Financial Management:

Federal Financial Management Improvement Act Results for Fiscal Year 1999

AIMD-00-307: Published: Sep 29, 2000. Publicly Released: Sep 29, 2000.

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Pursuant to a legislative requirement, GAO provided information on the implementation of the Federal Financial Management Improvement Act (FFMIA) in fiscal year (FY) 1999, focusing on: (1) compliance of the Chief Financial Officers (CFO) Act agencies' financial systems with FFMIA's requirements; (2) agencies' plans to bring their systems into compliance; and (3) other efforts to improve the government's financial management systems.

GAO noted that: (1) for FY 1999, auditors for 21 of the 24 CFO Act agencies reported that the agencies' financial systems did not comply substantially with FFMIA's requirements--federal financial management systems requirements, applicable federal accounting standards, and the U.S. Government Standard General Ledger (SGL); (2) as a result, the vast majority of agencies' financial management systems fall short of the CFO Act and FFMIA goal to provide reliable, useful, and timely information on an ongoing basis for day-to-day management and decision-making; (3) reasons for systems' noncompliance include: (a) nonintegrated systems; (b) inadequate reconciliation procedures; (c) noncompliance with the SGL; (d) lack of adherence to accounting standards; and (e) weak security over information systems; (4) although the financial management systems of most agencies do not yet comply with FFMIA's requirements, the number of agencies receiving "clean" or unqualified audit opinions is increasing; (5) 15 of the 24 CFO Act agencies received unqualified audit opinions on their financial statements for FY 1999, up from 12 in FY 1998 and 11 in FY 1997; (6) auditors of 12 of the 15 agencies that received unqualified opinions reported that the agencies' financial systems did not comply substantially with FFMIA's requirements in FY 1999; (7) through the rigors of the financial statement audit process and the requirements of FFMIA, agencies have gained a better understanding of their financial management weaknesses and the impetus to resolve problems caused by those weaknesses; (8) at the same time, agencies are slowly making progress in addressing their problems; (9) while an increasing number of agencies are receiving "clean" audit opinions on their financial statements, the continued widespread noncompliance with FFMIA shows that there is still a long way to go to having systems, processes, and controls that routinely generate reliable, useful, and timely information for managers and other decisionmakers; and (10) many leading finance organizations have a goal to reduce the time spent on routine accounting activities, such as financial statement preparation, so that financial management staff can spend more time on activities such as business performance analysis or cost analysis.

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