Jason Miller, FederalNewsRadio.com
When it comes to the federal budget, the GAO’s High Risk List and the deficit, Jeanette Franzel isn’t pulling any punches.
“The condition of federal finances is really dire right now.”
That was the assessment of the Managing Director for Financial Management and Assurance team at the Government Accountability Office speaking with the Federal Drive at the Association of Government Accountants National Leadership Conference.
“We are faced,” said Franzel, “with having to deal with both the short term critical issues as well as rethinking programs in the long term and we don’t want to damage the short term economic recovery.”
Franzel said there is a third factor complicating matters: trying to operate under a continuing resolution that doesn’t seem to have any resolution at all. “We at GAO,” said Franzel, “have been managing at a very prudent level, hoping to, once we get our budget, be on track, but again, there’s risk there.”
Difficult financial times, said Franzel, can make it easier to see what’s needed for a good financial system to run well. For example, “the importance of good financial data and estimates and regular updates is just really heightened in this type of an environment, and financial people are doing that to the best of their ability given the systems and data available right now.”
As for the three major departments she’s been concentrating on, Franzel sounded most concerned about the U.S. Postal Service, despite the President’s FY 2012 budget request granting relief from early payments into the retirement system they’ve been asking for.
Saying the Department of Defense has “a long way to go,” Franzel explained DoD’s being, yet again, on GAO’s High Risk List. “DoD has been one of the impediments to GAO’s being able to issue an opinion on the Consolidated Financial Report of the federal government, and the reason is that DoD itself does not get audits and because DoD is material to the Consolidated Financial Report, we can’t give an opinion.”
The Department of Homeland Security is in a similar situation, said Franzel, but for a different reason. “Also unable to have a clean audit opinion,” said Franzel, DHS has “some significant issues with financial systems.” Franzel said that’s understandable “if you think about the creation of the Department of Homeland Security, it came from a lot of different federal agencies across government, so that department is still struggling with integrating its financial management and its systems.”
-Suzanne Kubota, FederalNewsRadio.com
Management Report: Improvements Are Needed in Internal Control Over Financial Reporting for the Troubled Asset Relief Program.
GAO-12-415R, February 13.
Now that a debt ceiling deal is struck, agency financial managers are struggling to figure out their budgets for next year and beyond — and planning for the worst.
With the start of fiscal 2012 less than two months away, many experts expect agencies will have to live under a continuing resolution for at least several months past October; some observers expect the renewed prospect of a government shutdown to emerge from the political standoffs in Congress already being anticipated.
Many federal financial planners are preparing for big cuts. Well before the debt ceiling legislation passed last week, for example, Defense Department officials were running scenarios for absorbing several hundred billion dollars in projected spending cuts over the next decade, said a Navy financial manager who spoke last week on condition of anonymity.
The results will be woven into an adjustment of the Pentagon fiscal 2012 budget request that will likely be ready when Congress returns early next month from its August recess, the manager said. On top of long-term reductions already in place, those contained in the debt ceiling law represent “real dollars, real money and real hurt,” he said.
At other agencies, the caps on discretionary spending contained in the legislation will likely keep them focused on belt-tightening already underway.
OMB has not yet issued any 2013 budget guidance to agencies, a spokeswoman said.
At the moment, however, lawmakers aren’t even close to wrapping up work on the fiscal 2012 budget. Of the dozen appropriations bills needed to keep the government in business, none has been signed into law. The Republican-run House of Representatives has approved only six; the Democratic-controlled Senate, just one. And one of the largest and most politically charged — legislation to fund the Health and Human Services Department — has not moved in either chamber.
Shutdown scenarios will likely accompany the ensuing budget brinkmanship, Lilly said, with the odds of a deal uncertain. For agencies, he added, the process raises “tons” of uncertainties, such as how much money they will have to obligate for grants and contracts. “It also pushes the bureaucracy to more haphazard decision-making, which ultimately is the way we waste money.”
-Sean Reilly, FederalTimes.com