U.S. Accounting Systems Found Badly Flawed : Billions Are Reported Involved as Agencies Fail to Meet Standards

Congressional investigators have found that billions of taxpayer dollars are lost or mismanaged through the failure of more than half of the government’s 427 accounting systems to meet federal requirements, the General Accounting Office said in a report Wednesday.

“The major problems so far remain largely unchanged,” the GAO said in its study, released three years after Congress passed the Financial Integrity Act to curb fraud, waste and abuse in government.

“Widespread and often long-standing weaknesses and breakdowns in agency internal controls continue to result in wasteful spending, poor management and losses involving billions of dollars,” Comptroller General Charles A. Bowsher said. “The weaknesses also have made outright fraud more feasible.”

Problems Not Mentioned

Although most of the agencies found problems with their own accounting systems, their reports to Congress and the White House often do not mention them and thus do not provide an “accurate, clear assessment” of their overall status, the GA0 said in the 71-page report.

The investigators said serious internal control problems continue in a wide range of areas, including weapons procurement, Social Security and the collection of education, small business and other government loans.

“Overcharges for goods and services, cost overruns, overpayments, the purchase of faulty equipment and a host of problems related directly to inadequate government internal control and accounting systems . . . erode the public’s confidence in government,” the GAO said.

“Adding to the government’s dilemma is the overall poor condition of agency accounting and financial management systems,” it added.

226 Systems Cited

Of the 427 accounting systems used by 18 federal agencies, 226 were cited. The GAO said they either had not complied with the government-wide standards in use for 35 years or their officials did not know whether they did.

The congressional watchdog agency also disputed claims by 12 departments or agencies responsible for about 55% of the federal budget that their internal controls now provide a “reasonable assurance” for protecting against waste and fraud.

The GAO called those assurances misleading, saying that some of the agencies had not yet evaluated their internal controls while others made the assertion even after finding “uncorrected material weaknesses.”

It specifically criticized the White House Office of Management and Budget for allowing agencies to file reports omitting specific weaknesses in key accounting systems.

For example, the investigators said, the Small Business Administration last year reported that its accounting systems--”taken as a whole”--conformed with government requirements.

Systems Not Tested

But the agency had not even tested five of its eight accounting systems through which about 87% of its annual $2-billion budget is handled.

The GAO said the Justice Department claimed that its controls were in compliance with government regulations, despite data-processing weaknesses that allowed employees of the Immigration and Naturalization Service to sell permanent resident cards to illegal aliens.

“We continue to believe that most agencies should use an ‘except for’ reporting format” that would allow them to say which systems do or do not comply or have not been adequately evaluated, the GAO said.

Deputy White House Budget Director Joseph R. Wright Jr. said in a formal reply to the GAO report that its recommendations would “require much more detailed testing and resulting cumbersome reporting and even more paperwork.”

“The bottom line,” Wright said, is that the GAO showed “only four instances of material weaknesses not included among the 335 disclosed by agency management.”