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Highlights

As part of its second governmentwide report on the Federal Managers' Financial Integrity Act of 1982 (FMFIA), GAO reviewed the internal control and accounting system problems facing the government and highlighted the problems which have hindered federal agency efforts to implement FMFIA.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Office of Management and Budget The Director, OMB, should implement the prior recommendation to strengthen annual internal control reporting guidance to agencies. OMB must ensure that agencies disclose the bases for their positions on reasonable assurance, considering the weaknesses identified and the scope of evaluations. Specifically, OMB should revise internal control reporting guidance to incorporate the "except-for" reporting format of the House Committee on Government Operations whereby agencies would clearly disclose the significance of those systems which: (1) do not meet the act's requirements; and (2) have not yet been evaluated and for which the agency does not know whether or not they comply with the act's requirements.
Closed - Implemented
OMB changed the reporting guidance, but did not fully accept this recommendation. It still prefers use of "taken-as-a-whole" wording, but does not oppose the recommended "except for" language. Several agencies now use both terms in their annual reports.
Office of Management and Budget The Director, OMB, should require that, for agency heads to elect the "taken-as-a-whole" reporting format, they must clearly demonstrate that those systems that do not comply, or have not been adequately evaluated, are not of such significance as to detract from the credibility of an opinion on the agency as a whole.
Closed - Implemented
Although OMB has changed its reporting guidance, it still prefers the "taken-as-a-whole" language to the GAO recommended "except for" wording. Several agencies do, however, use both terms in their reports.
Office of Management and Budget The Director, OMB, should strengthen its guidance for reporting on accounting system conformance so that the annual report will clearly disclose the condition of an agency's accounting systems, applying the same criteria outlined for reporting on internal control systems. It should be clear which systems conform, which ones do not, and which ones have not been evaluated so that a conformance statement can be provided.
Closed - Implemented
Reporting guidance was changed and OMB now recognizes two distinct variations of "except-for" reporting which agencies can use to report on accounting systems' conformance. However, the guidance should be more prominently highlighted in either OMB Circular A-127 or OMB questions and answers to ensure that these reporting options are not overlooked by the agencies.

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