Federal Financial Woes: Tighter Reins, Better Processes

In the face of failed audits and a Continuing Resolution on appropriations, Federal political leaders concede problems with government financial management and accounting, leading Congress to establish a bipartisan working group to address new approaches to current and established programs.

This series of inter-related Federal financial events may require Federal executives to look even more closely at the role real property assets play in their organizations' budgets.

On December 9, 2006, Congress signed a third Continuing Resolution, extending the previous Continuing Appropriations Resolution, 2007 until February 15, 2007. By some reports, a further Continuing Resolution may be in the offing after that date.

At the same time, the Federal government reportedly failed its audit for fiscal 2006 - the tenth year in a row in which government auditors issued a judgment of "no comment" on the Federal consolidated audit statement.

According to reporting by Jenny Mandel in GovExec.com (http://www.govexec.com/dailyfed/1206/121506m1.htm), 27 percent of net costs on the balance sheets of five agencies could not be fully audited - some $790 billion overall in unauditable expenses.

The GovExec.com article indicated three shortcomings as cited by Government Accountability Office: "financial management problems at the Defense Department, an inability to account for and to reconcile balances that cross agency lines, and an ineffective process for preparing financial statements."

In previous reporting, Mandel also noted that government auditors identified problems "in the area of internal controls, the processes that guard against fraud and error, which agencies for the first time were required to test and report on. The requirement is in OMB's Circular A-123."

These continuing budgetary concerns have led Congress to propose a virtually unprecedented bipartisan working group. In a Congress Daily article posted online at GovExec.com, reporter Peter Cohn said the group - spearheaded by Senate Budget Chairman Kent Conrad (D-ND), and ranking member Judd Gregg, (R-NH) - would "tackle long-term fiscal challenges and propose parliamentary steps to boost passage of the politically risky ideas." (http://www.govexec.com/dailyfed/0107/011107cdpm1.htm)

Cohn quoted Government Accountability Office Comptroller David Walker, who in a hearing in early January "indicated Congress should continue to restrain discretionary spending and perhaps apply pay/go rules to existing entitlements, not just new programs."

Government's need to hold a tighter rein on internal controls and accounting procedures, as well as Walker's suggestions to restrain spending, indicates that real property will likely be subject to increased visibility and increased pressure for better performance, according to Ray Summerell, VP of Corporate Development at VISTA.

"These are challenging times, financially speaking, for Departments and agencies across the Federal government," Summerell said. "By reviewing processes, and by treating real property as an asset, rather than a budget line item, agencies will be in a better position to make the best of the government's continuing budget scrutiny."