Sometimes, reporting problems can stem from faulty or slow information-technology installation. NASA, for instance, is in the midst of a seven-year agencywide effort ending in 2009 to streamline its financial operations and management information systems.
NASA financial chief Gwendolyn Sykes says the agency's goal is long-term. "While clean opinions might have resulted from maintaining the old systems and procedures," she wrote in a response to NASA's inspector general, Robert Cobb, keeping the status quo would have perpetuated the same systemic challenges. "This is an opportunity to create a solid foundation for the future," she added.
In preparing and analyzing its 2004 financial statements, however, NASA's management identified "conversion and data-integrity issues" and significant errors in balances reported on its financials, according to a report by Ernst & Young, the agency's independent auditor. The errors included departures from generally accepted accounting principles. To the agency's credit, NASA installed internal controls and beefed up its reporting policies and procedures in the last quarter of fiscal 2004, according to E&Y.
The Department of Defense, the largest U.S. government agency, also believes progress is being made; high-level support for its "Business Management Modernization Program" starts with Defense Secretary Donald Rumsfeld.
"We will get a clean audit in 2007," said Linda Furiga, comptroller of the Defense Logistics Agency, who cited the success of those reform efforts during an interview with CFO last year. The agency is responsible for much of the Defense Department's procurement, supplies, and distribution.
But Kutz isn't holding his breath. "We don't think the department has a credible plan right now," he says, citing a lack of consistent leadership and accountability and the challenge of melding thousands of siloed financial-information systems among its divisions. Adds Kutz, "This isn't going to happen just because of the passage of time."
Craig Schneider writes frequently about regulatory matters. Contact him at CraigSchneider@cfo.com.
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