Financial Integrity Act: Inadequate Controls Result in Ineffective Federal Programs and Billions in Losses
AFMD-90-10
Published: Nov 28, 1989. Publicly Released: Nov 28, 1989.
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Highlights
As part of its fourth governmentwide report on federal efforts to strengthen internal controls and accounting systems under the Federal Managers' Financial Integrity Act (FMFIA), GAO reviewed the types and severity of the internal control and accounting system problems that exist throughout the government and the need for a vigorous program to correct these problems.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should, through its appropriation, authorization, and oversight committees, hold annual hearings on the actions of each of the 18 major federal agencies to evaluate its systems, to correct the material weaknesses identified, and to ensure that similar problems will not occur in the future. Agency Financial Integrity reports, plans for actions to correct material internal control and accounting system weaknesses, and financial statements provide information that congressional committees can use when planning and conducting annual oversight hearings. |
Closed – Implemented
|
An initial oversight hearing on the Department of Housing and Urban Development (HUD) was held on April 18, 1990. GAO also testified before the Subcommittee on HUD/Moderate Rehabilitation Investigation, Senate Committee on Banking, Housing and Urban Affairs (GAO/T-AFMD-90-14). Additional hearings are planned or on-going in such agencies as DOD, NASA, EPA, SBA, etc. |
| Legislation to establish a permanent financial management structure for the government is essential. Congress should enact legislation which would, among other things: (1) establish a Chief Financial Officer of the United States whose responsibilities include developing a long-range financial management improvement plan for the government; (2) set up corresponding chief financial officers in each major agency; and (3) require the annual preparation and audit of agency financial statements. |
Closed – Implemented
|
The Senate Committee on Governmental Affairs is drafting legislation for introduction during this session of Congress. Hearings on this topic are scheduled for late September, 1990. The CFO Act was implemented in November 1990. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of Management and Budget | The Director, OMB, should take prompt action to ensure that agencies implement the recommendations contained in the Internal Control Interagency Coordination Council report, including: (1) linking the Financial Integrity Act internal control review and reporting process to the budget; (2) identifying, in annual reports, agency actions taken to correct weaknesses; and (3) validating that corrective actions are accomplished and are effective. |
Closed – Implemented
OMB revised Circular A-11 incorporating the need to link OMB high-risk issues to the budget. In July 1990, OMB also issued its 1990 FMFIA guidance which addresses reporting on the agency's process for validating corrective actions, training available and taken by managers, and actions taken to ensure accountability for results in identifying and correcting weaknesses.
|
| Office of Management and Budget | One Council recommendation focused on the establishment of senior level policy committees at each agency to provide oversight of the internal control evaluation and reporting processes. OMB guidance on this point should be expanded to include, as a responsibility of these committees, oversight of agency evaluations of planned, in-progress, and completed corrective actions. |
Closed – Implemented
OMB 1990 FMFIA guidance will address setting up these committees. OMB reports that most agencies have established this through their assistant secretary for management. In the 1990 FMFIA report, OMB will ask agencies to address what they are doing in this area and how well they have done in overseeing correction of material internal control and accounting system weaknesses.
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| Office of Management and Budget | To ensure the existence of a strong governmentwide Financial Integrity Act effort, the Director, OMB, should annually review the internal control and accounting system evaluation, reporting and corrective action processes in each major agency to ensure that the agencies are effectively implementing the act. |
Closed – Implemented
OMB reports two actions in place to address this recommendation. First, OMB management analysts and budget examiners are monitoring agency actions to correct reported weaknesses by incorporating this as part of their routine agency reviews. The second effort involves periodic meetings between the OMB Executive Assistant Director and agency deputy or assistant secretaries for management.
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Topics
Congressional oversightexecutive relationsFederal agency accounting systemsFraudInternal controlsMaterialityProgram abusesReporting requirementsAccounting systemsMilitary forces