Internal Financial Controls in Federal Agencies' Accounting Systems

GAO participated in congressional oversight committee hearings on the need to improve internal control systems in the Federal Government. With increasing costs of Government operations and the national debt over $1 trillion, the public has a right to be concerned about the efficiency of Government operations. GAO stated that Federal officials can restore the public's confidence in Government operations by improving financial management systems, including budgeting, accounting, and internal controls. Many agencies' internal control systems are not the result of systematic planning. They are the product of many program and administrative changes made over the years, and GAO audit efforts have disclosed numerous instances where agencies are operating internal control systems susceptible to fraud, waste and abuse. A major problem GAO frequently finds is that Federal agencies are operating outdated, poorly designed accounting systems. While GAO generally supports agency efforts to consolidate accounting operations because they lower costs, it noted that it is important that such systems have strong internal financial controls. The Federal Government is a long way from having agencies operate effective internal controls. However, the Financial Integrity Act is an important step in putting the Federal Government's financial management house in order. One GAO responsibility under the act is the publication of internal control standards to guide agencies in establishing and maintaining good systems, and the inspector general community will have a very important role under this new legislation.