Financial Management

The State Department's financial operations and systems, which account for more than $5 billion in annual appropriations, are weak and have been for many years. Responsibility for financial management remains fragmented. State's financial operations continue to be hampered by inexperienced and inadequately trained financial management staff. Also, domestic and overseas financial systems are incompatible, have been allowed to deteriorate, are out-of-date, and cannot meet managers' needs. The Department acknowledges the seriousness of its problems. To meet the requirements of the Chief Financial Officers Act and conform its financial systems to federal accounting requirements, the Department has begun strengthening its Chief Financial Officer structure, addressing the problem of fragmented responsibilities, and developing an overall strategy for resolving its long-standing financial management weaknesses. A financial systems improvement plan is critical to guiding the Department's efforts to standardize and integrate financial systems, and the financial information needs of managers and others will have to be identified and documented.

GAO found that State: (1) lacked a centralized management entity to control financial operations, which led to duplication and cost inefficiencies; (2) consolidated many financial operations under the Chief Financial Officer (CFO); (3) planned to delegate control of overseas posts' financial management operations to various bureaus that would operate under CFO-directed policies; (4) lacked fully qualified and trained financial management personnel and planned to supplement existing staff with trained specialists, provide training exercises and experience to personnel, and increase supervision; (5) financial systems lacked the capacity to handle all transactions, and in some cases were obsolete; (6) planned to standardize and integrate its primary and subsidiary accounting systems so that all data would be processed uniformly and validated based on standard criteria; and (7) developed a reasonable strategy to improve its financial operations and systems, which included faster online response time, streamlined processing capabilities, and better system linkages. GAO also found that: (1) State's accounting systems did not provide a fully functional general ledger to support its financial statements, analysis, and oversight of financial operations; (2) managers did not receive adequate information on real property, personal property, and foreign nationals' benefits to monitor their programs properly; and (3) State's strategy for improving financial operations did not address its financial systems' ability to provide managers with needed financial information as required by regulations.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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