Financial Management: USDA Continues to Face Major Financial Management
Challenges (Testimony, 09/27/2000, GAO/T-AIMD-00-334).

Pursuant to a congressional request, GAO discussed Department of
Agriculture (USDA) financial management issues, focusing on USDA's
challenges in: (1) implementing the Federal Credit Reform Act of 1990
and related accounting standards; (2) reconciling its Fund Balance with
Treasury accounts; (3) addressing weaknesses in the Forest Service's
financial accounting and reporting; and (4) correcting certain other
material internal control weaknesses.

GAO noted that: (1) USDA continues to face major challenges in
correcting severe and long-standing financial management problems and
achieving financial accountability; (2) during the last 2 years USDA
financial managers have taken these challenges seriously and made a
commitment of resources not only to resolve financial management
weaknesses that have precluded the agency from receiving an unqualified,
or "clean" opinion on its financial statements, but also to begin moving
toward a long-term goal of achieving financial accountability; (3) there
is one notable exception, however, to GAO's assessment of USDA's
efforts; (4) in August 2000, GAO reported that the Rural Development
Service, one of USDA's major component agencies, has made slow progress
in improving credit program cost estimates and missed several milestone
dates because of a shortage in both the staff and funding resources that
are needed to resolve long-standing credit reform weaknesses; and (5)
because of this issue, USDA is likely several years away from achieving
financial accountability.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-AIMD-00-334
     TITLE:  Financial Management: USDA Continues to Face Major
	     Financial Management Challenges
      DATE:  09/27/2000
   SUBJECT:  Financial statement audits
	     Accountability
	     Financial management systems
	     Internal controls
	     Noncompliance
	     Accounting standards
	     Reporting requirements
IDENTIFIER:  U.S. Government Standard General Ledger
	     Food Stamp Program
	     USDA Homeless Children Nutrition Program
	     Forest Service Foundation Financial Information System

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GAO/T-AIMD-00-334

   * For Release on Delivery
     Expected at
     9:30 a.m.

Wednesday,

September 27, 2000

GAO/T-AIMD-00-334

financial management

USDA Continues to Face Major Financial Management Challenges

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Statement of Linda M. Calbom, Director

Accounting and Information Management Division

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Testimony

Before the Subcommittee on Research, Nutrition, and General Legislation,
Committee on Agriculture, Nutrition, and Forestry, U.S. Senate

United States General Accounting Office

GAO

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Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss U. S. Department of Agriculture
(USDA) financial management issues. Much of my testimony today is an update
of our March 2000 testimony on USDA's financial management, which focused on
the problems identified in the USDA Inspector General's (IG) audit report on
USDA's fiscal year 1999 financial statements.

In February 2000 the IG issued a disclaimer of opinion on USDA's fiscal year
1999 consolidated financial statements--the sixth disclaimer of opinion in
as many yearsindicating that the agency has pervasive problems in accounting
for its $118 billion in assets and $120 billion in budgetary resources
provided for fiscal year 1999. Before USDA can achieve financial
accountability, it must address a number of issues that we and USDA's Office
of Inspector General (IG) have reported as serious problems. Financial
accountability is achieved when an agency has strong financial management
systems and internal controls that can generate useful, relevant, and
reliable day-to-day financial information to support ongoing management and
accountability.

My statement will focus on the agency's challenges in achieving financial
accountability and complying with key financial management laws and
regulations. I will also discuss the corrective actions that USDA and its
component agencies have completed or have underway to resolve these
problems. Regarding financial accountability, USDA faces significant
challenges in four major areas: (1) implementing the Federal Credit Reform
Act of 1990 and related accounting standards, (2) reconciling its Fund
Balance with Treasury accounts, (3) addressing weaknesses in the Forest
Service's financial accounting and reporting, and (4) correcting certain
other material internal control weaknesses.

In brief, USDA continues to face major challenges in correcting severe and
long-standing financial management problems and achieving financial
accountability. During the last 2 years USDA financial managers have taken
these challenges seriously and made a commitment of resources not only to
resolve financial management weaknesses that have precluded the agency from
receiving an unqualified, or clean opinion on its financial statements, but
also to begin moving toward a long-term goal of achieving financial
accountability. There is one notable exception, however, to our assessment
of USDA's efforts. In August 2000, we reported that Rural Development (RD),
one of USDA's major component agencies, has made slow progress in improving
credit program cost estimates and missed several milestone dates because of
a shortage in both the staff and funding resources that are needed to
resolve long-standing credit reform weaknesses. Because of this issue, USDA
is likely several years away from achieving financial accountability.

Background

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Improving financial accountability throughout the federal government has
been an area of emphasis since implementation of the Chief Financial
Officers (CFO) Act of 1990, which established a CFO structure in 24 major
agencies and charged the Office of Management and Budget to provide the
necessary financial management leadership and focus. To help instill greater
accountability and fix pervasive and costly breakdowns in internal controls,
financial statements were required to be prepared and audited, beginning
with those for fiscal year 1991, for revolving and trust funds and
commercial activities. For 10 agencies-including USDA-audited financial
statements were required as part of a pilot program to test this concept for
an agency's entire operations.

Since USDA's participation in the pilot program in 1991, USDA and several of
its component agencies have received a series of unfavorable financial audit
reports due to deficiencies in financial reporting that are attributable
primarily to weaknesses in the agency's financial management systems. USDA's
Chief Financial Officer recognizes the seriousness of these problems and has
a number of efforts underway to address these issues.

The Government Management Reform Act (GMRA) of 1994 expanded the CFO Act by
mandating that (1) major departments and agencies produce annual financial
statements subject to independent audit, beginning with those for fiscal
year 1996, and (2) the Secretary of the Treasury, in cooperation with the
Director of the Office of Management and Budget, prepare financial
statements for the U.S. government that are audited by GAO, starting with
those for fiscal year 1997.

In addition, the Congress passed the Federal Financial Management
Improvement Act (FFMIA) of 1996. FFMIA requires auditors for each of the 24
major departments and agencies named in the CFO Act to report, as part of
their audit report on agencies' annual financial statements, whether the
agencies' financial management systems comply substantially with three
requirements: (1) federal financial management systems requirements, (2)
applicable federal accounting standards, and (3) the U. S. Government
Standard General Ledger (SGL) at the transaction level. These requirements
are critical for ensuring that agency financial management activities are
consistently and accurately recorded and promptly and uniformly reported
throughout the federal government. Departments and agencies must comply with
these requirements in order to maximize their performance and ensure their
accountability.

USDA is responsible for a variety of major programs that (1) boost farm
production and exports, (2) promote small community and rural development,
(3) ensure a safe food supply for the nation, (4) manage natural resources,
and (5) improve the nutrition of families and individuals with low incomes.
The financial results of these programs are reported in USDA's consolidated
financial statements and make up a significant portion of certain components
of the consolidated financial statements of the U.S. government. For
example, USDA is responsible for managing the nation's largest federal
direct loan portfolio, with reported net credit program receivables of about
$70.7 billion as of September 30, 1999. In addition, USDA reported net costs
of $32.7 billion for fiscal year 1999 for its food assistance programs such
as the Food Stamp Program and Child Nutrition Programs, which represent a
significant portion of income security net cost reported in the U. S.
consolidated financial statements.

USDA's fiscal year 1999 audit was conducted by the Office of Inspector
General. We reviewed the IG's workpapers between January and February 2000.
We conducted our update work for this testimony from September 12 to 25,
2000, in accordance with generally accepted government auditing standards.

Major Accounting and Reporting Deficiencies

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USDA faces significant financial management challenges in four major areas:
(1) implementing the Federal Credit Reform Act of 1990 and related
accounting standards, (2) reconciling its Fund Balance with Treasury
accounts, (3) addressing weaknesses in the Forest Service's financial
accounting and reporting, and (4) correcting certain other material internal
control weaknesses. USDA and its component agencies must resolve these
issues to obtain a clean audit opinion and begin to move toward achieving
financial accountability. I will briefly discuss the importance of each of
these issues and why they represent major challenges to USDA and its
component agencies.

Barriers to Implementing Credit Reform

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Prior to the implementation of the Federal Credit Reform Act (FCRA) of 1990,
credit programslike most other federal programswere reported in the budget
on a cash basis. Thus, loan guarantees appeared to be free in the budget
year, while direct loans appeared to be as expensive as grants. As a result,
costs were distorted and credit programs could not be compared meaningfully
with other programs and with each other. FCRA and the related accounting
standard, together known as credit reform, are intended to more accurately
measure the government's costs of federal loan programs and to permit better
comparisons both among credit programs and between credit and noncredit
programs. As part of implementing credit reform, agencies are required to
estimate the net cost of extending credit, generally referred to as subsidy
costs, based on the present value of estimated net cash flows, excluding
administrative costs.

Since 1994, the IG has reported material weaknesses in the processes and
procedures used by USDA's lending agencies to estimate and reestimate loan
subsidy costs. In January 1999, we reported that the agency was unable to
make reasonable estimates of the cost of its loan programs because it did
not maintain key historical data needed as a basis to estimate future cash
flows and that USDA's computer systems were not configured to capture the
data needed to make the estimates. USDA's Chief Financial Officer
established a task force in March 1999 to assist in resolving the agency's
credit reform problems.

Due to the magnitude of RD's credit programs, an unqualified audit opinion
on USDA's consolidated financial statements will not be possible without the
successful implementation of credit reform. However, as we reported in our
March 2000 testimony and again in August 2000, progress in resolving RD's
problems in implementing credit reform has been slow because USDA has not
provided sufficient resources needed to properly address this problem. We
also stated that without sustained top level management commitment and the
necessary dedicated staff and funding resources, RD will not be able to
improve the quality of its credit program cost estimates in a timely manner.
Furthermore, for most of USDA's credit programs, cost estimates based on
unreliable data can affect the availability of credit programs to potential
borrowers because changes in these estimates can affect the number and
amount of loans and guarantees that can be made.

USDA is the largest direct federal lender, with reported credit program
receivables of about $70.7 billion as of September 30, 1999. As these loans
are significant to the federal government's financial statements, USDA's
inability to make reasonable cost estimates for its loan programs will
continue to contribute to our inability to give an opinion on the
consolidated financial statements of the U. S. government. This problem also
raises questions about the quality of the budget data related to USDA's loan
programs since the accounting data under credit reform generally mirror the
related budget data. This mirroring provides the opportunity to improve the
integrity of the budget estimates through the financial statement audit.
However, USDA is not in a position to take advantage of this opportunity.

Status of Reconciling Fund Balance With Treasury Accounts

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USDA records its budget authority in asset accounts called Fund Balance with
Treasury and increases or decreases these accounts as it collects or
disburses funds. The Inspector General was unable to fully substantiate the
Fund Balance accounts with the U. S. Treasury, which totaled over $38
billion as of September 30, 1999, because the agency had not reconciled the
balance with the amount reported by Treasury. Prior to May 1999, USDA merely
adjusted its records to agree with Treasury's without determining which, if
either, number was correct, and did not establish or analyze the causes of
the differences between its and Treasury's records before reporting its
ending balance to Treasury. Since May 1999, USDA discontinued adjusting its
records to agree with Treasury's records and began disclosing any
differences in its reports to Treasury. Because most assets, liabilities,
revenues, and expenses stem from or result in cash transactions, errors in
the receipt or disbursement data affect the accuracy of various USDA
financial reports, including certain data concerning fiscal year 1999
obligations and outlays that USDA provided for inclusion in the President's
Budget.

The Office of the Inspector General first identified unreconciled
differences between USDA and Treasury records in its fiscal year 1992 audit.
According to the IG, differences in some instances have gone uncorrected for
more than 10 years. As of September 30, 1999, the IG reported the
unreconciled amount was about $5 billion. Unreconciled amounts continue to
occur because of, among other things, timing differences, missing
documentation, input errors, and the inability of USDA's supporting
computerized systems-referred to by USDA as feeder systems--to properly
transfer data to the accounting system and/or the accounting system's
inability to record transactions in the correct general ledger accounts.

To address the Fund Balance with Treasury reconciliation problem, USDA
formed a task force consisting primarily of members representing the Forest
Service, the National Finance Center (NFC), USDA's Office of the Chief
Financial Officer, and an outside consultantPricewaterhouseCoopers LLPto
resolve outstanding differences and develop procedures that will prevent
this problem from recurring in the future. In addition, the IG and we have
monitored this effort for the past year. Until this problem is corrected,
the integrity of much of USDA's financial data is questionable.

The IG recently issued a report and a letter to USDA's Chief Financial
Officer on the results of its work to monitor USDA's efforts to resolve its
Fund Balance with Treasury reconciliation problems. The report deals with
the adequacy of corrective actions taken by USDA to correct its
reconciliation problems with its old accounting system. This report
concluded that recommendations made by USDA's contractor,
PricewaterhouseCoopers LLP, when fully implemented, would resolve this
long-standing material weakness. In the letter, however, the IG raised some
concerns about USDA's progress in resolving unreconciled balances recorded
in the Forest Service's new accounting system, the Foundation Financial
Information System (FFIS) implemented on October 1, 1999. This letter stated
that the absolute difference between Treasury and the Forest Service general
ledger records as of June 2000, was over $276 million for disbursements, and
over $41 million for collections. This letter also stated that the IG staff
had discussed these problems with officials from the USDA's Office of the
Chief Financial Officer and the Forest Service who agreed that actions need
to be taken and have developed a time-phased plan to address the FFIS cash
reconciliation problems.

Forest Service Financial Management Weaknesses

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As a major USDA component agency, the Forest Service accounts for a
substantial portion of USDA's general property, plant, and equipment and
almost all of USDA's stewardship land. As of September 30, 1999, the Forest
Service reported $3.1 billion of general property, plant, and equipment82
percent of USDA's totaland 192 million acres of national forest land and
grasslands that the Forest Service holds in stewardship for current and
future generations.

Since the first audit of the Forest Service's financial statements, which
covered fiscal year 1991, USDA's IG has found serious accounting and
financial reporting weaknesses. The IG's February 2000 audit report on the
Forest Service's fiscal year 1999 financial statementsa disclaimer of
opinionshows that the agency remained unable to reliably track and report on
major assets worth billions of dollars. For example, the IG could not verify
the accuracy of the Forest Service's pooled assets, such as roads and
trails, valued at $1.5 billion because the agency lacked sufficient
documentation to support their purchase price, date acquired, and related
depreciation costs. Furthermore, the independence afforded by the agency's
autonomous field structure has hampered efforts to correct accounting and
financial reporting weaknesses. These shortcomings mean that the agency and
the Congress do not have accurate financial data to track the cost of
programs and activities and to help make informed decisions about future
funding. They also raise questions about the accuracy of program performance
measures and of certain budget data drawn from the same database.

The Forest Service has completed several actions and begun others that, if
successfully carried through, represent important steps toward achieving
financial accountability. Nevertheless, as we testified in March 2000 and
previously in July 1998, major barriers remain, and the Forest Service may
need several years to achieve financial accountability. Therefore, in
January 1999, we designated the Forest Service's financial management as a
high-risk area because of the serious and long-standing accounting and
financial reporting weaknesses plaguing its operations. Because of this
high-risk designation, we have given sustained attention to monitoring the
Forest Service's efforts to achieve financial accountability.

Material Internal Control Weaknesses Hamper Accountability

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A strong internal control system provides the framework for the
accomplishment of management objectives, accurate financial reporting, and
compliance with laws and regulations. Effective internal controls serve as
checks and balances against undesired actions and, as such, provide
reasonable assurance that agencies operate in a safe and sound manner. The
lack of good internal controls puts an agency at risk of mismanagement,
waste, fraud, and abuse. Furthermore, without strong internal controls, an
agency is unable to generate consistent, reliable financial information
needed to maintain accountability over its assets on an ongoing basis.

At USDA, several persistent internal control weaknesses contributed to the
IG's inability to form an opinion on the agency's fiscal year 1999
consolidated financial statements. Three of these weaknessesfood stamp
recipient claims, financial management systems, and accounting for personal
propertyidentified by the IG are discussed below.

Food Stamp Recipient Claims

The IG has reported material internal control weaknesses related to Food and
Nutrition Service (FNS) food stamp recipient claims since fiscal year 1991.
FNS relies on state agencies to administer the program and collect and
report on any overissuance of food stamp benefits. FNS has been working with
state agencies to put systems and procedures in place to collect identified
overissued food stamp benefits, which were estimated to total $193 million
as of September 30, 1999. However, based on a review of the status of state
agencies' progress in improving their claim systems, FNS noted that only 24
of the 53 state agencies in June 2000 had claim systems that can report
accurate, complete, and supportable information on overissued food stamp
benefits and related collections. Of the remaining 29 state agencies, 28
have prepared corrective action plans to address reported deficiencies in
their systems and only one has not prepared a corrective action plan. FNS
has established September 2001 as the deadline for implementation of all
corrective action plans. In addition, FNS issued claims regulations in July
2000 that strengthened controls over states' handling of food stamp
recipient claims. For example, these regulations created detailed procedures
for establishing, processing, and monitoring claims.

While we recognize that these efforts have strengthened controls over
recipient claims, additional efforts are needed. FNS must continue to work
with state agencies on implementing systems and controls to properly
identify and collect overissuances because program funds are lost when
claims are not established promptly and pursued vigorously.

Financial Management Systems

Since fiscal year 1997, the IG has reported that USDA's financial systems do
not always process and report departmentwide financial information
accurately. The IG has reported that many of these systems are not fully
integrated with other USDA systems and do not fully comply with federal
financial management systems requirements. Among the more serious problems
cited by the Inspector General were that USDA

   * had a net difference of about $130 million between its accounting
     records and the supporting personal property system;
   * had a payroll system that contained data dating as far back as 1979
     that had not been properly analyzed; and
   * lacked controls to ensure that transactions recorded in its old
     accounting system were accurate and properly authorized.

It is critical that USDA correct these problems by implementing new or
revamped systems that are properly designed and implemented to integrate
budgetary and cost information with external reporting to provide USDA with
the capability to accurately track assets and identify all costs associated
with an activity.

USDA's attempts to address this need go back to December 1994 when the
Office of the Chief Financial Officer (OCFO) purchased FFIS, a new
accounting system, with the goal of replacing the old accounting system
USDA-wide. But while USDA has implemented the new system in several
component agencies over the past few years, it has experienced delays in
agencywide implementation. Current plans call for complete implementation of
the system USDA-wide by October 1, 2002. Meanwhile, USDA's CFO has agreed
with the IG's recommendation to develop a long-range plan to consolidate,
integrate, and/or reengineer the feeder systems.

Accounting for Personal Property

In its fiscal year 1999 audit report, the IG reported that material internal
control problems existed in the accountability and valuation of personal
property at agency field offices, headquarters, and the National Finance
Center. For example, the IG noted that about 60 percent of approximately
10,000 USDA accountable property officers as of December 7, 1999, were
either delinquent in performing physical inventories or had never recorded
that an inventory had been taken. In addition, IG staff noted that
documentation supporting the purchase price of property was lacking, and
numerous errors in the property values were recorded in the system. For
example, the staff found a motor vehicle recorded in the system at over $97
million and a microscope recorded in the system at $11 million. Until all
counts are taken and recorded in the accounting records, USDA does not fully
know what assets it has, where they are, and what they are worth. Further,
the Congress cannot be assured that USDA requests for additional funds to
purchase property and equipment are fully warranted.

USDA Does Not Fully Comply With Certain Key Laws and Regulations

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Over the past decade the Congress has passed several important pieces of
legislation designed to improve financial accountability in the federal
government: the Chief Financial Officers (CFO) Act of 1990, the Government
Management Reform Act (GMRA) of 1994, and the Federal Financial Management
Improvement Act (FFMIA) of 1996. Generally accepted government auditing
standards require auditors to report on whether or not agencies complied
with laws and regulations where instances of noncompliance could have a
material impact on the agency's financial reporting. Instances of
noncompliance include situations in which an agency fails to follow a
requirement of a law or regulation or performs an act that is prohibited by
a law or regulation. The management of USDA is responsible for complying
with laws and regulations that are applicable to the agency. The IG reported
some instances in which USDA was noncompliant, including the two discussed
below.

First, the IG concluded that USDA had not fully addressed problems related
to compliance with the CFO Act. Specifically, the agency had not implemented
a fully integrated financial information system. The current system relies
on data from various program and administrative systems throughout the
agency in order to prepare USDA's consolidated financial statements. In
addition, USDA had not (1) conducted required biennial reviews of the fees,
royalties, and other charges imposed by USDA agencies for services and (2)
made recommendations on revising those charges to reflect costs incurred by
the agencies in providing those services as required by the CFO Act. The IG
noted that one agency did not update its user fees for its inspection
services for fiscal year 1998 and part of fiscal year 1999. As a result, the
agency did not bill for millions of dollars that it was entitled to receive
because the fees were not adjusted for salary increases and inflation
factors.

Second, the IG noted that some component agencies' financial management
systems do not substantially comply with the three requirements of FFMIA.
The act requires agencies to implement and maintain financial management
systems that comply substantially with federal financial management systems
requirements, applicable federal accounting standards, and the Standard
General Ledger at the transaction level. As required by the act, USDA has
prepared a remediation plan that includes corrective actions that are
scheduled to be completed no later than September 2003.

Status of Efforts to Resolve USDA's Financial Management Problems

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To its credit, USDA has achieved some accomplishments this fiscal year in
addressing its financial management weaknesses. I would like to highlight
the efforts of both USDA and the Forest Service to resolve these problems
and work toward financial accountability.

USDA

USDA's 1999 Annual Program Performance Report, issued on March 29, 2000,
lists various financial management improvements accomplished by USDA's
Office of the Chief Financial Officer. These and other corrective actions
identified based on other documents and discussions with USDA's financial
managers, follow:

   * Increased the number of component agencies receiving an unqualified
     audit opinion from two to three;
   * Hired a contractor to study USDA's deficient supporting computerized
     systems-referred to by USDA as feeder systems--to recommend solutions
     for integrating, consolidating, or reengineering these systems;
   * Implemented USDA's new accounting system in the Risk Management Agency;
   * Substantially increased funding to study and resolve the reconciliation
     problems with its Fund Balance with Treasury account--as of June 1,
     2000, USDA incurred over $2.8 million dollars, according to the IG, in
     contract costs, and millions more in direct and indirect personnel
     costs; and
   * Worked closely with Forest Service financial managers on correcting the
     Forest Service's financial management problems.

Although USDA has strengthened the involvement of its credit reform steering
committee in monitoring the agency's progress, thus far USDA management has
been slow in providing the necessary resources to resolve the agency's
problems in implementing credit reform.

Forest Service

The Forest Service has completed several corrective actions and begun others
that, if successfully carried through, represented important steps toward
achieving financial accountability. While the Forest Service has a long way
to go to achieve financial accountability, it continues to make progress in
addressing its financial management weaknesses. Specifically, the Forest
Service has accomplished the following:

   * Implemented a new accounting system on October 1, 1999, as scheduled;
   * Reorganized and strengthened the Office of Finance at agency
     headquarters;
   * Initiated an assessment of the Forest Service's highly decentralized
     and autonomous field office financial management structure, with a
     final report expected this fall;
   * Completed and implemented its methodology for valuing road assets with
     the IG's concurrence;
   * Developed 34 financial management performance measures in such areas as
     debt management and personal property to address weaknesses in
     financial accountability;
   * Developed and proposed a simplified budget structure for the National
     Forest System and the Capital Improvement and Maintenance
     Appropriations;
   * Worked towards addressing problems in reconciling the Fund Balance with
     Treasury account;
   * Implemented a new concept in October 1999 for charging expenditures
     based on work performed in addition to a standard set of definitions
     for indirect costs; and
   * finalized a long-range plan with goals and objectives, timeframes, and
     measures for attaining financial accountability.

As these accomplishments demonstrate, the Forest Service is making progress
in addressing its financial management deficiencies and is on the right
track towards financial accountability. However, much work remains, and
sustained top management commitment is necessary to ensure that progress
continues.

Conclusion

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In conclusion, USDA is a large, complex agency with many difficult issues to
address before it can be accountable to you, the Congress, and taxpayers for
the money provided to carry out its varied missions. Many of the problems
are deep rooted and will take time, sustained top management commitment, and
substantial resources to correct. Therefore, continued congressional
oversight, such as this hearing, are essential to help ensure that USDA
focuses adequate attention on resolving its financial management
deficiencies.

Mr. Chairman, this concludes my statement. I would be happy to answer any
questions you or other Members of the Subcommittee may have.

Contact and Acknowledgements

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For information about this statement, please contact McCoy Williams at (202)
512-6906. Individuals making key contributions to this statement included
Lou Schuster, Phillip McIntyre, Dan Blair, Carla Lewis, and Maria Zacharias.

(913917)

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Contact one:

Web site: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: [email protected]

1-800-424-5454 (automated answering system)

Financial Management: USDA Faces Major Financial Management Challenges
(GAO/T-AIMD-00-115, Mar. 21, 2000).

A disclaimer of opinion means that the auditor is unable to form an opinion
on the financial statements. A disclaimer results when a pervasive material
uncertainty exists, or there is a significant restriction on the scope of
the audit.

The Federal Accounting Standards Advisory Board (FASAB) developed the
accounting standard for credit programs, Statement of Federal Financial
Accounting Standards (SFFAS) No. 2, Accounting for Direct Loans and Loan
Guarantees (SFFAS No. 2), which became effective beginning in fiscal year
1994. This statement was supplemented by SFFAS No. 18, Amendments to
Accounting Standards for Direct Loans and Loan Guarantees, which becomes
effective for periods beginning after September 30, 2000.

Credit Reform: Improving Rural Development's Credit Program Cost Estimates
(GAO/AIMD-00-286R, Aug. 22, 2000).

The SGL provides a standard chart of accounts and standardized transactions
that agencies are to use in all their financial systems.

Present value is the worth of a future stream of returns or costs in terms
of money paid immediately. In calculating present value, prevailing interest
rates provide the basis for converting future amounts into their money now
equivalents.

1994 was the first year in which agencies were to apply credit reform in
their financial reporting, following FASAB's publication of SFFAS No. 2 in
July 1993.

Credit Reform: Key Credit Agencies Had Difficulty Making Reasonable Loan
Program Cost Estimates (GAO/AIMD-99-31, January 29, 1999).

OCFO Commits to Correct a 10-Year Problem with Its Fund Balance with
Treasury Account (Report No. 11099-14-FM, Sept. 2000) and FFIS Fund Balance
with Treasury (Letter to the USDA CFO, Sept. 2000).

Forest Service: Financial Management Issues (GAO/T-AIMD-98-230, July 7,
1998).

This amount represents USDA's estimate of collectible overissued amounts.
However, USDA statistically projected that total overissuance of food stamps
could have been as much as $1.3 billion for fiscal year 1998.

According to the Forest Service's Office of Finance, the House
appropriations subcommittee responded with a variation of the Forest
Service's proposal that is expected to be included in the Forest Service's
final fiscal year 2001 appropriation.
*** End of document. ***