	Auditors’ Assessments of FFMIA Compliance for Fiscal Year 2002

For fiscal year 2002, Inspectors General and their contract auditors  reported that the systems for 19 of the 24 CFO Act agencies did not comply  substantially with at least one of the FFMIA requirements—federal  financial management systems requirements, applicable federal accounting  standards, or the SGL. Nonintegrated Financial Management Systems

The CFO Act calls for agencies to develop and maintain an integrated  accounting and financial management system that complies with federal  systems requirements and provides for (1) complete, reliable, consistent,  and timely information that is responsive to the financial information needs  of the agency and facilitates the systematic measurement of performance,  (2) the development and reporting of cost management information, and  (3) the integration of accounting and budgeting information. Agencies face significant challenges implementing these  standards. Agency Efforts to Implement New Core Financial Systems

The continuing trend of noncompliance with FFMIA indicates the overall  long-standing poor condition of agency financial systems. Across government, agencies have many efforts underway to implement or  upgrade financial systems to alleviate long-standing weaknesses in  financial management. As we recently reported, as of September 30, 2002,  17 agencies advised us that they were planning to or were in the process of  implementing a new core financial system. Nevertheless, it is imperative that agencies adopt leading  practices to help ensure successful systems implementation. In the past, federal agencies  have experienced setbacks and delays in their implementation processes. Congressional Oversight

The leadership demonstrated by the Congress has been an important  catalyst to reforming financial management in the federal government. To achieve the  financial management improvements envisioned by the CFO Act, FFMIA,  and more recently, the President’s Management Agenda, agencies need to  modernize their financial systems to generate reliable, useful, and timely  financial information throughout the year and at year-end. However, as we  have discussed today, agencies are facing significant challenges in  implementing new financial management systems. Continued attention to  these issues will be critical to sustaining momentum on financial  management reforms.
Why GAO Did This Study

The Federal Financial Management Improvement Act of 1996 (FFMIA) requires Chief Financial Officers (CFO) Act agencies to implement and maintain financial management systems that comply substantially with (1) federal financial management systems requirements, (2) federal accounting standards, and (3) the U.S. Government Standard General Ledger. Most federal agencies face long-standing challenges, which are discussed in greater detail in our mandated September 2003 report, Sustained Efforts Needed to Achieve FFMIA Accountability (GAO-03-1062). In light of these circumstances, Congress asked GAO to testify about recurring financial management systems problems and agencies' efforts to upgrade their systems.

What GAO Found

The results of the fiscal year 2002 FFMIA assessments performed by agency inspectors general or their contract auditors again show that the same types of problems continue to plague the financial management systems used by the CFO Act agencies. While much more severe at some agencies than others, the nature and severity of the problems indicate that overall, agency management lacks the full range of information needed for accountability, performance reporting, and decision making. Audit reports highlight six recurring problems that have been consistently reported for those agencies whose auditors reported noncompliant systems. Agencies have recognized the seriousness of the financial systems weaknesses, and have many efforts underway to implement or upgrade financial systems to alleviate long-standing problems. As of September 30, 2002, 17 CFO Act agencies advised us they were planning to or were in the process of implementing a new core financial system. It is imperative that agencies adopt leading practices, such as top management commitment and business process reengineering, to ensure successful systems implementation and to avoid complicating factors, such as poor communication and inadequate project planning, that have hampered some agencies' efforts in the past. Congressional oversight, the Joint Financial Management Improvement Program Principals, and the President's Management Agenda are driving forces behind several governmentwide efforts now underway to improve federal financial management. Continued attention by these key drivers is critical to sustaining agencies efforts to improve their financial management systems.