District of Columbia:

Improved Financial Information and Controls Are Essential to Address the Financial Crisis

T-AIMD-95-176: Published: Jun 21, 1995. Publicly Released: Jun 21, 1995.

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GAO discussed its ongoing work on the District of Columbia's financial condition. GAO noted that: (1) the District's fiscal year 1995 expenditure and cash projections have dramatically changed, with expenditures ranging from $3.25 billion to $3.89 billion and cash balances ranging from $50 million to $236 million; (2) the overexpenditures are due to Medicaid cost settlements and adjustments, agency overexpenditures, and $140 million in mandated budget cuts; (3) the District has recently revised its expenditures estimate to $3.39 billion; (4) the District's attempts to control spending administratively have been ineffective and may have contributed to inaccurate financial information; (5) the District requested $146.7 million from the U.S. Treasury in June 1995 and GAO could find no evidence that the request did not comply with congressional limitations and applicable laws; (6) the District has not implemented many of its planned budget cuts and will not meet its projected savings level; (7) the District's financial records and internal controls are poor and do not provide the basic financial data needed for proper fiscal management; (8) the District's financial management system requires manual entry of data from other systems into the central system, which delays processing and leads to errors and untimely recording of data; (9) the District accepts and pays for delivery of goods and services without valid contracts; and (10) major improvements in financial and other management information will only be realized if they are part of an overall effort to improve the efficiency of city operations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Authority has (1) performed site visits and benchmarking analysis of accounting and financial management information systems similar to that used in the District: (2) hired a consultant with extensive business process reengineering and systems implementation experience to analyze the District's financial management information systems implementation effort; and (3) created a System of Accounting and Reporting (SOAR) Steering Committee, headed by the Chair of the Authority, which includes the Mayor, CFO, Chief Technology Officer, Inspector General, and a DC Council Member.

    Recommendation: The District of Columbia Financial Responsibility and Management Assistance Authority (DCFRA) should study the accounting and financial management information needs of the District of Columbia government.

    Agency Affected: District of Columbia: District of Columbia Financial Responsibility and Management Assistance Authority

  2. Status: Closed - Implemented

    Comments: GAO recommended that the Mayor of the District of Columbia contract for an interim closing for the financial records to identify all payables and to establish a baseline of the fund status. On August 28, 1995, the District of Columbia Financial Responsibility and Management Assistance Authority contracted with KPMG Peat Marwick to identify all payables and establish a baseline of the fund status. According to KPMG, the work was performed from August 28, 1995, through January 12, 1996. KPMG performed the procedures agreed to by the Authority, which was to provide an estimate of vendor accounts payable of the District of Columbia's General Fund as of September 30, 1995.

    Recommendation: The Mayor of the District of Columbia should contract for an interim closing for the financial records to identify all payables and to establish a baseline of the fund status.

    Agency Affected: District of Columbia

  3. Status: Closed - Implemented

    Comments: According to the District's Interim Chief Financial Officer, "the system implemented by the City Administrator, the City Administrator's Reporting System (CARS), is no longer the mechanism used to track management initiatives. Under the auspices of the District's new Chief Management Officer (CMO) all management reform and the reporting of initiatives is now done by the CMO. This monthly reporting process captures information by agency which includes: funding, expense, cost saving, and project activity to include phase, duration, start date, and completion date."

    Recommendation: The Mayor of the District of Columbia should establish a process of accountability for implementation of management initiatives.

    Agency Affected: District of Columbia

  4. Status: Closed - Implemented

    Comments: According to D.C. officials, the District implemented quarterly apportionments at the agency level in FY1995. The apportionment process has been enhanced for FY1996, by requesting that agencies provide an annual obligation plan that on a quarterly basis identifies all fund and fund type obligations for agencies. The Budget Office will review and approve these obligation plans and any subsequent modifications for each quarter. For the first quarter, the agency's budget was established at 25 percent of its pending FY1996 gross budget authority. This authority will be modified to reflect the agency's first quarter in its approved obligation plan. The Office of the Budget transmitted the request and instructions to all agencies on September 6, 1995. The Office is currently reviewing agency plans.

    Recommendation: The Mayor of the District of Columbia should implement a meaningful process of quarterly apportionment at the agency level for all expenditures, including entitlement and personnel costs, and establish accountability for agency managers to spend in accordance with the apportioned amounts.

    Agency Affected: District of Columbia

  5. Status: Closed - Implemented

    Comments: According to the District's Chief Financial Officer, the District has successfully cleaned up its financial data and continues to place an emphasis on accounting principles and procedures. Specifically, with the implementation of a new financial management system in October 1999, it was necessary to review and determine the accuracy of the financial data converted from FMS (the old financial management system) to the new accounting system (the System of Accounting and Reporting - SOAR). The CFO obtained contractual assistance to work with the District agencies and identify adjustments required to the SOAR system balances, and ensure that these adjustments were properly recorded and reflected in SOAR. In addition, the District reestablished the Committee For Financial Excellence charged to build an infrastructure that supports a strong financial base.

    Recommendation: The Mayor of the District of Columbia should clean up existing data in the financial systems and place special emphasis on ensuring that basic accounting policies and procedures are followed.

    Agency Affected: District of Columbia

  6. Status: Closed - Implemented

    Comments: Although DCFRA reported that it was assessing the functionality of the SOAR Performance Budgeting module, and including performance budgeting as an agenda item for the SOAR Steering Committee, it was dissolved prior to ensuring that the District's management information would be consistent with the financial and performance plans. In addition, the District agreed with GAO's recommendation for improving the usefulness of the performance reports as a management tool by addressing issues of data quality and including additional analysis in future years. Also, the District's Inspector General verified the accuracy of performance measures for fiscal year 2003 as reported by District agencies. In its June 17, 2004 report, the District IG acknowledged that the city had made substantial progress in improving its performance management system.

    Recommendation: DCFRA should ensure that any improvements to management information be consistent with both the financial plan and the performance plan that are required by the Financial Responsibility and Management Assistance Act of 1995, the District of Columbia Fiscal Year 1995 Appropriation Act, and the Federal Payment Reauthorization Act of 1994.

    Agency Affected: District of Columbia: District of Columbia Financial Responsibility and Management Assistance Authority

 

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