Department of Homeland Security
Challenges and Steps in Establishing Sound Financial Management Gao ID: GAO-03-1134T September 10, 2003Based on its budget, the Department of Homeland Security (DHS) is the largest entity in the federal government that is not subject to the Chief Financial Officers (CFO) Act of 1990. The department, with an estimated $39 billion in assets, an almost $40 billion fiscal year 2004 budget request, and more than 170,000 employees, does not have a presidentially appointed CFO subject to Senate confirmation and is not required to comply with the Federal Financial Management Improvement Act (FFMIA) of 1996. In addition, we designated implementation and transformation of DHS as high risk based on three factors: (1) the implementation and transformation of DHS is an enormous undertaking that will take time to achieve in an effective and efficient manner, (2) components to be merged into DHS already face a wide array of existing challenges, and (3) failure to effectively carry out its mission would expose the nation to potentially very serious consequences. In light of these conditions, Congress asked GAO to testify on the financial management challenges facing DHS, steps for establishing sound financial management and business processes at DHS, and GAO's comments on H.R. 2886, The Department of Homeland Security Financial Accountability Act.
The Homeland Security Act of 2002 brought together 22 agencies to create a new cabinet-level department focusing on reducing U.S. vulnerability to terrorist attacks, and minimizing damages and assisting in recovery from attacks that do occur. Meeting this mission will require a results-oriented environment with a strong financial management infrastructure. Creating strong financial management at DHS is particularly challenging because most of the entities brought together to form the department have their own financial management systems, processes, and in some cases, deficiencies. Four of the seven major agencies that transferred to DHS reported 18 material weaknesses in internal control for fiscal year 2002 and five of the seven major agencies had financial management systems that were not in substantial compliance with FFMIA. For DHS to develop a strong financial management infrastructure, it will need to address these and many other financial management issues. Through the study of several leading private and public sector finance organizations (Creating Value Through World-class Financial Management, GAO/AIMD-00-134), GAO has identified success factors, practices, and outcomes associated with world-class financial management. Four steps DHS can take to begin developing sound financial management and business processes are to: (1) make financial management an entity-wide priority, (2) redefine the role of the finance organization, (3) provide meaningful information to decision makers; and (4) build a team that delivers results. H.R. 2886 can help facilitate the creation of a first-rate financial management architecture at DHS by providing the necessary tools and setting high expectations. The bill would (1) make DHS a CFO Act agency, (2) require DHS to obtain an opinion on its internal controls, and (3) require DHS to include program performance information in its performance and accountability reports. GAO fully supports the objectives of the CFO Act to provide reliable financial information and improve financial management systems and controls and believes DHS should be included under the act and therefore also subject to FFMIA. Further, GAO strongly believes that auditor reporting on internal control can be a critical component of monitoring the effectiveness and accountability of an organization and supports DHS, as well as other CFO Act agencies, obtaining such opinions. In addition, GAO supports agencies including program performance information in their performance and accountability reports and strongly encourages DHS to report this information voluntarily. Finally, as introduced, H.R. 2886 provided a waiver allowing DHS to forego a financial statement audit for fiscal year 2003. We understand an agreement has been reached to remove this waiver from the proposed legislation. DHS has committed to a 2003 financial statement audit, which is already underway. GAO supports dropping this provision from H.R. 2886.
GAO-03-1134T, Department of Homeland Security: Challenges and Steps in Establishing Sound Financial Management
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Testimony:
Before the Subcommittee on Government Efficiency and Financial
Management, Committee on Government Reform, House of Representatives:
For Release on Delivery Expected at 2:00 p.m. EST Wednesday, September
10, 2003:
Department of Homeland Security:
Challenges and Steps in Establishing Sound Financial Management:
Statement of McCoy Williams, Director Financial Management and
Assurance:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1134T] GAO-03-
1134T:
GAO Highlights:
Highlights of GAO-03-1134T, a testimony before the Subcommittee on
Government Efficiency and Financial Management, House Committee on
Government Reform, House of Representatives
Why GAO Did This Study:
Based on its budget, the Department of Homeland Security (DHS) is the
largest entity in the federal government that is not subject to the
Chief Financial Officers (CFO) Act of 1990. The department, with an
estimated $39 billion in assets, an almost $40 billion fiscal year
2004 budget request, and more than 170,000 employees, does not have a
presidentially appointed CFO subject to Senate confirmation and is not
required to comply with the Federal Financial Management Improvement
Act (FFMIA) of 1996. In addition, we designated implementation and
transformation of DHS as high risk based on three factors: (1) the
implementation and transformation of DHS is an enormous undertaking
that will take time to achieve in an effective and efficient manner,
(2) components to be merged into DHS already face a wide array of
existing challenges, and (3) failure to effectively carry out its
mission would expose the nation to potentially very serious
consequences.
In light of these conditions, the Subcommittee asked GAO to testify on
the financial management challenges facing DHS, steps for establishing
sound financial management and business processes at DHS, and GAO‘s
comments on H.R. 2886, The Department of Homeland Security Financial
Accountability Act.
What GAO Found:
The Homeland Security Act of 2002 brought together 22 agencies to
create a new cabinet-level department focusing on reducing U.S.
vulnerability to terrorist attacks, and minimizing damages and
assisting in recovery from attacks that do occur. Meeting this mission
will require a results-oriented environment with a strong financial
management infrastructure.
Creating strong financial management at DHS is particularly
challenging because most of the entities brought together to form the
department have their own financial management systems, processes, and
in some cases, deficiencies. Four of the seven major agencies that
transferred to DHS reported 18 material weaknesses in internal control
for fiscal year 2002 and five of the seven major agencies had
financial management systems that were not in substantial compliance
with FFMIA. For DHS to develop a strong financial management
infrastructure, it will need to address these and many other financial
management issues.
Through the study of several leading private and public sector finance
organizations (Creating Value Through World-class Financial
Management, GAO/AIMD-00-134), GAO has identified success factors,
practices, and outcomes associated with world-class financial
management. Four steps DHS can take to begin developing sound
financial management and business processes are to: (1) make financial
management an entitywide priority, (2) redefine the role of the
finance organization, (3) provide meaningful information to decision
makers; and (4) build a team that delivers results.
H.R. 2886 can help facilitate the creation of a first-rate financial
management architecture at DHS by providing the necessary tools and
setting high expectations. The bill would (1) make DHS a CFO Act
agency, (2) require DHS to obtain an opinion on its internal controls,
and (3) require DHS to include program performance information in its
performance and accountability reports. GAO fully supports the
objectives of the CFO Act to provide reliable financial information
and improve financial management systems and controls and believes DHS
should be included under the act and therefore also subject to FFMIA.
Further, GAO strongly believes that auditor reporting on internal
control can be a critical component of monitoring the effectiveness
and accountability of an organization and supports DHS, as well as
other CFO Act agencies, obtaining such opinions. In addition, GAO
supports agencies including program performance information in their
performance and accountability reports and strongly encourages DHS to
report this information voluntarily. Finally, as introduced, H.R. 2886
provided a waiver allowing DHS to forego a financial statement audit
for fiscal year 2003. We understand an agreement has been reached to
remove this waiver from the proposed legislation. DHS has committed to
a 2003 financial statement audit, which is already underway. GAO
supports dropping this provision from H.R. 2886.
What GAO Recommends:
www.gao.gov/cgi-bin/getrpt?GAO-03-1134T.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact McCoy Williams at 202-
512-6906 or williamsm1@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the major financial management
challenges facing the Department of Homeland Security (DHS), steps for
establishing sound financial management and business processes, and our
comments on H.R. 2886, The Department of Homeland Security Financial
Accountability Act. The perspective we offer in this testimony is
derived from an extensive body of work on these topics completed by
inspector generals, independent auditors, as well as from GAO reports;
executive guidance; and testimony related to financial management and
DHS.
The Homeland Security Act of 2002 brought together 22 diverse agencies
and created a new cabinet-level department to help prevent terrorist
attacks in the United States, reduce the vulnerability of the United
States to terrorist attacks, and minimize the damage and assist in
recovery from attacks that do occur. Efforts to improve homeland
security will require a results-oriented approach to ensure mission
accountability and sustainability over time, and DHS must have a strong
financial management infrastructure to support these goals. As stated
in the President's Management Agenda, accurate and timely financial
information is needed to secure the best performance and highest
measure of accountability for the American people.
DHS has stated its commitment to becoming a model of efficiency and
effectiveness for the federal government. To achieve this goal, it must
first overcome significant challenges in integrating 22 separate
agencies and their systems into a single, effective department, as well
as correct the wide array of existing management challenges in the
inherited components. Developing a financial management architecture
with integrated systems and business processes is one of the many
difficult challenges the new department faces. We designated
implementation and transformation of DHS as high risk based on three
factors: (1) the implementation and transformation of DHS is an
enormous undertaking that will take time to achieve in an effective and
efficient manner, (2) components to be merged into DHS already face a
wide array of existing challenges, and (3) failure to effectively carry
out its mission would expose the nation to potentially very serious
consequences.[Footnote 1] Our high-risk program has helped the
executive branch and the Congress to galvanize efforts to seek lasting
solutions to high-risk problems and challenges.
Complicating DHS's efforts to develop a strong financial management
infrastructure are the many known financial management weaknesses and
vulnerabilities in the agencies DHS inherited. For example, for four of
the seven major agencies[Footnote 2] that transferred to DHS on March
1, 2003--the Immigration and Naturalization Service (INS), the
Transportation Security Administration (TSA), the Customs Service, and
the Federal Emergency Management Agency (FEMA)--auditors reported 18
material weaknesses[Footnote 3] in internal control for fiscal year
2002. Further, for five of the seven major agencies, auditors reported
that the agencies' financial management systems were not in substantial
compliance with the Federal Financial Management Improvement Act
(FFMIA) of 1996.[Footnote 4]
Building an effective financial management infrastructure will require
sustained leadership from top management. Currently, based on its
budget, DHS is the largest entity in the federal government that is not
subject to the Chief Financial Officers (CFO) Act of 1990.[Footnote 5]
As such, this department, with a fiscal year 2004 budget request of
nearly $40 billion and currently more than 170,000 employees, does not
have a presidentially appointed CFO subject to Senate confirmation and
is not required to comply with FFMIA. The goals of the CFO Act and
related financial reform legislation, such as FFMIA, are to provide the
Congress and agency management with reliable financial information for
managing and making day-to-day decisions and to improve financial
management systems and controls to properly safeguard the government's
assets. DHS should not be the only cabinet-level department not covered
by what is the cornerstone for pursuing and achieving the requisite
financial management systems and capabilities in the federal
government.
The creation of DHS presents an opportunity for the federal government
to ensure that it designs and implements a world-class organization
with a first-rate financial management systems architecture. Providing
DHS with the necessary tools, which would be facilitated by the passage
of H.R. 2886, and setting high expectations are of paramount importance
to its success. First, however, DHS must overcome many financial
management challenges, which I will now discuss.
DHS Faces Significant Financial Management Challenges:
Although many of the larger agencies that transferred to DHS have been
able to obtain unqualified or "clean" audit opinions on their annual
financial statements, most employed significant effort and manual work-
arounds to do so in order to overcome a history of poor financial
management systems and significant internal control weaknesses.
Furthermore, some of the entities that transferred may also have
weaknesses not yet identified or reported on merely because the
problems were considered small or immaterial in relation to their large
parent departments, such as the Department of Defense or the U.S.
Department of Agriculture. Such weaknesses may become evident now that
these smaller agencies are proportionately larger as a part of DHS, add
to the known extensive existing challenges, and may therefore be
subjected to increased levels of audit scrutiny. Cumulatively, these
weaknesses and the efforts needed to resolve them to achieve sound
financial management and business processes are an important reason for
amending the CFO Act to include DHS and measuring DHS's financial
management systems and internal control against the same important
financial reform legislation and performance expectations as other
federal departments and agencies.
DHS, like other federal agencies, has a stewardship obligation to
prevent fraud, waste, and abuse, to use tax dollars appropriately, and
to ensure financial accountability to the President, the Congress, and
the American people. For the most part, DHS's component entities are
using legacy financial management systems that have a myriad of
problems, such as disparate, nonintegrated, outdated, and inefficient
systems and processes. DHS will need to focus on building future
systems as part of its enterprise architecture approach to ensure an
overarching framework for the agency's integrated financial management
processes. Plans and standard accounting policies and procedures must
be developed and implemented to bridge the many financial environments
in which inherited agencies currently operate to an integrated DHS
system.
Another significant challenge for DHS is fixing the previously
identified weaknesses that the agencies bring with them to DHS, a
number of which I will now discuss.
Immigration and Naturalization Service:
While receiving unqualified audit opinions on its fiscal year 2001 and
2002 financial statements,[Footnote 6] the former INS under the
Department of Justice (DOJ) faces numerous challenges in achieving a
sound financial management environment. Although INS was abolished and
split into multiple bureaus within DHS, its prior financial management
weaknesses will still need to be addressed and could be further
complicated by this realignment.
For fiscal year 2002, INS's financial statement auditors reported three
material internal control weaknesses and that its systems were not in
substantial compliance with FFMIA. Specifically, auditors noted
limitations in the design and operation of INS's financial accounting
system, thereby requiring it to use stand-alone systems or obtain the
required financial information via manual processes and nonroutine
adjustments as part of the financial statement preparation process.
Having systems that can routinely produce information for financial
reporting on demand for day-to-day decision making is one of the
expected results of the President's Management Agenda, as well as one
of the goals of FFMIA.
In addition, for both fiscal years 2001 and 2002, auditors reported
that INS did not have a reliable system for providing regular, timely
data on the numbers of completed and pending immigration applications,
and the associated collections of fees valued at nearly $1 billion for
fiscal year 2002. Accordingly, INS was not able to accurately and
regularly determine fees it earns without relying on an extensive
servicewide, year-end physical count of over 5.4 million pending
applications, as was the case in fiscal year 2002. INS has been
developing a new tracking system to facilitate its inventory process.
However, until the new system is implemented, INS must rely on
inefficient manual processes that significantly disrupt its operations.
These and other inherent weaknesses in INS's financial management
process limit its ability to produce useful, accurate, and timely
financial information.
Despite the importance and prevalence of information technology (IT)
systems in accomplishing its core missions, INS has not yet established
and implemented effective controls for managing its IT
resources.[Footnote 7] The root cause of INS's systems problems has
been an absence of effective enterprise architecture management and an
IT investment management process. To address such weaknesses, INS has
been developing an enterprise architecture, including a current and
target architecture, as well as a transition plan. Similarly, INS has
taken steps to implement rigorous and disciplined investment management
controls. However, with the transfer to DHS and the splitting of INS,
these plans will have to be reanalyzed, further delaying implementation
of effective systems and complicating DHS's ability to produce
reliable, timely, and accurate financial statements and information.
Federal Emergency Management Agency:
FEMA, the only CFO Act agency to transfer in its entirety to DHS, faces
several major financial management challenges, in spite of receiving an
unqualified opinion on its fiscal year 2002 financial
statements.[Footnote 8] In fiscal year 2002 FEMA's auditors reported
six material internal control weaknesses and that FEMA's financial
management systems were not in substantial compliance with the
requirements of FFMIA. One major weakness was FEMA's inability to
efficiently prepare accurate financial statements as called for in the
President's Management Agenda. For example, auditors reported that for
fiscal year 2002, FEMA did not have an integrated financial reporting
process that could generate financial statements as a byproduct of
already existing processes, and that its financial statements were
prepared late and required significant revisions.
In addition, auditors reported in fiscal year 2001 and again in fiscal
year 2002 that FEMA did not have adequate accounting systems and
processes to ensure that all property, plant, and equipment were
properly recorded, accurately depreciated, and tracked in accordance
with its polices and applicable federal accounting standards. As a
result, FEMA's property management system cannot track items to
supporting documentation or to a current location. Furthermore, FEMA
lacks procedures to ensure that (1) equipment is consistently recorded
on either a system or a component basis, (2) procedures are in place to
ensure that property inventories are performed properly, and (3) all
equipment is entered into its personal property management system. As a
result, there is an increased risk that equipment and other property
could be lost, stolen, or improperly recorded in its accounting
records.
Since FEMA was the only agency to transfer to DHS in its entirety, it,
unlike all of the other agencies, is left without a legacy department
to prepare financial statements for the first 5 months of activity for
fiscal year 2003 or an Office of Inspector General (OIG) to audit them,
leaving FEMA's financial management information for the first 5 months
of this fiscal year vulnerable to omissions, errors, and ultimately
material misstatements. Given the weaknesses in, among other things,
FEMA's property controls, we are initiating a review of FEMA's
disbursement activity and property management controls covering this 5-
month period. We will keep this Subcommittee informed of our progress
in this review. Until corrective actions are implemented to address
weaknesses, FEMA will not be able to achieve effective financial
accountability or ensure that property is properly accounted for.
U.S. Customs Service:
In fiscal year 2002, Customs under Treasury received a qualified
opinion on a limited scope review[Footnote 9] of its internal controls.
This qualified opinion was due to the identification of four material
weaknesses in Customs' internal controls by its independent
auditors.[Footnote 10] For example, auditors reported that Customs'
financial systems did not capture all transactions as they occurred
during the year; did not record all transactions properly; were not
fully integrated; and did not always provide for essential controls
with respect to override capabilities. As a result, extensive manual
procedures and analysis were required to process certain routine
transactions and prepare year-end financial statements.
Customs, which typically collects and processes over $23 billion in
fees annually, was found to have poor collection procedures throughout
the agency. Ongoing weaknesses in the design and operation of Customs'
controls over trade activities and financial management and information
systems continue to inhibit the effective management of these
activities and protection of trade revenue. For example, auditors
reported that Customs' Automated Commercial System could not provide
summary information on the total unpaid assessments for duties, taxes,
and fees by individual importer. The system also could not generate
periodic management information on outstanding receivables, the age of
receivables, or other data necessary for managers to effectively
monitor collection procedures. Such a capability would allow Customs to
give managers timely access to program revenue information and more
effectively present performance measures, which is critical for
implementation of the President's Management Agenda.
Despite Customs' progress in implementing recommendations GAO and
others have made over the years, numerous weaknesses continue to hinder
progress toward developing Customs' planned import system, the
Automated Commercial Environment (ACE).[Footnote 11] ACE is intended to
replace the current system used for collecting import-related data and
ensuring, among other things, that trade-related revenue is properly
collected and allocated. To ensure proper implementation of these
initiatives, DHS's management must continue to provide a sustained
level of commitment to its successful implementation. Until this system
is fully implemented, billions in trade-related revenue will continue
to be tracked by systems with inadequate controls. In addition, like
INS, Customs faces additional financial management challenges because
it was split into various components.
Transportation Security Administration:
TSA was created by the Aviation and Transportation Security
Act[Footnote 12] under the Department of Transportation (DOT) in
November 2001, to develop transportation security policies and programs
that contribute to providing secure transportation for the American
public. Despite its short history, the former TSA brings to DHS
numerous financial management issues. In fiscal year 2002, auditors
reported five material weaknesses and that TSA's systems were not in
substantial compliance with FFMIA.[Footnote 13] Specifically, auditors
found that TSA management had not established written accounting
policies and procedures to properly perform TSA's financial management
and budgeting functions during fiscal year 2002. This is an example of
what can happen when a newly created entity does not thoroughly develop
and implement standard accounting policies and procedures. DHS should
carefully review TSA's weaknesses to avoid experiencing them on a
departmentwide basis.
Auditors also reported that TSA did not maintain complete and accurate
records of its passenger and baggage screening equipment, most notably
its Explosive Detection System (EDS) equipment. For example, a
significant amount of fixed assets were found to not be recorded in the
financial statements and an adjustment of approximately $149 million
was made after year-end to properly record construction in progress for
the manufacture of EDS equipment. Until such weaknesses are resolved,
millions of dollars spent on new equipment and other fixed assets could
go unaccounted for or be improperly recorded, leaving TSA and DHS
vulnerable to fraud, waste, and abuse.
Another weakness reported by DOT's OIG was TSA's inadequate controls
over security screener contracts. Policies and procedures were not
established to provide an effective span of control to monitor
contractor costs and performance. This lack of oversight enabled
contractors to charge TSA up to 97 percent more than the contractors
charged air carriers prior to the federalization of the screener
workforce. This weakness provides further evidence of the importance of
carefully documenting policies and procedures early in the
implementation of a new organization.
Office of Domestic Preparedness:
Established in 1998, the former Office of Domestic Preparedness (ODP)
under DOJ's Office of Justice Programs provides grant funds and direct
support to, among other things, help address the equipment, training,
and technical assistance needs of state and local jurisdictions for
responding to terrorism and terrorist-related activities.
Since its inception, auditors have reported deficiencies in ODP's
ability to administer grant funds.[Footnote 14] In fiscal year 2002, we
reported grant management as one of DOJ's major performance and
accountability challenges.[Footnote 15] DOJ's OIG has found that while
millions of dollars had been awarded, the funds were not awarded
expeditiously, and grantees were very slow to spend the requested
monies.[Footnote 16] According to the OIG, more than half of the monies
requested and granted over the past few years remained unspent and some
of the equipment purchased by state and local jurisdictions was
unavailable for use because grantees did not properly distribute the
equipment, could not locate it, or were inadequately trained to use it.
Since the DOJ OIG reported on this issue in fiscal year 2002, DHS has
released more than $4.4 billion in grants to state and local
governments and private sector organizations. This increased level of
grants will only exacerbate these problems unless DHS works with
grantees to improve the accountability over these funds.
Coast Guard:
Unlike many of the larger agencies that transferred to DHS, the Coast
Guard did not have a stand-alone financial statement audit, but was
audited as part of DOT's consolidated audit. Although the auditors for
DOT have not reported significant financial management weaknesses at
the Coast Guard in recent years, the Coast Guard still uses DOT's
Departmental Accounting and Financial Information System, which, among
other things, was unable to produce auditable financial statements
based on the information within the system. In addition, we have listed
the Coast Guard as part of DHS's major management challenges due to its
dual missions of maritime safety and homeland security.[Footnote 17]
Concerns have also been reported regarding the Coast Guard's Deepwater
Procurement Project, which currently has an estimated cost of $17
billion over 20 years. It is intended to replace or modernize by 2022
all assets used in missions that generally occur offshore. However, due
to the events of September 11TH and the Coast Guard's expanded role in
homeland security, additional project requirements have been
identified, including accelerating the project to be completed in 10
years. These changes may result in increased annual funding needs for
the project, thus increasing the vulnerability to ineffective and
inefficient use of funds.
Secret Service:
The Secret Service, formerly under the Department of the Treasury
(Treasury), has also not had a stand-alone financial statement audit,
but was audited as part of Treasury's consolidated audit. Although from
an audit perspective the Secret Service was relatively small in
relation to the Internal Revenue Service and Bureau of the Public Debt
at Treasury, its missions of protecting the President and investigating
financial crimes are sensitive. Auditors for Secret Service may
identify internal control weaknesses that were not previously known,
but may now be identified since the Secret Service is proportionately a
larger component of DHS than it was under Treasury, and may therefore
be subjected to increased levels of audit scrutiny.
Other Entities:
Aside from the known weaknesses at the 7 larger component agencies
comprising DHS, some of the 15 smaller entities that transferred to DHS
may also have weaknesses not previously identified. As with the Secret
Service, these entities may be proportionately more significant at DHS
than they were at their legacy departments. In addition, once combined,
certain areas may be cumulatively subject to more audit scrutiny than
when they were dispersed throughout other departments. Any such
weaknesses will only exacerbate the extensive existing challenges.
Financial Reporting Challenges:
DHS plans to prepare financial statements for the 7 months ending
September 30, 2003. We support DHS's decision to do so, but recognize
that it will be very challenging given the problems DHS inherited,
compounded by the additional complexity of merging a number of diverse
entities, which literally has had to hit the ground running from day
one. Obtaining a consolidated DHS financial statement audit for that
same period will be equally challenging, but also worthwhile.
Since DHS is a new entity, its auditors have already begun performing
audit procedures on beginning balances (i.e., transferred balances) as
of March 1, 2003, the activity for the 7 months ending September 30,
2003, and ending balances. The transfer date of March 1 represents a
unique challenge because it does not fall on the end of a typical
accounting period, such as the end of the fiscal year or reporting
quarter. In addition, legacy departments' goals of reaching accelerated
reporting dates[Footnote 18] for fiscal year 2003 may be impaired if
DHS cannot provide intragovernmental information needed by these
departments on time. OMB and Treasury require agencies to reconcile
selected intragovernmental activity and balances with their "trading
partners" (i.e., other agencies) and to report on the extent and
results of intragovernmental activity and balance reconciliation
efforts. This information is necessary, not only for the agencies'
financial statements and reports, but also for the U.S. Consolidated
Financial Statements.
These are unique challenges that must be addressed to ensure that
accounts and amounts transferred to DHS are complete and accurate and
that legacy departments' reporting is not negatively impacted. Any
significant problems encountered could also negatively impact the
preparation and audit of the U.S. government's fiscal year 2003
financial statements.
In the longer term, DHS can only overcome its many challenges if it
establishes systems, processes, and controls that help to ensure
effective financial management and insists on the adherence to strong
financial practices. In addition to addressing the many ongoing
challenges existing in the programs of incoming agencies, DHS will need
to focus on building future systems as part of its enterprise
architecture approach to ensure an overarching framework for the
agency's integrated financial management processes. Plans and standard
accounting policies and procedures must be developed and implemented to
bridge these financial environments into an integrated DHS system.
Mr. Chairman, I would now like to discuss steps DHS should take to
establish sound financial management and business processes.
Steps for Establishing Sound Financial Management and Business
Processes:
Successful financial management of DHS will depend on the department
producing financial information that provides useful information for
executive decision making. In April 2000, we issued an executive guide
that provided guidance in creating value through financial
management.[Footnote 19] After studying the financial management
practices and improvement efforts of nine leading private and public
sector finance organizations, we identified several success factors,
practices, and outcomes associated with world-class financial
management. The organizations we studied include The Boeing Company,
Chase Manhattan Bank, General Electric Company, Hewlett-Packard, Owens
Corning, Pfizer Inc., and the states of Massachusetts, Texas, and
Virginia.
First and foremost, establishing the following goals is key to
developing a world-class finance organization with sound financial
management and business processes: (1) make financial management an
entitywide priority, (2) redefine the role of the finance organization,
(3) provide meaningful information to decision makers, and (4) build a
team that delivers results. I will discuss each of these goals in more
detail below, including several best practices that are critical in
meeting these goals. These practices lead to finance organizations that
provide timely information that is relevant to management, useful in
the decision-making process, and adds value to the organization. Since
it is a newly created entity, DHS has a unique opportunity to implement
the identified practices when developing financial policies and
activities to establish sound financial management and business
processes.
Establish Financial Management as an Entitywide Priority:
Based on our study of world-class financial organizations, making
financial management an entitywide priority is encouraged through the
following best practices: (1) providing clear, strong, executive
leadership, (2) building a foundation of control and accountability,
and (3) using training to change the culture and engage line managers.
Top leadership involvement is essential for a successful realignment of
this magnitude. Top leadership is responsible for allocating the
resources needed to improve financial management and for building and
maintaining the organization's commitment to doing business in a new
way. The CFO Act established the position of CFO in 24 agencies (app. I
lists the original 24 CFO Act agencies--FEMA has transferred to DHS
since the act was enacted) in the federal government. These CFOs are
given oversight authority regarding financial management matters and
are responsible for ensuring that sound financial management is in
place. As you know, DHS is not currently subject to the provisions of
the CFO Act, and thus has no legal requirement to comply with its
provisions. Although Secretary Ridge pledged financial management as a
priority in his May 1, 2003, testimony, passage of H.R. 2886, which
would amend the CFO Act to include DHS, is important to ensure the
department's long-term commitment to establishing sound financial
management and business processes.
Further, as DHS continues to integrate its 22 entities, it must build a
strong overall foundation of control and accountability. Management
should begin by considering any significant control issues with
agencies that are being integrated to form DHS, many of which I have
already highlighted. These issues must be addressed within the specific
agencies, as well as departmentwide to ensure they do not continue to
be control issues within the newly formed department. Additionally,
increases in accountability should be encouraged through the production
of financial and performance reports for major programs on a regular
and frequent basis to help in the decision-making process and strategic
planning. Ultimately, the foundation for regular and frequent reporting
will be through development of an integrated financial management
system--one capable of capturing data at an appropriate level of detail
and producing relevant and reliable information for users based on
their needs. In the case of DHS, the challenge of combining,
integrating, modernizing, and in some cases replacing the systems of
many disparate agencies will require careful planning if the conversion
is to be successful.
Redefine the Role of the Finance Organization:
As discussed earlier, many of the larger agencies that transferred to
DHS have a history of poor systems and inadequate financial management.
In order to establish sound financial management and business
processes, we found that world-class finance organizations redefined
the role of the finance organization and implemented an integrated
financial management structure that: (1) assessed the finance
organization's role in meeting the department's mission, (2) maximized
the efficiency of day-to-day accounting activities, and (3) organized
the finance organization to add value.
The ever-increasing competition for resources requires careful
allocation of funds. Without the support of an effective finance
organization, program managers may not be able to determine costs
associated with government activities, defend those costs, or identify
the benefits derived from them. The finance organization must
understand the department's mission and be able to provide information
in support of that mission. Of key importance is the ability of the
finance organization to efficiently complete routine accounting
activities, thus freeing resources to focus on other finance-related
priorities that are in support of the department's mission. As I
previously discussed, many of the larger agencies that transferred into
DHS spend significant time preparing financial statements using manual
work-arounds and have a history of poor financial management systems
and significant internal control weaknesses. Such a time-consuming
method of routine financial statement preparation does not allow for
efficient use of finance staff. As DHS develops its financial
management and businesses processes, it should focus on developing the
abilities to (1) efficiently and effectively complete routine
processing activities and (2) compile the data needed to measure
performance so that information is available to management on a day-to-
day basis.
Provide Meaningful Information for Decision Makers:
The overarching goal of the President's Management Agenda is the
improvement of government performance. The finance organization must
play a pivotal role in providing decision makers with the information
they need to measure performance. To efficiently and effectively
provide reliable information to decision makers, we identified three
best practices in our study of world-class finance organizations: (1)
develop systems that support the partnership between finance and
operations, (2) reengineer processes in conjunction with new
technology, and (3) translate financial data into meaningful
information.
To help agencies set goals and measure performance, the Congress
enacted the Government Performance and Results Act (GPRA) in 1993. As
part of GPRA, agencies, including DHS, are required to prepare a 5-year
performance plan and annual performance reports. These required reports
provide a strategic planning and management framework intended to
improve federal performance and hold agencies accountable for achieving
results. GPRA was intended, in part, to improve congressional decision
making by giving the Congress comprehensive and reliable information on
the extent to which federal programs are fulfilling their statutory
intent. Additionally, the President's Management Agenda includes
improved financial management performance as one of the five
governmentwide management goals. This initiative is aimed at ensuring
that federal financial systems produce accurate and timely information
to support operating, budget, and policy decisions. The finance
organization is a key component of a department's ability to meet its
requirements under GPRA and the objectives of the President's
Management Agenda.
Build an Effective Finance Team:
Over the years, the federal government has had difficulty attracting
and retaining talented financial management officials. Improving
financial performance is difficult without experienced leadership and
staff who are committed to success. Our study of several world-class
finance organizations indicated the following as best practices to
build a team that can deliver results: (1) develop a finance team with
the right mix of skills and competencies, and (2) attract and retain
talent.
Given the current demand on resources and the competition for qualified
employees, developing and retaining a talented finance team that is
capable of meeting the changing demands of the federal financial
workplace is an important goal. The lack of highly qualified financial
management professionals can hamper effective federal financial
management operations. The CFO Act requires OMB's Deputy Director for
Management to develop and maintain qualification standards for agency
CFOs and their deputies; provide advice to agencies on the
qualification, recruitment, performance, and retention of financial
management personnel; and assess the adequacy of financial management
staffs throughout the government. Additionally, the CFO Act places
responsibility with the CFO to recruit, select, and train finance
personnel.
To help department leaders manage their people and integrate human
capital considerations into daily decision making and the program
results they seek to achieve, we developed a strategic human capital
model.[Footnote 20] This model is applicable to department leadership
as a whole but is also applicable to finance organization leadership as
they seek to attract, develop, and retain talent. The two critical
success factors identified in our model to assist organizations in
creating results-oriented cultures are (1) linking unit and individual
performance to organizational goals and (2) involving employees in the
decision-making process. Agency leaders have other opportunities for
displaying their commitment to human capital. Continuous learning
efforts, employee-friendly workplace policies, competency-based
performance appraisal systems, and retention and reward programs are
all ways in which agencies can value and invest in their human capital.
The sustained provision of resources for such programs can show
employees and potential employees the commitment agency leaders have to
strategic human capital management. DHS should adopt these success
factors in building a financial management team that delivers results.
It is well recognized that mergers of the magnitude of DHS carry
significant risks, including lost productivity and inefficiencies.
Successful transformations of large organizations generally can take
from 5 to 7 years to achieve. Necessary management capacity,
communication and information systems, as well as sound financial
management and business processes must be established. Though creating
and maintaining these structures will be demanding and time consuming,
it is necessary to effectively implement the national homeland security
strategy.[Footnote 21]
Over the past several months, we have met with DHS's CFO, Acting
Inspector General and Assistant Inspector General for Audits, and its
independent auditors performing its financial statement audit for 2003.
We are committed to working in a coordinated effort with the Congress,
DHS, and its auditors to provide advice to DHS on developing a sound
financial management structure that will facilitate, and not hamper,
its mission of securing the homeland. We believe that passage of H.R.
2886 will further assist DHS in meeting this goal.
Comments on H.R. 2886:
Mr. Chairman, as you know, H.R. 2886 as introduced on July 24, 2003
would amend the CFO Act to (1) add DHS as a CFO Act agency and remove
FEMA as a CFO Act agency, (2) require DHS to obtain an audit opinion on
its internal controls, and (3) require DHS to include program
performance information in its performance and accountability reports.
In addition, H.R. 2886 as introduced would have provided a waiver
allowing DHS to forego a financial statement audit for fiscal year
2003. We understand an agreement has been reached to remove this waiver
from the proposed legislation. DHS's 2003 audit is already underway and
the department has stated it is committed to obtaining this audit. The
waiver option is, therefore, no longer needed, and we support dropping
the provision from H.R. 2886.
Inclusion of DHS as a CFO Act Agency:
We supported passage of the CFO Act in 1990 and continue to strongly
support its objectives of (1) giving the Congress and agency decision
makers reliable financial, cost, and performance information both
annually and, most important, as needed throughout the year to assist
in managing programs and making difficult spending decisions, (2)
dramatically improving financial management systems, controls, and
operations to eliminate fraud, waste, abuse, and mismanagement and
properly safeguard and manage the government's assets, and (3)
establishing effective financial organizational structures to provide
strong leadership. Achieving these goals is critical for establishing
effective financial management, and we fully support amending the CFO
Act to include DHS.
In developing the CFO Act, the Congress viewed the CFO as being a
critical player in the management of an agency. At the time, financial
management was not a priority in most federal agencies and was all too
often an afterthought. All too often, the top financial management
official wore many hats, which left little time for financial
management; did not necessarily have any background in financial
management; and focused primarily on the budget. By establishing
statutorily the position of CFO, requiring that the person in the
position have strong qualifications and a proven track record in
financial management, and giving this person status as a presidential
appointee, the Congress sought to change the then existing paradigm. Of
the 24 agencies named in the 1990 CFO Act, 16 were designated as Level
IV, Presidential appointee Senate confirmation positions and eight were
career positions. Today, CFOs have become influential across government
and the quality of the appointees has borne out the wisdom of the
Congress's insistence that this position be elevated (meaning it
reported to the top and had standing with other top officials). We have
seen an evolution of the CFO position and a quantum change in the
expertise and abilities of CFOs and the attractiveness of this position
to someone having the type of proven track record in financial
management that is needed in the federal government. In the end, the
key attribute is the quality of the person in the position to affect
change and carry out the role of CFO and whether the head of the agency
supports the CFO and empowers that person to do the job needed.
Appointment of the CFO by the President, subject to Senate
confirmation, is one way to help ensure that the goals of the CFO Act
are met and that has proven itself over time.
The CFO Act, as expanded by the Government Management Reform Act of
1994, also requires agencies to prepare and have audited financial
statements. The Congress added further emphasis to the importance of
sound financial management when it enacted FFMIA. Under the
Accountability of Tax Dollars Act of 2002,[Footnote 22] DHS, as an
executive branch agency with budget authority greater than $25 million,
would be required to obtain annual financial statement audits; however,
its auditors would not have to report on compliance with FFMIA.
Although DHS has appropriately contracted with independent auditors to
report on its systems compliance with FFMIA for fiscal year 2003, it is
not legally required to do so. FFMIA requires that agencies implement
and maintain financial management systems that substantially comply
with (1) federal systems requirements, (2) federal accounting
standards, and (3) the U.S. Government Standard General Ledger. The
ability to produce the data needed to efficiently and effectively
manage the day-to-day operations of the federal government and provide
accountability to taxpayers has been a long-standing challenge at most
federal agencies. As we discussed earlier, auditors reported that many
of the larger agencies that transferred to DHS were not in substantial
compliance with FFMIA prior to their transfer to DHS. Given these
preexisting compliance issues, in addition to issues that may arise
with system integration initiatives, it is critical that DHS be legally
required to comply with these important financial management reforms.
Opinion on Internal Controls:
Current OMB guidance for audits of government agencies and
programs[Footnote 23] requires auditor reporting on internal control,
but not at the level of providing an opinion on internal control
effectiveness. However, we have long believed and the Comptroller
General has gone on record in
congressional testimony[Footnote 24] that auditors have an important
role in providing an opinion on the effectiveness of internal control
over financial reporting and compliance with laws and regulations in
connection with major federal departments and agencies. For a number of
years, we have provided separate opinions on internal control
effectiveness for the federal entities that we audit because of the
importance of internal control to protecting the public's interest.
Specifically, we provide separate opinions on internal controls and
compliance with laws and regulations for our audits of the U.S.
government's consolidated financial statements, the financial
statements of the Internal Revenue Service and Federal Deposit
Insurance Corporation, the Schedules of Federal Debt managed by the
Bureau of the Public Debt, and numerous small entities' operations and
funds. Our reports and related efforts have engendered major
improvements in internal control.
As part of the annual audit of our own financial statements, we
practice what we recommend to others and contract with an independent
public accounting firm for both an opinion on our financial statements
and an opinion on the effectiveness of our internal control over
financial reporting and compliance with laws and regulations. Our goal
is to lead the way in establishing the appropriate level of auditor
reporting on internal control for federal agencies, programs, and
entities receiving significant amounts of federal funding.
Additionally, three agencies, Social Security Administration (SSA),
General Services Administration (GSA), and the Nuclear Regulatory
Commission (NRC) voluntarily obtain separate opinions on internal
control effectiveness from their auditors, which is commendable.
Another consideration as the Congress decides whether to enact new
requirements is that an opinion on internal controls is what has been
prescribed by the Congress for publicly traded corporations. A final
rule issued by the Securities and Exchange Commission in June 2003 and
effective in August 2003 provides guidance for implementation of
Section 404 of the Sarbanes-Oxley Act of 2002,[Footnote 25] which
requires publicly traded companies to establish and maintain an
adequate internal control structure and procedures for financial
reporting and include in its annual report a statement of management's
responsibility for and management's assessment of the effectiveness of
those controls and procedures in accordance with standards adopted by
the Securities and Exchange Commission. The final rule defines this
requirement and requires applicable companies to obtain a report in
which a registered public accounting firm expresses an opinion, or
states that an opinion cannot be expressed, concerning management's
assessment of the effectiveness of internal controls over financial
reporting.
Auditor reporting on internal control is a critical component of
monitoring the effectiveness of an organization's accountability. GAO
strongly believes that this is especially important for very large,
complex, or challenged entities. By giving assurance about internal
control, auditors can better serve their clients and other financial
statement users and better protect the public interest by having a
greater role in providing assurances of the effectiveness of internal
control in deterring fraudulent financial reporting, protecting assets,
and providing an early warning of internal control weaknesses. We
believe auditor reporting on internal control is appropriate and
necessary for publicly traded companies and major public entities
alike. We also believe that such reporting is appropriate in other
cases where management assessment and auditor examination and reporting
on the effectiveness of internal control add value and mitigate risk in
a cost-beneficial manner.
We know that some will point to increased costs as a reason to remove
this provision from the legislation. We believe that auditors who
follow the Financial Audit Manual--which was jointly developed by GAO
and the President's Council on Integrity and Efficiency (PCIE)[Footnote
26]--should ordinarily have little to no incremental costs associated
with such reporting.
We fully support having DHS, as well as all CFO Act agencies, obtain an
opinion on its internal control. If DHS is truly committed to becoming
a model federal agency, it should begin obtaining opinions on internal
control as soon as practical and set an example for other agencies to
follow and in keeping with the actions already taken by SSA, GSA, NRC,
and GAO.
Inclusion of Performance Information in Accountability Reports:
We also support agencies including program performance information in
agency performance and accountability reports, so that relevant
performance and financial information is presented in a consolidated
and useful manner. Agencies currently have the discretion to include
this information in a consolidated format. We strongly encourage DHS to
consolidate this information in its accountability report beginning
with fiscal year 2003.
In closing, the American people have increasingly demanded
accountability from government and the private sector. The Congress has
recognized, through legislation such as the CFO Act, that the federal
government must be held to the highest standards. We already know that
many of the larger agencies transferred to DHS have a history of poor
financial management systems and significant internal control
weaknesses. These known weaknesses provide further evidence that DHS's
systems and financial controls should be subject to provisions of the
CFO Act and thus FFMIA. We also strongly encourage DHS to become a
model agency and, as soon as practical, obtain an opinion on its
internal controls and report performance information in its
accountability reports.
Mr. Chairman, this concludes my statement. I would be happy to answer
any questions you or other Members of the Subcommittee may have at this
time.
Contacts and Acknowledgments:
For information about this statement, please contact McCoy Williams,
Director, Financial Management and Assurance, at (202) 512-6906, or
Casey Keplinger, Assistant Director, at (202) 512-9323. You may also
reach them by e-mail at [Hyperlink, williamsm1@gao.gov] or [Hyperlink,
keplingerc@gao.gov]. Individuals who made key contributions to this
testimony include Cary Chappell and Heather Dunahoo.
[End of section]
Appendix I: CFO Act Agencies:
24 CFO Act Agencies:
The Department of Agriculture The Department of Commerce The
Department of Defense The Department of Education The Department of
Energy The Department of Health and Human Services The Department of
Housing and Urban Development The Department of Interior The
Department of Justice The Department of Labor The Department of State
The Department of Transportation The Department of the Treasury The
Department of Veterans Affairs The Environmental Protection Agency
The National Aeronautics and Space Administration The Agency for
International Development The Federal Emergency Management
Agency[Footnote 27] The General Services Administration The National
Science Foundation The Nuclear Regulatory Commission The Office of
Personnel Management The Small Business Administration The Social
Security Administration:
[End of section]
Related GAO Products:
[End of section]
Fiscal Year 2002 U.S. Government Financial Statements: Sustained
Leadership and Oversight Needed for Effective Implementation of
Financial Management Reform. [Hyperlink, http://www.gao.gov/cgi-bin/
getrpt?GAO-03-572T] GAO-03-572T. Washington, D.C.: April 8, 2003.
Transportation Security Administration: Actions and Plans to Build a
Results-Oriented Culture. [Hyperlink, http://www.gao.gov/cgi-bin/
getrpt?GAO-03-190] GAO-03-190. Washington, D.C.: January 2003.
High-Risk Series: An Update. [Hyperlink, http://www.gao.gov/cgi-bin/
getrpt?GAO-03-119] GAO-03-119. Washington, D.C.: January 2003.
Major Management Challenges and Program Risks: Federal Emergency
Management Agency. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
03-113] GAO-03-113. Washington, D.C.: January 2003.
Major Management Challenges and Program Risks: Department of the
Treasury. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-109]
GAO-03-109. Washington, D.C.: January 2003.
Major Management Challenges and Program Risks: Department of Justice.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-105] GAO-03-105.
Washington, D.C.: January 2003.
Major Management Challenges and Program Risks: Department of Homeland
Security. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-102]
GAO-03-102. Washington, D.C.: January 2003.
Financial Management: FFMIA Implementation Necessary to Achieve
Accountability. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-
31] GAO-03-31. Washington, D.C.: October 1, 2002.
Homeland Security: Critical Design and Implementation Issues.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-957T] GAO-02-
957T. Washington, D.C.: July 17, 2002.
A Model of Strategic Human Capital Management. [Hyperlink, http://
www.gao.gov/cgi-bin/getrpt?GAO-02-373SP] GAO-02-373SP. Washington,
D.C.: March 2002.
Executive Guide: Creating Value Through World-class Financial
Management. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AMID-00-
134] GAO/AMID-00-134. Washington, D.C.: April 2000.
(195024):
FOOTNOTES
[1] High-Risk Series: An Update, GAO-03-119 (Washington, D.C.: January
2003).
[2] The seven major agencies that were transferred to DHS are:
Immigration and Naturalization Service, Federal Emergency Management
Agency, Customs Service, Transportation Security Administration, the
Office of Domestic Preparedness, the U.S. Coast Guard, and the Secret
Service.
[3] A material weakness is a condition that precludes the entity's
internal control from providing reasonable assurance that
misstatements, losses, or noncompliance, which are material in relation
to the financial statements or to stewardship information, would be
prevented or detected on a timely basis.
[4] FFMIA requires auditors, as part of CFO Act agencies' financial
statements, to report whether agencies' financial management systems
substantially comply with (1) federal financial management systems
requirements, (2) applicable federal accounting standards, and (3) the
federal government's standard general ledger at the transaction level.
[5] Pub. L. No. 101-576, 104 Stat. 2838 (1990).
[6] U.S. Department of Justice, Office of Inspector General,
Immigration and Naturalization Service Financial Statements, Fiscal
Year 2002, Audit Report No. 03-22 (Washington, D.C.: May 2003).
[7] U.S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Justice, GAO-03-105 (Washington, D.C.:
January 2003).
[8] Federal Emergency Management Agency, Annual Performance and
Accountability Report Fiscal Year 2002 (Washington, D.C.: Jan. 24,
2003).
[9] A limited scope review was performed in lieu of a financial
statement audit due to security clearance procedures and other matters
related to the access and handling of sensitive information, which
delayed the start of the IT evaluation and thus prevented the auditors
from completing test work on IT general and application controls.
[10] U.S. Department of the Treasury, Office of Inspector General,
Financial Management: Report on Internal Control Over Financial
Reporting of the U.S. Customs Service for Fiscal Year 2002, OIG-03-033
(Washington, D.C.: Dec. 16, 2002).
[11] U.S. General Accounting Office, Customs Service Modernization:
Automated Commercial Environment Progressing, but Further Acquisition
Management Improvements Needed, GAO-03-406 (Washington, D.C.: February
2003).
[12] Pub. L. No. 107-71, 115 Stat. 597 (2001).
[13] U.S. Department of Transportation, Office of Inspector General,
Quality Control Review of Audited Financial Statements for Fiscal Year
2002, TSA, QC-2003-016 (Washington, D.C.: Jan. 27, 2003).
[14] U.S. Department of Justice, Office of Inspector General, Office of
Justice Programs: State and Local Domestic Preparedness Grant Programs,
02-15 (Washington, D.C.: March 2002).
[15] U.S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Justice, GAO-03-105 (Washington, D.C.:
January 2003).
[16] U.S. Department of Justice, Fiscal Year 2002 Performance and
Accountability Report (Washington, D.C.: Jan. 31, 2003).
[17] U.S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Homeland Security, GAO-03-102 (Washington,
D.C.: January 2003).
[18] The Office of Management and Budget (OMB) has issued accelerated
reporting requirements that require agencies to prepare financial
statements close to the end of the reporting period. Under these
requirements, agency performance and accountability reports for fiscal
year 2002 were due to OMB by February 1, 2003, and by fiscal year 2004
agencies will be required to submit these reports by November 15, 2004.
In addition, in fiscal year 2003, agencies are required to prepare and
submit quarterly financial statements no later than 45 days after the
end of the reporting period.
[19] U.S. General Accounting Office, Executive Guide: Creating Value
Through World-class Financial Management, GAO/AIMD-00-134 (Washington,
D.C.: April 2000).
[20] U.S. General Accounting Office, A Model of Strategic Human Capital
Management, GAO-02-373SP (Washington, D.C.: Mar. 15, 2002).
[21] GAO convened a forum on September 24, 2002, to identify and
discuss useful practices and lessons learned from major private and
public sector organizational mergers, acquisitions, and
transformations. U.S. General Accounting Office, Highlights of a GAO
Forum: Mergers and Transformation: Lessons Learned for a Department of
Homeland Security and Other Federal Agencies, GAO-03-293SP (Washington,
D.C.: November 2002).
[22] Pub. L. No. 107-289, 116 Stat. 2049 (2002).
[23] Office of Management and Budget, Audit Requirements for Federal
Financial Statements, Bulletin 01-02 (Washington, D.C.: Oct. 16, 2000).
[24] U.S. General Accounting Office, Fiscal Year 2002 U.S. Government
Financial Statements: Sustained Leadership and Oversight Needed for
Effective Implementation of Financial Management Reforms, GAO-03-572T.
[25] Pub. L. No. 107-204, 116 Stat. 745 (2002).
[26] Generally referred to as the GAO/PCIE Financial Audit Manual.
[27] Under the Homeland Security Act of 2002, FEMA transferred to DHS
and under H.R. 2886 would no longer be considered a CFO Act agency.
