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Government Leader home > news stories
02/14/06
OMB: Financial performance a tough puzzle to solve
By John L. Guerra
Special to Government Leader
Federal agencies continue to earn the lowest marks in their financial performance in spite of calls from the White House and Congress for fiscal belt-tightening and zero tolerance for fraud and fiscal mismanagement.
The latest executive branch management scorecard gives the lowest possible rating—unsatisfactory—to the financial performance of 17 out of 26 federal agencies. Efforts of some agencies to improve financial performance in fact are in “serious jeopardy,” according to the President’s Management Agenda (PMA) rating system.
The scorecard measures each federal agency’s performance—from the Agriculture Department to the Social Security Administration—in categories such as human capital, competitive sourcing, improving financial performance, E-gov efforts, and budget and performance integration.
The scorecard, displayed as a matrix with agencies listed on the left and the categories across the top, uses a green dot to indicate “success,” a yellow dot for “mixed results” and red to indicate “unsatisfactory.” It’s the “improving financial performance” column that gives agencies the hardest time.
Let’s put it this way: It’s easier to list the eight agencies that rated “successful” in their financial performance: the Commerce, Education, Labor and State departments, the Environmental Protection Agency, the National Security Agency, the Smithsonian Institution and the Social Security Administration.
By the way, the Office of Personnel Management rates a yellow dot, indicating “mixed results” for its financial performance. If your agency isn’t on that list, it’s a member of “club red.”
There’s more bad news: Most of the unsatisfactory financial performers have held that ranking for more than a year, and others for more than two years.
What’s taking agencies so long to improve?
The Chief Financial Officers Act of 1990 requires agencies to submit to the OMB annual, audited financial statements for each revolving fund, trust fund, office, bureau and activity that performs a substantial commercial function. Agencies also are required to maintain an integrated agency accounting and financial management system that systematically measures performance.
It’s a tall order. Since the passage of the CFO Act, an OMB document says, “agencies have been engaged in a process of catching up to long-established private-sector practices of financial reporting.” Before the CFO Act created accounting guidelines, OMB records show that agencies took more than five months to prepare their end-of-year financial statements. These days, CFOs regularly finish their annual financial statements within 45 days after the fiscal year ends.
Other roadblocks slow improvement. An OMB official tells Government Leader that agencies must show sustained improvement before their progress is recognized. “Repeat material weaknesses keep most agencies at red,” the OMB official said. “They must make their systems comply with federal financial management system standards. For each weakness/deficiency, agencies must submit corrective action plans to OMB and meet scheduled milestones. Slippage in meeting planned actions can result in a progress downgrade under the PMA.”
“Achieving ‘green’ in financial performance isn't something that agencies accomplish overnight or on their own,” the official added. “It requires detailed, multiyear plans and collaboration.”
Agency CFOs share OMB’s financial performance goals, but a lack of qualified accounting personnel is holding them back. The Office of National Performance Review says recruiting and hiring technically qualified personnel is not easy under present civil-service policies. It cites efforts by a former CFO at the Housing and Urban Development Department who tried in 1992 to raise standards for candidates for HUD’s 10 regional controller positions. OPM, however, wouldn’t let him specify more stringent qualifications than already existed for the job category. “[Inexperience] reaches down to every level of the financial management staff,” the review says.
A November 2005 Government Accountability Office report titled “Driving the Transformation of Federal Financial Management” says federal agencies also lack up-to-date IT auditing systems and accounting software to improve their financial performance reporting.
But staring at a chart of colored dots doesn’t give a complete picture, either. The PMA report card doesn’t show the following improvements, according to the OMB official:
- In fiscal 2005, 19 agencies received a “clean” opinion on their audited financial statements, one agency more than in 2004 and an increase of two since 2001.
- Agencies in 2005 reported 132 material weaknesses, 14 fewer (or 11 percent less) than 2004. It’s also a lot less than the 186 material weaknesses reported in 2001.
- All 24 CFO Act agencies submitted their annual Performance and Accountability Reports and financial statements by the Nov.15, 2005 deadline. That’s two more than made the deadline in 2004—and a heck of a lot better than 2001, when agencies were five months late in submitting the same reports.
Agencies will take good news when they find it.
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