NCPA - National Center for Policy Analysis

What About Accounting Practices at Federal Agencies?

March 1, 2002

Federal agencies have long been notoriously poor at keeping their financial records in shape. While the latest audits by the Office of Management and Budget show modest improvements recently, OMB director Mitchell Daniels Jr. cautions that the improvements "should not be oversold and we are far from satisfied."

  • Five major departments -- Justice, Transportation, Education, Agriculture and the U.S. Agency for International Development -- have showed improvement in their financial accounting.
  • But this progress was partially offset by deterioration at the Federal Emergency Management Agency and the National Aeronautics and Space Administration.
  • Daniels called the Pentagon's notoriously problem-plagued accounts "a case unto itself."
  • The Defense Department neither improved nor deteriorated -- instead, there was a disclaimer attached to its audit explaining that OMB's standards couldn't be applied to its accounting practices.

The remaining agencies received favorable reviews of their audits.

The Bush administration's initiative to tie government funding more directly to agency performance adds greater emphasis to the quest for accurate bookkeeping. Without that, performance evaluation is hobbled, at best.

To improve internal audits, OMB is implementing a series of steps, including making audits due one and a half months after the end of the fiscal year by 2004 from the current standard of five months, requiring quarterly reporting, improving financial systems and integrating the accountability reports with government performances reports.

Source: Dow Jones Newswires, "U.S. Agencies' Accounting Has Improved, But Work Is Needed, According to Audits," Wall Street Journal, March 1, 2002.


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