[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
 FINANCIAL MANAGEMENT CHALLENGES AT THE GENERAL SERVICES ADMINISTRATION

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                      FINANCE, AND ACCOUNTABILITY

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 7, 2006

                               __________

                           Serial No. 109-212

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCHMIDT, Ohio                       (Independent)
------ ------

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

   Subcommittee on Government Management, Finance, and Accountability

              TODD RUSSELL PLATTS, Pennsylvania, Chairman
VIRGINIA FOXX, North Carolina        EDOLPHUS TOWNS, New York
TOM DAVIS, Virginia                  MAJOR R. OWENS, New York
GIL GUTKNECHT, Minnesota             PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
JOHN J. DUNCAN, Jr., Tennessee

                               Ex Officio
                      HENRY A. WAXMAN, California

                     Mike Hettinger, Staff Director
               Tabetha Mueller, Professional Staff Member
                          Erin Phillips, Clerk
            Adam Bordes, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 7, 2006.....................................     1
Statement of:
    Turco, Kathleen, Chief Financial Officer, General Services 
      Administration; and Eugene L. Waszily, Jr., Assistant 
      Inspector General for Auditing, General Services 
      Administration.............................................     5
        Turco, Kathleen..........................................     5
        Waszily, Eugene L........................................    28
Letters, statements, etc., submitted for the record by:
    Platts, Hon. Todd Russell, a Representative in Congress from 
      the State of Pennsylvania, prepared statement of...........     4
    Turco, Kathleen, Chief Financial Officer, General Services 
      Administration, prepared statement of......................     9
    Waszily, Eugene L., Jr., Assistant Inspector General for 
      Auditing, General Services Administration, prepared 
      statement of...............................................    30


 FINANCIAL MANAGEMENT CHALLENGES AT THE GENERAL SERVICES ADMINISTRATION

                              ----------                              


                        WEDNESDAY, JUNE 7, 2006

                  House of Representatives,
Subcommittee on Government Management, Finance, and 
                                    Accountability,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m., in 
room 2154, Rayburn House Office Building, Hon. Todd Russell 
Platts (chairman of the subcommittee) presiding.
    Present: Representatives Platts and Towns.
    Staff present: Mike Hettinger, staff director; Tabetha 
Mueller, professional staff member; Dan Daly, counsel; Erin 
Phillips, clerk; Gary Lawkawski, intern; Adam Bordes, minority 
professional staff member; and Cecelia Morton, minority office 
manager.
    Mr. Platts. A quorum being present, this hearing of the 
Government Reform Subcommittee on Government Management, 
Finance, and Accountability will come to order.
    Operations at the General Services Administration affect 
the entire Federal Government. GSA is the Government's business 
manager.
    All Federal agencies rely on GSA for support services and 
management guidance.
    In addition to this important mission, GSA is the lead 
agency for the Office of Management and Budget's financial 
management line of business, and it is one of four designated 
shared service providers.
    In this dual role, GSA will not only bid to provide 
financial management services for other Federal agencies, it 
will set the standards for the Government-wide implementation 
of this critical line of business.
    For these reasons, the subcommittee was troubled when GSA 
was unable to earn a clean opinion on its audited financial 
statements, coming on the heels of improper acquisition 
practices that were uncovered 3 years ago and the prospect of 
declining revenues.
    This hearing will provide an important discussion of what 
GSA is doing to improve management functions and to restore 
faith in its business practices.
    This certainly is a critical time for GSA.
    The agency has a significant reorganization underway, new 
leadership in several key positions, including a new 
administrator, increased internal controls requirements, and 
the added challenge of managing a Government-wide initiative 
with broad implications.
    As GSA rebuilds its reputation and moves forward, sound 
financial management must serve as its foundation.
    We are pleased to have with us today Ms. Kathleen Turco, 
Chief Financial Officer at GSA, and Mr. Eugene Waszily, 
Assistant Inspector General for Auditing. We thank both of you 
for being here today and for your written testimonies which you 
provided in advance and for your oral testimonies you're about 
to give.
    Before we swear you in and also recognize our ranking 
member, I want to recognize we are delighted to have the new 
Administrator, Lurita Doan with us.
    Ms. Doan, thank you for being with us. We appreciate your 
commitment to financial management, as evidenced by your 
presence here today, and I saw in the Federal Times interview 
as you highlighted the challenges going forward, financial 
management being one of your priorities and returning to that 
track record of clean audits that GSA has long maintained. We 
are grateful for your presence today and the assistance of your 
colleagues here today, as well.
    Ms. Doan. Thank you.
    Mr. Platts. With that, I will recognize the ranking member, 
Mr. Towns from New York, for the purposes of an opening 
statement.
    Mr. Towns. Thank you very much, Mr. Chairman. I would like 
to associate myself with your remarks welcoming the new 
Administrator. Delighted to have you on-board.
    Also, Mr. Chairman, let me thank you for having this 
hearing.
    Today's hearing comes at a pivotal time for GSA, as it 
works to both remedy its accounting deficiencies and 
restructure its acquisition programs.
    The challenges ahead are formidable due to financing 
irregularities uncovered within GSA's acquisition fund in 2003.
    In response, some agencies have sought to keep more bulk 
purchasing working in-house instead of utilizing GSA's 
programs.
    On balance, these events have altered the business model of 
GSA and have increased the financial uncertainty for its 
programs.
    While I believe the establishment of one unified Federal 
acquisition service fund is a good start at reform, I am 
uncertain about the outcome of these efforts due to the results 
of GSA's 2005 financial statement.
    Common sense dictates that restructured programs having 
ineffective financial management controls are unlikely to 
succeed.
    In addition, I am dismayed with the administration's effort 
to use GSA as a financial center of excellence for other 
agencies.
    If GSA is failing to achieve a clean annual audit, as it 
did in 2005, how can we expect it to meet the financial 
management needs of other agencies? I do not see how.
    In closing, it is my hope that our witnesses today can 
demonstrate the effectiveness of GSA's reforms so it can 
continue as the premiere acquisition agency for the Federal 
Government.
    Mr. Chairman, again, let me conclude and to say to you 
thank you so much for having this hearing, and I look forward 
to hearing from our witnesses.
    Mr. Platts. Thank you, Mr. Towns.
    If I could ask our witnesses to swear in before their 
testimony, please stand and raise your right hands.
    [Witnesses sworn.]
    Mr. Platts. Thank you.
    You may be seated.
    The clerk will note that both witnesses affirmed the oath.
    Again, we appreciate your testimonies. We will ask you to 
keep your opening statements to roughly 5 to 7 minutes.
    If you need more time, with the smaller setting here today, 
we understand that, but we are anxious to get to the kind of 
exchange with Q&A, as well.
    Ms. Turco, if you would like to begin.
    [The prepared statement of Hon. Todd Russell Platts 
follows:]

[GRAPHIC] [TIFF OMITTED] T3117.001

STATEMENTS OF KATHLEEN TURCO, CHIEF FINANCIAL OFFICER, GENERAL 
SERVICES ADMINISTRATION; AND EUGENE L. WASZILY, JR., ASSISTANT 
INSPECTOR GENERAL FOR AUDITING, GENERAL SERVICES ADMINISTRATION

                  STATEMENT OF KATHLEEN TURCO

    Ms. Turco. Thank you, Mr. Chairman, Mr. Towns, other 
distinguished members of the subcommittee.
    I am Kathleen Turco, the Chief Financial Officer for the 
General Services Administration.
    In order to fully understand the disclaimer of opinion of 
GSA's fiscal year 2005 audit, some background of GSA and its 
business is helpful.
    GSA recorded $18 billion in revenues in 2005, paid $1.4 
million vendor invoices, and issued 475,000 billings to Federal 
customers.
    GSA is primarily comprised of three revolving funds. A 
large portion of our business with our customers is for time 
and materials, as opposed to fix-fee contracts. Therefore, we 
often are not completely certain when a project is considered 
financial complete, because we do not always know when a vendor 
has billed us for all their costs. This is important, because I 
will refer to residual balances from completed projects 
throughout my statement.
    Additionally, with time and material contracts, there is an 
incentive to retain funding when a project is perceived as 
complete, just in case a vendor bills the GSA for final and 
unexpected expenses.
    The disclaimer we received in 2005 from our auditors was 
related to our budgetary accounts.
    I want to note that our proprietary accounts--revenues, 
expenses, assets, liabilities, and equity--in all three GSA 
revolving funds did receive clean opinions.
    Only the budgetary accounts in the information technology 
fund and the general supply fund received disclaimers of 
opinion.
    So, why the disclaimer?
    In August 2005, GSA auditors informed me that they would 
not be able to rely on GSA's internal controls over processing 
of unfilled customer orders and obligations.
    Unfilled customer orders are orders for goods and services 
from our customers for which the good or service has not yet 
been provided.
    Obligations are amounts that are designated for a specific 
customer requirement, and maybe either delivered or 
undelivered.
    The auditors found residual unfilled customer order and 
obligation balances from completed projects that were no longer 
valid. They also noted issues around incorrect amounts such as 
$10,000 being recorded instead of $1,000, as well as an 
apparent lack of a bona fide need behind some orders.
    A bona fide need is a need that is current, clear, and 
defined within a given fiscal year, as required for a customer 
to validly obligate their budget authority. If no bona fide 
need exists, there cannot be a valid obligation or an unfilled 
customer order in GSA or its customers' financial records.
    The auditors asked us to provide detailed records. We faced 
a major problem, because financial reporting for this audit was 
for fiscal year 2005, as well as the prior year, 2004, and it 
was August 2005.
    We simply could not conduct a complete review of GSA 
records by year-end and meet the November 15th Government-wide 
reporting date.
    To provide detailed records would have required a complete 
review of unfilled customer orders and obligations for 2005.
    Also, we could not recreate the exact detail that went into 
the 2004 fiscal year financial report.
    Instead, we decided to conduct a statistical sample of the 
fiscal year 2005 year-end numbers and report statistically 
valid data by reviewing 1,200 files and statistically 
calculating the unfilled customer order and obligation 
balances.
    Unfortunately, we were not able to statistically calculate 
unfilled customer orders and obligations as of September 30, 
2004.
    We simply could not go back in time to recreate the 
populations that were needed for sampling.
    Further complicating this challenge was that our financial 
system of record received summary information that could not be 
aged to identify the oldest and most suspect balances.
    The specifically statistical amounts we adjusted due to 
this analysis in our fiscal year 2005 year-end numbers amounted 
to 1 billion of unfilled customer orders and $444 million of 
obligations across our three funds.
    This is significant, because GSA's materiality level is 
$450 million.
    We clearly exceeded the materiality level.
    With the statistical sampling finished, we reported what we 
considered to be statistically solid fiscal year 2005 year-end 
numbers, but we did not have good fiscal year 2004 ending 
numbers, which should be the same as the fiscal year 2005 
beginning numbers. This led to the loss of the clean opinion.
    What are we doing in 2006 to address these problems?
    GSA has undertaken a substantial revision to our financial 
internal control program.
    The factors contributing to our disclaimer are under 
corrective action.
    Aging reports have been put in place. Aging reports will 
allow us to identify completed projects that have residual 
balances and projects for which there is no longer a bona fide 
need.
    We have developed reports that break out unfilled customer 
orders, obligations, accounts receivable, and accounts payable 
balances by business line, by program, by fiscal year, and by 
region. Reports allow us to focus our reviews and clean up the 
oldest and, therefore, most suspect balances.
    Along with the aging reports, we are reviewing all 
significant files.
    For the Federal buildings fund, we are reviewing 75 percent 
of all obligations, as well as 100 percent of many of the 
fiscal year 2004 and prior unfilled customer orders that have 
no financial activity in the last 12 months.
    In the general supply fund, we are reviewing the files of 
obligations in question, and we have already completed and 
corrected 47 million of the estimated 58 million. For the 
unfilled customer orders, we have corrected 26 million of the 
estimated 33 million problems.
    The information technology fund, where we were most 
challenged--we have completed reviewing 95 percent of the 
fiscal year 2005 and prior unfilled customer orders, and we are 
on track to return over 600 million in invalid unfilled 
customer orders to our customers.
    Finally, we are reviewing all obligations with our five 
largest vendors that comprise the majority of the information 
technology fund obligations.
    In addition, we have issued three significant policies, 
including a streamlined de-obligation policy, an unfilled 
customer order certification requirement policy, and a policy 
requiring certifications for obligations.
    Another problem area was inadequate reconciliation of GSA's 
business systems to our core financial system. I have mandated 
and implemented monthly and semi-annual reconciliations between 
all business systems and core financial systems.
    The difference here led, in fiscal year 2005, to a material 
adjustment of $500 million on the books. We were able to 
correct this, but clearly, we had a problem in terms of using 
our primary reporting system to produce timely or accurate 
information on a day-to-day basis.
    We have also established an automated routine practice of 
compiling and comparing budgetary and proprietary accounts.
    This allows us to ensure data moves in sync between our 
budgetary and proprietary accounts so that both contain 
accurate financial information and the balances are identical.
    This effort has reviewed 2.5 million transactions, and it 
is currently 99 percent complete.
    The challenges we face in cleaning up our disclaimer have 
driven us to quickly implement OMB Circular A-123, management's 
responsibility for internal control. I can factually report 
that we have implemented the process for assessing, 
documenting, and reporting.
    We have completed the planning process as well as 
evaluation and controls, including cross-walking our key 
business processes to our material financial reporting line 
items.
    We have documented our most important key financial 
reporting processes and conducted a risk assessment.
    To ensure coverage of all key controls, we selected five 
regional offices, a warehouse operation, and several 
headquarters locations to perform testing.
    We are complete in our testing. We are currently conducting 
followup work and evaluating the results of our testing.
    We will meet the June 30, 2006, reporting deadline to 
provide our statement of assurance of the effectiveness of 
internal controls for financial reporting. Any problems we 
find, we will have the ability to address between now and the 
close of the fiscal year.
    The efforts I have described are an appropriate aggressive 
approach to cleaning up our financial house. If carried out 
effectively, we should regain the clean audit opinion.
    We do face a hurdle.
    As I stated earlier, we calculated statistical projects of 
our unfilled customer order and obligations at the end of 2005.
    Statisticians from three separate firms, including our 
external auditors, all agreed on the sampling and projecting 
methodology, but ultimately, our projections were estimates.
    If our review efforts this year find errors materially 
different in what we estimated last year, our 2005 projections 
may be materially misstated, which means our 2005 ending 
balances and, therefore, our fiscal year 2006 beginning 
balances would be materially misstated.
    In the event--and this is key--that we are unable to 
quantify the difference between our reviews and statistical 
projections, a clean opinion may not be achievable for fiscal 
year 2006.
    Current indicators are that this is unlikely, but I would 
be remiss in not acknowledging this possibility.
    Serving other Federal agencies is the core mission of GSA.
    OMB selected GSA to serve as one of the four financial 
management lines of businesses.
    I would like to assure the subcommittee that the disclaimer 
has no impact on GSA's ability to provide financial services to 
other agencies, because the primary reason behind the loss of a 
clean audit opinion was residual balances from past IT 
projects.
    It was not from our financial system software or reporting 
practices.
    As a shared service provider for over 30 years, we are 
currently providing financial services to 47 independent 
agencies, boards, and Presidential commissions, as well as a 
payroll service provider to 37 agencies. We spent the last 6 
months focused on establishing our Federal integrated solutions 
center and developing a marketing plan to provide financial 
management services and products to our current and future 
Federal clients.
    Our shared services are built upon a financial management 
enterprise architecture foundation. We are in accordance with 
the financial management enterprise architecture standards, and 
in fact, our financial management enterprise architectural work 
is being used by OMB's Financial Systems Integration Office 
[FSIO], as the foundation document for dividing common business 
processes and data. Security and privacy protection of data has 
also been a priority. We believe our financial systems controls 
have been strengthened considerably over the last few years, as 
evidenced by our recent scorecard grade of an A-minus for 
Federal Information Security Act compliance in this area.
    GSA is committed to getting back our clean opinion for 2006 
and doing what is best for the Federal Government and our 
client agencies.
    I welcome your questions.
    [The prepared statement of Ms. Turco follows:]

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    Mr. Platts. Thank you, Ms. Turco.
    Mr. Waszily.

                 STATEMENT OF EUGENE L. WASZILY

    Mr. Waszily. Good afternoon, Mr. Chairman, Mr. Towns.
    Thank you for the opportunity to participate in today's 
hearing on the status of financial management services at the 
General Services Administration.
    Sound financial practices are the bedrock upon which all 
successful enterprises are built, and Federal agencies are no 
exception.
    We appreciate the subcommittee's interest in this important 
subject.
    Today I would like to provide you a brief overview of my 
formal written comments, and I will be addressing three 
particular topic areas: one, the GSA financial system 
framework, the results of the 2005 financial statement audit, 
and a brief comment on the implementation of the revised 
Federal Managers Financial Integrity Act, A-123.
    Up until about 5 years ago, the core accounting system for 
GSA was hosted completely on a mainframe computer system that 
was actually built in the 1970's and has been modified 
countless times over the intervening years. It was determined 
to have become highly ineffective and very expensive to 
operate.
    Central to the new accounting system, which is named 
Pegasus, is the concept of enterprise architecture, and under 
this scheme, it mandates that each financial system that feeds 
into the accounting system must be compatible with the core 
accounting system.
    During the implementation of Pegasus, the agency breached 
this fundamental requirement and permitted one of the service 
components to develop a management information system that 
subsequently proved to be incompatible with the accounting 
system.
    After about 4 years of development of that system, it was 
determined to be fatally flawed, and it had to be scrapped. It 
also caused the CFO's office inordinate amounts of resources to 
unwind the inaccurate accounting information that had been 
provided by this feeder system.
    If there is anything to learn from the GSA experience in 
this area, it is that once the fundamental rules of development 
are set, major departures cannot be permitted.
    Other delays have been experienced in some of the related 
on-line systems that are part of the modernization initiative, 
and while these delays are unwelcome, I think it should be 
viewed that GSA has been making substantial progress in its 
modernization efforts and that, clearly, as I like to put it, 
the glass is half full and getting fuller all the time.
    Progress, particularly in the past 2 years, has been 
substantially better than in the prior 2 years.
    Turning to the financial statement audit of 2005, for 17 
consecutive years, GSA had received unqualified or what are 
called clean opinions, and while the 2005 financial statement 
audit again confirmed the fair presentation of GSA's 
proprietary accounts, the external auditors were unable to 
verify some of the financial information presented in the 
supporting statements.
    Signs of these problems originally occurred during audits 
that my office conducted back in 2004. These were procurement 
audits.
    Alert to the problems that we were finding with some of the 
underlying documentation for those procurements, the external 
auditors in the 2005 audit cycle expanded their review of the 
budgetary accounts, finding that, for several years prior, that 
the Federal Technology Service had been mis-applying and mis-
counting for obligational authorities that had been transferred 
to it from client agencies.
    Because of these inaccurate accounting practices, the 
problems have been accruing for almost 8 years. The budgetary 
misstatements were in excess of $900 million, which, again, as 
Ms. Turco pointed out, materially misstated our budgetary 
accounts.
    I can attest that GSA has gone to great lengths to clear up 
the inaccuracies in its budgetary balances. I believe the 
stumble that occurred in 2005 will actually benefit the agency 
going forward and that this episode has forced GSA to look more 
closely at its business transactions and has also provided the 
incentives to grant the CFO greater leverage to establish more 
control and oversight over the fiscal activities of the entire 
agency.
    Up until about 2 or 3 years ago, the CFO was viewed as a 
supporting role for the organization, but many of the line 
components really dictated how the accounts were managed, and a 
lot of the information that went to the CFO's office was only 
the aggregate information, not the detail.
    So, it was very hard to assess when a problem was 
festering.
    Under the new role, the CFO office has a much better 
opportunity to identify problems and head them off before they 
become major issues.
    I would like to stress, though, that as Ms. Turco pointed 
out, the basic accounts of GSA and the stewardship of assets 
under its management were never misrepresented or subject to 
undue risk during this time.
    On the subject of internal controls and the new A-123 
requirements, I am very pleased with the enhanced version of A-
123. It is near and dear to an auditor's heart.
    I am even more pleased with the steps that Deputy 
Administrator Bibb and Ms. Turco have taken to place GSA in the 
forefront of implementation of the new process.
    GSA is faithfully following the implementation guidance 
provided by OMB in following the five-step process which 
includes the planning of the control testing, doing various 
testing at the entity level, the process level, and then down 
to the transaction level, assessing across the agency the 
results, and then reporting on any corrective actions that 
might need to be taken to improve the internal control 
environment.
    I believe that we are, as an agency, in the forefront of 
implementation of the new requirements.
    That concludes my opening statement, Mr. Chairman. I would 
be pleased to answer any of your questions.
    [The prepared statement of Mr. Waszily follows:]

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    Mr. Platts. Thank you, Mr. Waszily, for your statement, and 
I wanted to note we appreciate, as a fellow native 
Pennsylvanian, you being here, and especially your prior 
service in the U.S. Army, as well.
    Our ranking member, Mr. Towns, does have another conflict 
here shortly, so we are going to begin with his questions and 
then come back to me.
    Mr. Towns.
    Mr. Towns. Thank you, Mr. Chairman.
    I am really happy that I got a chance to hear the 
witnesses.
    Let me begin with you, Mr. Waszily.
    Are all of GSA's services now functioning under one unified 
financial management system?
    Are there outstanding issues between different funds and 
accounting programs?
    Mr. Waszily. Yes, sir, there still are problems. GSA was 
crafted in 1949, and over a period of time, we have brought in 
a number of different programs from other agencies--of course, 
the entire environment of technology many of these accounting 
systems for these subordinate programs were, in essence, bolted 
onto the existing accounting system. So, the modernization 
effort that was initiated a little over 5 years ago is a long-
range program, and there still are some substantial differences 
between the different funds.
    The nature of the business from the different funds--there 
will always be some differences in how they operate, but to Ms. 
Turco's credit, we are trying to attempt to bring as much 
standardization to the agency, both across the programs, as 
well as across the regional activities, GSA-wide.
    Mr. Towns. Right.
    On a scale, I guess, from 1 to 10, have there been 
significant improvements made to the accounting processes for 
the agency, customer orders, of course, that were identified in 
the 2005 audit? How would you characterize that in terms of 
progress?
    Mr. Waszily. In regard to the budgetary accounts?
    Mr. Towns. Yes.
    Mr. Waszily. Yes, sir.
    I think the 2005 audit actually is trying to capture, if 
you will, the sins of about 8 years of mis-application of funds 
by one particular activity within GSA, and it was so large that 
it tainted the validity of the budgetary accounts for the 
entire agency, because the problems had been allowed to fester 
for 7 or 8 years, so that it became a huge problem that you had 
to bite the bullet in one particular year, and as Mr. Turco 
pointed out, we could clean off the bad accounts and the 
invalid obligations that were sitting on the accounts, but 
because the accounting system at the end of the year could not 
look backward and re-establish what should have been the 
appropriate balances for the beginning of the year, it ends up 
in an adverse opinion for that particular year.
    So, even though there was a $900 million misstatement in 
2005, it really is not attributable to mistakes that were made 
in 2005, and in fact, the agency had put in policies for going 
forward to avoid those problems in the future.
    So, the 2005 transactions that were being conducted in the 
agency actually were operating under the proper rules. What we 
were suffering from is trying to clean up the residual problems 
that had accumulated over the previous 8 years, and as Ms. 
Turco pointed out, we still have a bit of uncertainty whether 
or not we have them all cleared out of the system, but I am 
pretty comfortable that we have at least 80 percent, if not 
more, that have already been resolved, and we will be 
continuing to work this year to resolve the remainder.
    Mr. Towns. That sounds like an eight, then.
    Mr. Waszily. Maybe an A-minus.
    Mr. Towns. Do you see any of the current accounting or 
management control deficiencies jeopardizing the merger of the 
FTS and FSS into the Federal Acquisition Service?
    Mr. Waszily. No, sir, I do not. Again, the principle issue 
here were budgetary accounts. It does not disturb the 
proprietary accounts, and actually, I think the merger will 
actually help expedite the clean-up.
    Mr. Towns. What effect--and this is my last one, Mr. 
Chairman.
    What effect will declining revenue streams have on the 
future viability of GSA services and operations?
    Mr. Waszily. The agency, at the moment, is going through a 
process to balance out its workload, the resources, and the 
level of personnel engaged in the agency so that it is 
commensurate with the level of business. Understandably, many 
of the client agencies--because as part of this clean-up, GSA, 
to its credit, had to admit that we had made a serious mistake.
    In many instances, we had to return money to client 
agencies, and in several instances, the money that we returned 
to the obligational authority, we returned to them, was no 
longer available for other use. So, understandably, we have a 
large group of customers out there who are very unhappy. They 
had thought that they had substantial amounts of contracting 
dollars available for use, say, in 2005 and in 2006 and 2007, 
and all of the sudden, we have turned that back to them, said 
the money is no longer available, and that we can only do 
business if you provide us new resources.
    I know Mrs. Doan, one of her priorities is to mend the 
fences with our client agencies. This is a Herculean challenge 
given that it was the right thing for the agency to do, but you 
know, customers don't like to get surprised like that, and 
particularly when resources are tight and they were counting on 
that money, it puts them in a very precarious situation.
    So, I am confident. I have been traveling the country, 
talking to procurement personnel, from the senior executives 
down to the folks in the trenches, I can tell you I am very 
impressed with the procurement and marketing cadre of GSA. I 
believe strongly they have a good product.
    I would like other agencies to focus on their missions and 
let GSA do the procurement business, and I think, with time, we 
can demonstrate that we can do it better, we can come up with 
better solutions, and do it quicker, and let them tend to their 
primary missions, and I think the agency is righting the ship 
now.
    Mr. Towns. Thank you very much.
    Mr. Chairman, on that note, I yield back.
    Mr. Platts. Thank you, Mr. Towns.
    Ms. Turco, I want to come to the point of the structure and 
the history of GSA as a very decentralized environment with 
headquarters and in the various services and regional offices. 
From your role as CFO and trying to right the ship and move 
forward in a positive way, would it help you to have more 
central control, especially over the service CFOs?
    My understanding is they answer now to the commissioner, 
not to you.
    Yet you are the one that has to sit here and answer the 
questions and take responsibility for financial management, you 
know, throughout the entire entity.
    Would that be of help to you? I would analogize it to NASA.
    We had a similar situation with Gwen Sykes and where all 
the individual NASA centers did not answer to her or the CFOs, 
and so, it caused some challenges that she and the 
administrator rectified to give more direct oversight. Could 
you expand on that issue?
    Ms. Turco. Chairman Platts, I have been at several 
agencies, and I would say that, with GSA, we have an excellent 
financial community, some of the best folks that I have worked 
with.
    Both PBS and FAS have excellent comptrollers, but I would 
agree with you in terms of the CFO needing direct management 
control of all financial staff.
    That is how the CFOs Act of 1990--it is a requirement in 
the CFOs Act.
    So, yes, I think it would help to alleviate some of the 
challenges we go through, some of the steps, and would move our 
efforts to clean up and to provide financial services across 
the agency to a higher level. It also would move it faster.
    Mr. Platts. That is certainly what we have found in working 
with NASA, with their realignment, is it has benefited the 
overall organization in a very positive way.
    What is the relationship with you and the CFOs at the 
regional offices?
    I am not as certain of that.
    Ms. Turco. Technically, we just have two CFOs or 
comptrollers, one for PBS and one for FAS.
    There are individuals who have labeled themselves as CFOs, 
but they are really doing budget work in the regions, not 
financial.
    Mr. Platts. OK.
    Ms. Turco. They are not preparing financial statements and 
they're not doing that level of analysis.
    Mr. Platts. OK.
    Ms. Turco. It is a very good group of people, and we have 
very good working relationships. So, that is not an issue, and 
in fact, this past year, when I have asked them to change their 
practices, when I have asked them to implement the policies and 
to make them a priority, they have done so.
    Mr. Platts. As you look at the possible restructuring with 
the service CFOs and how they interact with you and your 
authority over them, at this point are you aware if there are 
any legislative obstacles that would need to be addressed by 
legislative action, or is it more internal?
    Ms. Turco. It is internal only.
    Mr. Platts. OK.
    Mr. Waszily, I will come back to the audit issue, and your 
statement. You talk about if this had been a private 
corporation, in essence, GSA would have gotten a clean 
opinion----
    Mr. Waszily. Yes, sir.
    Mr. Platts [continuing]. And only because of the public 
sector and the way we look at it and the results of the 
internal audits, it raised some flags that created the 
additional scrutiny.
    Could you first elaborate on that premise, that it would 
have been a clean opinion on the private sector side, and then 
explain, in best possible layman's terms, how you would 
describe the budgetary resources that were the source of the 
disclaimer?
    Mr. Waszily. Certainly.
    In the private sector, the accounting financial opinion 
would be based upon a review of the books and records of the 
corporation to reflect the validity of assets, liabilities, 
shareholder equity for the particular corporation or entity, 
and there you would have the equivalent, the income statement 
and the expenditures of the corporation. Commonly called, these 
are the propriety accounts, and these typically would be what 
the fundamental financial opinion would be in the corporate 
world.
    In the Government, we also add this budgetary accounting, 
and it has only been the past 5 or 6 years that OMB has 
actually required the agencies to express an opinion on the 
validity of their budgetary accounts in addition to their 
proprietary accounts.
    Now, to take it one step further, GSA is even a bit 
different from the other Federal agencies. What OMB was 
principally interested in in the budgetary accounts was that 
most agencies operate under congressional appropriation, and 
the budgetary accounts basically provide a scorecard as to the 
status of obligational authorities provided by the Congress.
    So, OMB wanted to use this as a report card to measure the 
agency's reporting against the Presidential budget and also to 
provide Congress information as to the status of funds 
provided, whether they were obligated or available for 
obligation.
    GSA has very few appropriated funds. We have these three 
major revolving funds.
    So, in many ways, we look more like a business.
    So, our use of the budgetary accounts really is more 
reflective of authorities that have been granted to us by our 
clients. The easiest way to put it would be it is sort of like 
a forecast of business that we anticipate to be--or are in the 
process of developing at the moment, but we have not yet 
actually reached the stage where we have prepared a contract 
for our client agency.
    This makes it somewhat different as far as what a budgetary 
account is for GSA, as opposed to the other Federal agencies. 
The other complication in this matter with the budgetary 
accounts and why part of this went astray was that most of the 
agencies have operating budgets and appropriations that are 
good for 1 year. Our revolving funds generally have a life-span 
of 5 years, and in part, I think some folks were a little 
confused in years past as to, if an agency who has 1-year money 
gives a 5-year revolving fund money, how long does that 
appropriation live, and frankly, there's very little guidance 
regarding the viability of money when you move it from one 
status to the other.
    I hope I have clarified, not further confused the issue.
    Mr. Platts. Well, that leads to the question--and Mr. Towns 
and you touched on it--the impact on those agencies that you 
are dealing with, your clients----
    Mr. Waszily. Right.
    Mr. Platts [continuing]. Because of the errors over the 8 
years, roughly $900 million.
    When you went back to them, do I understand correctly the 
reason they, in essence, lost the use of those funds is because 
they were back to them, and for them, they were 1-year 
appropriations, and they have, in essence, lapsed, because they 
were not in the revolving fund?
    Mr. Waszily. Yes, that is a large portion of the funds.
    Many agencies who had, let's say, funds that they 
anticipated for paying for ongoing service-type work, they had 
anticipated that those funds would be available to them for 
maybe 2 or 3 years going forward, and unfortunately, we had to 
say, well, you know, we are very sorry, but we misinterpreted 
how we could use those funds, we have to de-obligate them from 
our books, give them back to you, and since they had their 
basis is 2003 or 2004, they were no longer available for other 
obligation.
    So, yes, that's what caused the tension between GSA and its 
client agencies, and if I was a client, I would be very upset, 
too, if I was planning--I had laid my budget out for the next 2 
or 3 years, anticipating I had certain expenses already 
covered, and now I have to find other resources to cover them.
    Other ones, as Ms. Turco pointed out, were caused by the 
technology service. Because, first of all, the Web-enabled IT, 
created a great explosion for the demand for those services.
    So, the technology service was growing by leaps and bounds.
    They couldn't keep up with the business.
    They were bringing in hundreds of new people, many from the 
private sector, who had never dealt in a government environment 
before.
    They were interested--terrific marketing people and 
terrific at customer response.
    They were interested in going out and getting even more 
business, so that is--as Ms. Turco pointed out, if they had 
given us $100,000 for a project but it actually only cost 
$90,000, no one went back to close out the account and clear 
that other $10,000 out.
    Well, you start multiplying that by 10,000 or 15,000 
accounts, and there is a substantial amount of money that is 
just languishing in accounts that should have been closed out.
    So, there were really two factors: one, invalid money, and 
two, the balances that should have been swept out of the 
accounts.
    Mr. Platts. The issue of the revolving fund, the money 
going in there--it really gets into the broader issue of the 
Federal Government, whether we should have more flexibility for 
departments and agencies in a capital fund where they really 
can plan for spending this money over 2, 3, 4 years, because of 
the type of capital investments they are making, which, in 
essence, is what the fund had been doing for certain agencies.
    Mr. Waszily. That is right, and that is important to point 
out.
    We had a few instances of situations where there were 
actually out-and-out frauds taking place.
    This was a relatively small thing, and it was just one or 
two individuals who saw an advantage in a huge system that 
unfortunately, took advantage of the system, but for the most 
part, both the marketing folks, the procurement folks at GSA, 
and the agencies were really just trying to keep, get their 
services that they needed to support their mission, and GSA was 
anxious to meet their customers' needs, and overall, other than 
these financial issues, which we have to respect the 
requirements that are--and restrictions that are put on 
appropriation. We have to respect those, but their intent--they 
were well intended, and this was not done maliciously, and 
frankly the business--it had grown from close to $3 billion and 
in less than 5 years had grown closer to $9 billion, just a 
tremendous amount of growth, and any organization that grows 
that fast has a tendency to lose control.
    Mr. Platts. Ms. Turco, you referenced in your testimony the 
heroic effort, manual corrections that have taken place to go 
back and really to correct the budgetary accounts and to get 
back to a solid bedrock, you know, foundation and move forward 
on--what is your assessment of the need for that type of manual 
effort in this year and the coming years? With what you are 
doing now, will you get back on track? Can you go back to that 
being more of an automated process, not the manual effort?
    Ms. Turco. It has been a real effort this year, and we are 
doing everything possible to make it what I'd call automatic.
    The aging reports have provided substantial information, 
and the aging reports go--obviously begin with 2006--they go 
back to 1999, and we have been able to go in and clean out 
balances.
    In terms of moving it forward, we feel that, beginning in 
fiscal year 2007, we will be able to load in budgetary data at 
the beginning of the year, appropriation data at the beginning 
of the year, and it will be automated in terms of the balances, 
in particular between the budgetary and the proprietary.
    So, we have taken steps both in terms of our practices and 
in terms of the system to ensure that we have ourselves in sync 
for fiscal year 2007.
    Mr. Platts. So, for 2006, you may still have more manual 
heroic effort coming----
    Ms. Turco. Uh-huh.
    Mr. Platts [continuing]. But you have a game plan to get 
away from that.
    Ms. Turco. Yes.
    Mr. Platts. That is good to hear, because that is one of 
our worries in our various oversight hearings with departments 
and agencies, large and small, that we get away from the end-
of-the year heroic manual efforts and just get that good 
internal controls processes in place, that it is, you know, 
really almost any day of the year, you can say snap, here is 
where we stand on all accounts. It sounds like that is what you 
are working toward.
    Ms. Turco. Yes, that is our goal.
    Mr. Platts. I guess, Mr. Waszily, for you, you mentioned 
that the intent on these errors had occurred not being 
malicious or deceitful, but I guess, in the independent auditor 
report, there were three things that were identified as 
possible Anti-Deficiency Act violations.
    Mr. Waszily. Yes, sir, that is correct.
    Mr. Platts. Could you describe those issues and where those 
issues stand?
    Mr. Waszily. Yes, sir.
    As I mentioned, most--the initial discoveries of the 
weaknesses in the financial system came from procurement audits 
that we were conducting, principally in the Federal Technology 
Service, and once we started to find that there were 
substantial issues related to many procurements, particularly 
those with the Department of Defense, we were asked by the 
Senate Armed Services Committee to conduct joint reviews with 
the Department of Defense IG, taking a look at each of the 
client support centers in each of the GSA regions.
    We have been doing a series of audits, beginning in 2003.
    We have done another set in 2004.
    We are just wrapping up a set for 2005, making sure that 
the systems, both on the procurement and financial sides, are 
improving.
    During the course of that work, we discovered some 
transactions that were substantial in dollar value that led to 
possible anti-deficiency violations.
    The three that you refer to--the first one is a $177 
million Air Force project.
    It had to do with installing vehicle access barriers at Air 
Force bases around the world. Approximately 500 barrier 
construction projects were going to be put in place, and then a 
related computerized security system was going to be tied into 
this process.
    All of this initiative was to free up Air Force personnel, 
reduce the number of security personnel, by trying to automate 
and protect the bases in a mechanical way rather than using 
human resources.
    The money was funded out of 2003 operating money, and there 
were several fits and starts.
    I wouldn't say this was a model procurement, by any means, 
but the question came up from the DOD IG's office as to, since 
we had gotten into fiscal 2004 and several pieces had not yet 
been contracted for, were those 2003 funds still viable. This--
as they say if you get three attorneys in the room, you can get 
at least six opinions. We have had a multiplicity of legal 
opinions as to whether or not the funding of this project is 
appropriate.
    It has ultimately reached the level of the general counsel 
of the Department of Defense and the general counsel of GSA, 
and I believe, as of last week, we have formally concluded that 
this was actually appropriate and that the funds are available 
for use and that this will not be an anti-deficiency violation.
    The second one had to do with a relocation of the Army and 
Materiel Command.
    It was a $44 million project, and it was--a vendor was 
contracted to actually relocate this entire command, acquire 
and then install modular buildings that comprise 230,000 square 
feet of office space at a location at Fort Belvoir in Virginia.
    This was done through transactions that were processed both 
through the general supply fund and the information technology 
fund.
    Neither of those funds have the authority to engage in 
contracts that have to do with realty, and once you start 
bolting the modular buildings to the ground, you have created 
realty.
    So, at a minimum, on this one, we believe that there was a 
purpose statute violation on the part of GSA. There are other 
aspects to this.
    There are also provisions about the level of expenditure 
for military construction that can be undertaken without the 
approval of the military construction committee, and that is--
we are waiting for the final report from the DOD IG, from their 
side of the transaction.
    We are reasonably sure we are going to have something on 
our side, most assuredly, a purpose statute violation in that 
case.
    The third one was to try and get at the entire financial 
issue that we were talking about this afternoon. That over a 
period of time, the Federal Technology Service, beginning in 
about 1997 or 1998, when it initiated getting into this service 
technology area, tended to be very flexible in how they used 
client money.
    They would--if they had an account for you, they would 
always make sure that they accounted for all the funds that you 
had provided them, but if you had six or seven projects that 
were underway, they felt that it was all right to move money 
from one project to the other, and they had a tendency--what 
they would do is use the oldest money in the pot first and roll 
the money forward into the other accounts. Then, if one overran 
and one underran, they would move the money.
    This is inappropriate as far as project management. It is 
also inappropriate from appropriations law.
    Again, we also had issues of using funds and putting funds 
into the information technology revolving fund that actually 
only had a life of 1 year, and they were applying it and making 
awards maybe 2 or 3 years later. Again, these are technical 
anti-deficiency, inconsistent with the appropriation law.
    So, what we were trying to do here--we are talking a matter 
of thousands of transactions, and over the course of 8 years, 
probably, I do not know, $10 or $12 billion flowed through the 
fund. To try and parse out where the money actually belonged or 
to file an anti-deficiency on each and every one of these 
didn't seem to be realistic.
    So, we were trying to suggest, in this one, to make a 
recommendation, some kind of global mea culpa that we had a 
transgression in our accounting for funds, we have remedied the 
situation going forward. There were substantial numbers of 
disciplinary actions that were taken as a result of these 
findings, and that we are now in the process, as Ms. Turco 
outlined, of trying to clean up the accounts to bring them into 
line and make sure they're fairly stated currently.
    So, that was the third one.
    Mr. Platts. Thank you for the summary of each of those.
    It seems that part of your effort of getting back on track 
and heading forward and continuing to have the glass be more 
and more full in a positive way and with your client agencies, 
as you look to more and more of that shared service center and 
compete for and gain clients, that these anti-deficiency 
actions, possible actions, violations in the past, and then the 
budgetary challenges that directly related to how you accounted 
for money between other agencies and your agency, that those 
will impact whether somebody wants to come to GSA, as a shared 
service provider, and so, I assume that, as you delineate what 
exactly happened on the anti-deficiency violations or possible 
violations and the budgetary, that is part of your message to 
the other agencies, to your clients, that you have identified 
the wrongs of the past and you are correcting them and making 
sure they don't happen again.
    Is that a fair statement?
    Ms. Turco. Yes, Chairman Platts. In fact, we have met with 
a majority of our 47 financial external clients, and we have 
explained the problem to them, and at this point, they are all 
still with us.
    So, moving forward, we have actually been meeting with 
several agencies who are interested in migrating to a shared 
service provider, and we have explained our problems, the 
disclaimer, and they have not been unwilling to work with us. 
They are still willing to work with us, and we are still in 
talks in terms of migrating folks over.
    Mr. Platts. I want to come back to a couple of things.
    Mr. Waszily. Mr. Chairman, Ms. Turco had touched upon it 
previously, and as I mentioned, most of these issues that came 
up as far as the anti-deficiencies, these really came out of 
the program and procurement folks in this one particular aspect 
of GSA, and as she had pointed out in her testimony, up until 
we started with the new modern accounting system, the CFO's 
office only got to see the aggregate detail.
    So, these transgressions were really procurement-generated, 
and they were being maneuvered, if you will, or manipulated at 
very low levels, and it was only the aggregate data that anyone 
actually saw by the time that it hit the official accounting 
records, and that's really where the problem was.
    It was not a problem with the accounting system or the 
CFO's office accounting for transactions.
    Mr. Platts. In fact, the approach of asking or requiring 
more detail is helping to guard against that in the future----
    Mr. Waszily. Exactly.
    Mr. Platts [continuing]. In uncovering and guarding 
against.
    With the financial management line of business, one of the 
requirements, when we have talked to OMB, is that you have a 
clean audit to be a shared service center and that you were 
already a shared service center before the disclaimer came out 
on your last audit.
    One, have you been given any feedback from OMB that you 
will not remain a shared service provider if you do not return 
to a clean audit?
    Ms. Turco. I have not been given that feedback. We have met 
with OMB on our implementation of OMB Circular A-123, and all 
the efforts we have underway to clean up our books.
    We were told we were--they were keeping some internal 
ratings and that we were rated green in terms of our efforts.
    Many of my staff worked on the revision of A-123, and in 
particular, appendix A and all of the requirements.
    So, we are working closely with OMB so they can fully 
understand all the efforts we have underway to correct our 
actions, and as Mr. Waszily was saying, it really was not the 
financial system that was the problem, per se. It was the 
actions by the contracting staff.
    Mr. Platts. From everything you have shared with us in 
prior written testimony and here today, I appreciate that, and 
to separate the issues, it leads to one of those questions that 
we still have with OMB when we had them before the committee on 
the broad issue of financial management line of business, that 
there are a lot of, I will say, unanswered questions or 
uncertainties out there if, currently, they say you have to 
have a clean audit to become a shared service, well, if that's 
the case, what happens when you lose your clean audit and do 
not, you know, immediately return the following year?
    What is the legitimacy of that requirement if it really is 
more specific to, well, why didn't you have a clean audit, as 
in your case, it is on the budgetary side, not on the 
proprietary accounts, and that is something that we have not 
really gotten, maybe, a final answer yet from OMB, so I am not 
surprised that you have not gotten any direction yourself, and 
if anything, it seems like they are assuming you are moving 
forward as a shared service provider, clean audit or not from 
2005.
    With the fact that GSA has worked with OMB in, in essence, 
helping to revise the criteria and the requirements to become a 
shared service provider and then to compete for the work, do 
either of you see a possible conflict of interest because you 
are a center and you want to get the business, and yet you are 
responsible for directing or devising the criteria on how to be 
a center, that it could be seen as a conflict for your entity 
over others?
    Ms. Turco. When I began here at GSA in August 2002, I had 
on my staff JFMIP, and you know, JFMIP, which has evolved 
into--it is still JFMIP, but it has evolved into FSIO--they 
were conducting the testing of the software. I had a problem 
with that, and I went to OMB, and I said it is inappropriate 
for it to be under the GSA CFO. Danny Werfel at OMB agreed with 
me on that, and he and I worked together to find a new home for 
the FSIO office.
    When all was said and done, the Office of Government-Wide 
Policy was able to take over the FSIO office, and we think that 
is very appropriate.
    Much of what they do is externally facing, and it is 
providing policies and procedures Government-wide.
    So, we have worked with them, as have other agencies, many 
of them shared service providers, in terms of the requirements, 
and the standards, etc., in terms of the FSIO documentation for 
financial systems, but no more or no less than the other 
Federal agencies.
    So, we are not unduly influencing anything within the FSIO 
office.
    Mr. Platts. So, you are kind of the lead, but it is a 
partnership in the final development.
    Ms. Turco. The actual partnership, though, is between OGP, 
Office of Government-Wide Policy, which is within GSA, and OMB.
    So, we do--and I purposely keep myself separate from that.
    My staff has provided input.
    Like I said, our financial management enterprise 
architecture is being used, and they came to us and said can we 
use your financial management architecture, and we said 
certainly, we would welcome that.
    Our architecture is standard.
    It is about payables and receivables.
    So, there is nothing that any other agency could not use.
    Mr. Platts. So, GSA is the lead agency for coordinating the 
financial management line of business for everybody, right?
    Ms. Turco. Technically, it is OMB. It is the Office of 
Federal Financial Management, and then OGP, the office of FSIO 
that is led by Mary Mitchell, works with OFSM, Danny Werfel and 
Linda Combs, to coordinate the financial management line of 
business.
    FSIO sets out the financial system standards that we all 
must follow, as well now as the expanded standards around 
shared service providers.
    Mr. Platts. So, your agency, as far as how someone becomes 
a shared service provider and then implement it, you really do 
not have a say in that. OMB is directly responsible for that.
    Ms. Turco. That is correct. OMB is directly responsible for 
that determination.
    Mr. Platts. OK.
    How about internally with the fact that you are a shared 
service provider and seeking clients? It is my understanding 
that--I guess I am not sure--your regional offices and the 
services--are they using you, your entity, as their shared 
service provider at their own agency, or are they doing their 
own work?
    Ms. Turco. Yes, sir, they are using us, yes.
    We provide the financial operations for GSA, all offices, 
all regions, yes, all business lines, yes, all program areas, 
yes.
    Mr. Platts. OK.
    Coming back to the technology investment with Pegasys and 
your system--and I think, actually, it was in your testimony, 
Mr. Waszily, some of the delays, some of the challenges, that 
originally it was a 3-year plan, and that was not going to 
work.
    If you or both want to give us an update of where we are 
with Pegasys and what challenges, if any, remain in the full 
implementation.
    Ms. Turco. Again, when I started in August 2002, I was 
told, in 6 weeks, that we were to stand up Pegasys, we were 
going to go live October 1st, fiscal year 2003. So, I sort of 
walked into what was sort of the tail-end.
    Did we have challenges? Yes, like any Federal agency, we 
had challenges in terms of the stand-up, but we actually had a 
bigger challenge, and we are in the midst of it right now.
    We implemented the vast majority of the Momentum software.
    However, our accounts receivable module and our billing 
module are still in the old system known as Near, and I felt 
very strongly that, once we implemented what we did with 
Pegasys, we needed to step back.
    There were challenges. I went back and I read the audit 
reports. I talked to the auditors, and many of our internal 
customers, and we needed a new way of doing business.
    We also just cannot simply, you know, sort of pull the plug 
on the old system because of the extensive billing practices 
that we have.
    So, we decided that what we would do is develop our 
financial management enterprise architecture. We also put in 
place a program, a performance management office within the 
Office of the CFO.
    I designated certain positions as requiring PM 
certification.
    We have sent an extensive amount of staff to program 
management training.
    We have put in configuration management. We have a change 
control board, and we now have a more disciplined, rigorous 
process in terms of how we go about the investment, whether it 
is a module or something as straightforward as the e-travel 
system, which we are in the midst of putting in place.
    We do business case analysis, cost-benefit analysis. We 
look at all software.
    So, our challenge going forward is what is the best 
solution for replacing our accounts receivable module and our 
billing activities at GSA.
    We have drafted a business case that is being reviewed 
internally, and we will use that, along with the financial 
management enterprise architecture, to go out to the vendors 
and offer out a bid in terms of how we want to provide a 
solution for GSA.
    Mr. Platts. Now, is that something, Mr. Waszily, that--you 
are part of that review?
    Mr. Waszily. Yes, sir.
    We are consistently doing followup reviews, both from our 
technology side and our financial audit activities, in addition 
to the work that we do on the financial statement audit.
    So, it is a constant sort of checking every few months to 
just see where progress is going.
    I might want to add, one of the challenges that GSA has--we 
have one of the ironies in that the Momentum system was 
basically built as a specialized accounting system for Federal 
agencies, and of course, OMB also has asked the agencies to 
adopt a standard general ledger.
    The irony is that, because GSA looks more like a business, 
in many ways, than it does a Federal agency, we have had to 
reconfigure the Government accounting system, because we look 
like a business. So we have to translate it back into 
government accounting, and the same way we had to adapt 
Momentum to have these business features to it, because it 
basically was set up just for obligational activity that the 
typical agency would have.
    So, on some days--I think Kathleen would agree with me--
some days we would prefer to go corporate and just report to 
the Congress the profits we make.
    Mr. Platts. Right.
    Is there a timeframe for the review, your accounts 
receivable, and where you hope to be and when?
    Ms. Turco. We are currently in the midst of a upgrade, a 
software upgrade from 5.2 to 6.12 with the Momentum software. 
That is this summer.
    We are implementing an asset management module, and in the 
midst of all this, we are doing the analysis around the 
accounts receivable. We hope, during 2007, to put it out on the 
market, and then the implementation would be the beginning of 
2008.
    Mr. Platts. It is not in current use. Is that correct?
    Ms. Turco. Chairman Platts, we were fully aware of this 
problem 2 years ago, and we, in fact, had pointed it out to our 
auditors.
    You will be happy to know we are doing it in an automated 
fashion now.
    So, it has been put in place, and going forward, we do not 
think there is going to be a problem. The challenge for us is 
we are still having to do work sheet adjustments this year, but 
beginning in fiscal year 2007, we feel it will be fully 
automated. Data is loaded into the system at the beginning of 
the fiscal year.
    As I understand right now, there is new requirements that 
have just been published. Is that correct? They are in draft, 
and I honestly have not looked at them. I have not had a 
chance. So, I would be actually hard pressed for me to comment.
    Mr. Platts. That is something you could followup with us.
    Ms. Turco. OK. I will look into it and get back with you.
    Mr. Platts. Thank you.
    Is there anything that either of you wanted to address that 
we have not covered in the statements or the questions?
    Mr. Waszily. No, sir.
    Mr. Platts. We really need that example for the rest of the 
departments of the Federal Government.
    With that, we stand adjourned.
    [Whereupon, at 3:17 p.m., the subcommittee was adjourned.]

                                 
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