The Honorable Linda M. Springer
Controller, Office of Federal Financial Management
Office of Management and Budget
Subcommittee on Government Efficiency and Financial Management
Committee on Government Reform
United States House of Representatives
Report of the United States Government for Fiscal Year 2003
Mr. Chairman and Members of the Subcommittee.
I am happy
to provide our commentary and response to the auditors report on
the Financial Report of the United States Government (the Financial
Report) for fiscal year 2003. I also will share with you the significant
progress made by Federal agencies during the past year that underlies
the Financial Report and positions us for the future.
Opinion and Material Weaknesses
Accounting Office (GAO) issued a disclaimer of opinion on the 2003 Financial
Report. In making this determination, GAO continued to identify three
main impediments to rendering an opinion: financial management problems
at the Department of Defense (DoD), deficiencies in accounting for intragovernmental
transactions, and ineffective processes for preparing the consolidated
financial statements. The Office of Management and Budget (OMB) concurs
with these observations. Efforts are underway to address these issues
as noted in the auditors report.
an opinion, qualified initially, on the government-wide financial statements
remains our goal. OMB is working closely with the Department of the Treasury
(Treasury) to create a closer link between audited agency financial statements
and the government-wide statements reflected in the Financial Report.
Beginning with fiscal year 2004, a new process will be implemented to
better align the agency statements with the government-wide report.
at DoD are being addressed. Progress is being made, but it is important
to recognize that long-standing issues in a department having over 300
sub-entities are not easily remediated. In many cases, elimination of
DoD material weaknesses is dependent upon the new financial management
systems implementation. OMB meets periodically with both the DoD Chief
Financial Officer (CFO) and its Inspector General (IG) to review plans
for each area of concern and to monitor progress.
The inability to balance significant amounts of intragovernmental transactions
is being addressed on several fronts by OMB and Treasury. Process enhancements
such as more frequent reporting and reconciliation, and new tools like the
Intragovernmental Reporting and Analysis System (IRAS), will support
our efforts to eliminate reporting errors. Also, the Intragovernmental
Transaction Portal (IGTP) is scheduled to be implemented in fiscal
2004 to help standardize the transaction processing for certain intragovernmental
report comments on timeliness issues at the agency level that impacted
its audit scope. It should be understood that this was the direct result
of variations in the degree to which agencies were able to accelerate
from the official 2003 fiscal year reporting date of January 30, 2004.
Moving forward from this transitional year, we will return to the single
Performance and Accountability Report (PAR) due date of November 15th.
control environment of any entity is an area of focus for management as
well as its auditor. The agencies of the Federal Government are no exception.
There are several existing laws that govern the agencies in assessing
and representing the quality of their internal control. Agency heads are
required to provide reasonable assurance of compliance with the Federal
Managers Financial Integrity Act (FMFIA) with respect to both management
control and financial management systems. Agency heads are also required
to certify that their systems satisfy specified requirements under the
Federal Financial Management Improvement Act (FFMIA). The Federal Information
Security Management Act (FISMA) provides for government-wide management
and oversight of information security risks and agency information security
programs. As such, FISMA requirements provide an additional standard for
financial systems control.
Federal agencies are able to provide these statements of assurance; however
all continue to make progress in eliminating barriers to compliance. Because
financial systems are a major part of the universe to which these statutes
apply, it is entirely possible that positive assurance from the collective
group of agencies will emerge over a period of years due to the time required
for new system design, development and implementation.
and the Chief Financial Officers (CFO) Council are keenly aware of the
internal control challenges and related new assurance requirements that
have been reported in the private sector. We are actively engaged with
the Inspector General community in reviewing these requirements and their
potential applicability to Federal Government agencies.
erroneous payments within the Federal Government has been, and continues
to be, a major focus of the Presidents Management Agenda (PMA).
When the Improper Payments Information Act of 2002 (IPIA or the Act) was
passed, we enthusiastically endorsed the efforts in Congress to create
a review process that would identify and eliminate erroneous payments
throughout all major Federal programs and activities. The Office of Federal
Financial Management issued guidance implementing the Act in May of 2003
and subsequently met with the Offices of the CFO and the IG at each major
agency to ensure that plans to meet the requirements of the IPIA were
being developed. We directed all agencies to submit by November 30, 2003,
their plan for complying with the Act. Further, we are now in the process
of meeting with each agency CFO office to ensure that progress is being
made according to its plan. Agency reports will be included in the 2004
PARs as required by the guidance.
During the 2003 fiscal year, the Federal Accounting Standards Advisory Board
(FASAB) issued Statement of Federal Financial Accounting Standard (SFFAS)
No. 25, Reclassification of Stewardship Responsibilities and Eliminating
the Current Services Assessment. Among the provisions of this standard
is the requirement that the Statement of Social Insurance, which is currently
reported in the stewardship section of the Financial Report, become a basic
financial statement with full audit scrutiny. This Statement provides estimates
for important components of the Social Security and Medicare programs and
is accompanied by an expansive discussion of underlying assumptions and
sensitivity analyses. This requirement of the standard is scheduled to be
effective for fiscal 2005 and will enhance the significance and the prominence
of what is one of the most extensively presented components of the current
Effective with the 2003 Financial Report, DoD is required to report the
value of its national defense property, plant and equipment on the balance
sheet under SFFAS No. 23, Eliminating the Category National Defense
Property, Plant and Equipment. Process and system refinements that
will provide the basis for this valuation in the future will decrease reliance
on surrogate estimates.
Accomplishments and Progress
challenges remain, but I can report to you that much has been accomplished
in the area of financial reporting during the past fiscal year. The very
fact that we are here on this day in March a month earlier than
last year indicates that financial reporting deadlines are being
accelerated. For fiscal 2003,
- a record
18 of the 24 (75%) major agencies and departments completed their PARs
by the end of December, compared to only two agencies in fiscal year
- of these
agencies, eight accelerated the submission of their PARs to mid-November
of 2003, a year ahead of the 2004 requirement, all with unqualified
- 20 of
the 23 CFO Act agencies received an unqualified opinion on their financial
completed quarterly financial statements for the first time ever;
- the Department
of Homeland Security (DHS), created five months into the fiscal year,
elected to forgo its first-year waiver and prepare audited financial
statements for the first time;
- DHS received
a qualified opinion on its Balance Sheet and Custodial Activity Statement;
- the United
States Agency for International Development (USAID) received an unqualified
opinion on all of its audited financial statements for the first time
in its history and met the mid-November reporting date;
Medicare-Eligible Retiree Health Care Fund financial statements received
a qualified opinion in its first year and the National Reconnaissance
Office received an unqualified opinion on its statements;
- the Small
Business Administration (SBA) developed or significantly revised credit
models for five of its programs during the course of the year;
- the total
number of material weaknesses reported by auditors was reduced by 13%
- the total
number of FMFIA material weaknesses was reduced by 41% in 2003;
- new financial
management systems went live in many agencies, including four between
the close of the fiscal year and the end of December.
for the Future
for improving the quality and timeliness of financial reporting to the
American citizen is positive. Many challenges remain, but others that
appeared similarly insurmountable just a few years ago are being solved.
Who would have thought that the Administrations goal of shortening
the time for agencies to prepare audited financial statements from five
months to 45 days after the end of the year would be attained by a third
of the major agencies a year in advance of the deadline?
It is often
said that such achievements can only be accomplished by heroic efforts.
Hard work is always a factor, but these results are a tribute to detailed
planning, effective management and excellent execution.
acceleration targets are critical and they will be achieved by all agencies,
they are not our ultimate objective. The discipline and improved control
needed to accelerate financial reports are only the foundation for ensuring
the availability of useful financial information. The incorporation of
timely and accurate financial information into management decision-making
and operational assessment continues to be our main goal. Progress toward
this goal was made during fiscal year 2003, as shown by the addition of
two agencies, the Social Security Administration and the Environmental
Protection Agency, that achieved green status under the PMA Improved Financial
Performance initiative. They were joined by the Department of Education
in the first quarter of fiscal 2004.
forward to continued execution of our role in leading the Federal financial
management community and reporting additional progress across the financial
management spectrum to you in the months ahead.
for listening. I am happy to entertain your questions.