Financial Management:

Serious Deficiencies in State's Financial Systems Require Sustained Attention

AFMD-93-9: Published: Nov 13, 1992. Publicly Released: Nov 13, 1992.

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GAO reviewed the Department of State's accounting and financial management operations and systems, focusing on: (1) major weaknesses; (2) State's efforts to correct known problems; and (3) actions that could improve the usefulness and relevance of State's financial reports.

GAO found that State: (1) lacked a centralized management entity to control financial operations, which led to duplication and cost inefficiencies; (2) consolidated many financial operations under the Chief Financial Officer (CFO); (3) planned to delegate control of overseas posts' financial management operations to various bureaus that would operate under CFO-directed policies; (4) lacked fully qualified and trained financial management personnel and planned to supplement existing staff with trained specialists, provide training exercises and experience to personnel, and increase supervision; (5) financial systems lacked the capacity to handle all transactions, and in some cases were obsolete; (6) planned to standardize and integrate its primary and subsidiary accounting systems so that all data would be processed uniformly and validated based on standard criteria; and (7) developed a reasonable strategy to improve its financial operations and systems, which included faster online response time, streamlined processing capabilities, and better system linkages. GAO also found that: (1) State's accounting systems did not provide a fully functional general ledger to support its financial statements, analysis, and oversight of financial operations; (2) managers did not receive adequate information on real property, personal property, and foreign nationals' benefits to monitor their programs properly; and (3) State's strategy for improving financial operations did not address its financial systems' ability to provide managers with needed financial information as required by regulations.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In March 1993, State met with its program, financial, and overseas managers and service agencies to discuss their information needs and data requirements. The Department is developing functional requirements for the IFMS system and conducting area analyses to document user needs. GAO has completed a review of State's and particularly the CFO's planning for the IFMS project and has issued a report to the Chairman, House Committee on Government Operations, Legislation and National Security Subcommittee (AIMD-94-141, August 12, 1994) that includes recommendations for the CFO to include all key State managers in planning for and overseeing the IFMS project. These recommendations reiterate and expand on this recommendation.

    Recommendation: To ensure that useful and relevant financial information is made a primary objective of financial systems modernization efforts, the Secretary of State should direct CFO to work with financial, program, and overseas managers and others, such as the military services, to identify and document the financial data they need to make decisions on day-to-day operations, assess performance, and maintain accountability.

    Agency Affected: Department of State

  2. Status: Closed - Not Implemented

    Comments: State plans to integrate and standardize all its financial and program systems under its new financial system development effort, IFMS. GAO completed a review of State's management and oversight of the IFMS project and has issued a report to the Chairman, House Committee on Government Operations, Legislation and National Security Subcommittee (AIMD-94-141, August 12, 1994), that includes recommendations for strengthening the management and top management oversight of the IFMS project. These recommendations reiterate and expand on this recommendation.

    Recommendation: To ensure that financial management improvement at State is a continuous process that has top management's strong support and commitment, the Secretary of State should direct CFO to monitor long-range standardization and integration efforts to see that they have an agencywide focus and result in financial and program systems that contain compatible financial information.

    Agency Affected: Department of State

  3. Status: Closed - Not Implemented

    Comments: State plans to develop and implement the IFMS system worldwide. The Department recently completed the Roadmap Implementation Plan and Information Strategy Plan for its planned integrated system. GAO completed a review of State's planning for the IFMS system and has issued a report to the Chairman, House Committee on Government Operations, Legislation and National Security Subcommittee (AIMD-94-141, August 18, 1994) that includes recommendations to the Secretary of State to strengthen planning for IFMS to focus the project on correcting long-standing financial management problems. These recommendations reiterate and expand on this recommendation.

    Recommendation: To help ensure that financial management improvement at State is a continuous process that has top management's strong support and commitment, the Secretary of State should direct CFO to give top priority to resolving fundamental financial problems, such as reconciling disbursements, and to improving existing financial systems' basic accountability, discipline, and accuracy so that financial reports are reliable and timely.

    Agency Affected: Department of State

  4. Status: Closed - Not Implemented

    Comments: State plans to design, develop, and implement a State-wide Integrated Financial Management System (IFMS). The IFMS project entails redefining State's business areas, completing business area analyses, and developed and carrying-out comprehensive training for operators and users of the new system. GAO has completed a review of State's planning for and management of the IFMS project and has issued a report to the Chairman, Legislation and National Security Subcommittee, House Committee on Government Operations (GAO/AIMD-95-141). This report includes recommendations to the Secretary of State to strengthen the planning for and management of the IFMS project. These recommendations, by addressing the entire IFMS project, subsume this recommendation.

    Recommendation: To help ensure that financial management improvement at State is a continuous process that has top management's strong support and commitment, the Secretary of State should direct CFO to complete the CFO strategy to identify and address problems in attracting and retaining financial management staff, create professional development and training experiences for financial managers, and support a continuing education policy for them.

    Agency Affected: Department of State

  5. Status: Closed - Implemented

    Comments: The Department has established an Associate Comptroller for International Financial Operations with oversight authority for all accounting and CFO financial management operations of the RAMC and overseas posts administered by bureaus. Subsequently, State appointed a CFO and Deputy CFO.

    Recommendation: To help ensure that financial management improvement at State is a continuous process that has top management's strong support and commitment, the Secretary of State should direct CFO to establish a process to monitor: (1) headquarters bureaus' execution of financial management authority delegated to them by CFO; and (2) implementation of CFO policies by overseas posts administered by the bureaus.

    Agency Affected: Department of State

  6. Status: Closed - Not Implemented

    Comments: State plans to correct all deficiencies in its current system and develop a new system that meets all government accounting requirements. This goal is reflected in the recently completed Information Strategy Plan. GAO has completed a review of State's planning for IFMS and has issued a report (AIMD-94-141, August 12, 1994), that includes recommendations to the Secretary of State to better focus the IFMS project on correcting State's long-standing financial management problems.

    Recommendation: To ensure that useful and relevant financial information is made a primary objective of financial systems modernization efforts, the Secretary of State should direct CFO to establish a procedure to review financial systems development and enhancement projects at key decision points to determine that the projects incorporate the information requirements identified and documented by CFO. In particular, financial system projects should: (1) provide financial reporting that supports State's mission and operations; (2) produce cost trend and analytic information useful to managers; and (3) support performance measurements and indicators. Priority attention should be given to: (1) financial statements prepared from a general ledger that is maintained on an accrual basis; and (2) financial information for reporting disbursements, managing property, and overseeing foreign service national employee benefits programs.

    Agency Affected: Department of State

 

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