Are the IGs and Other Federal Auditors Doing Enough to Improve Government Accountability?

By: Mike Kristek, CGFM

Mike Kristek, CGFM, a member of AGA’s New Mexico Chapter, recently retired from the U.S. Department of Energy. He is a longtime member of AGA’s Journal Editorial Board.

On March 3, 1993 two documents were issued that speak to the question “Are the IGs and other federal auditors doing enough to improve government accountability?” The first document was the Gore Report on Reinventing Government (Gore Report). In this document, then-Vice President Al Gore noted that the federal government was filled with good people trapped in bad systems: budget, personnel, procurement, financial management and information. The report went on to note that the U.S. General Accounting Office (GAO, now known as the Government Accountability Office) had published a 28-volume report on federal government management problems and that the U.S. Office of Management and Budget had a list programs that carried a significant risk of runaway spending or fraud. Finally, it noted that in 1990 the Chief Financial Officers Act was passed to overhaul financial management systems and was followed in July 1993 by the Government Performance and Results Act, which introduced performance measurement throughout the federal government. The Gore Report then made 13 recommendations on how to improve the federal government’s financial management.

The second report was from the Office of the Chairman, Administrative Conference of the United States, titled Inspectors General: An Institution in Need of Reform (Administrative Conference Report). The report questioned if the IGs’ overall approach to improving accountability was workable and questioned if the IGs reports were getting the necessary public or congressional attention to fix outmoded financial management systems.

A November 2007 Federal Times article stated that the IGs were the vanguard for achieving government accountability. However, I believe the IGs fall short of that lofty goal. My basis for this pessimistic view—25 years as a federal auditor with the last 16 working for an inspector general of a large federal department, as well as the annual GAO reports that continue to show problems with government accountability. The IGs are hampered with resource issues that prevent them from doing the work necessary to actually improve government accountability. Specifically:

• Audit follow-up is extremely rare. Most IGs do not have the staffing necessary to perform current audits of all programs in their departments in a timely manner let alone follow up on previous audits. In the last few years, the IG I worked for discovered that on several occasions, department management concurred with recommendations and stated they would implement the recommendations. However, we found in a few instances that no action was ever taken despite assurances to the contrary. If recommendations are not actually implemented how do mangers hope to improve accountability?

• Large federal contractors want to have self-governance. Consequently, the large contractors are often very resistant to IG audits and inspections. Some go as far as trying to deny access for necessary documentation and do all they can to try and stop the audit. IGs, in this era of political correctness, try to not be seen as overly aggressive and want to cooperate so they are often reluctant to push the issues. If the contractors do not want the light of truth shown on their programs, does that mean they do not want to improve accountability?

• Finally, the Annual Financial Statement Audit is itself a stumbling block to improving federal government accountability. Approximately half of the IGs’ time and money is taken up by this financial audit. However, a dirty little secret of the auditing profession is financial audits will never uncover fraud, waste and abuse. They are not designed to do so. A financial audit will tell you if you have accounted for your expenditures. It will not tell you if those were wise or efficient expenditures. The financial audits will not determine if programs are valuable. The financial audits will not determine if the government is operating effectively. The Administrative Conference Report noted the need to examine programs and root out those that are poorly designed with multiple administrative layers and fail to fund new financial management systems. If huge financial and personnel resources go to an effort that only tells of what we already know (there is not good financial management in the federal government) how will the resources be found to do the necessary audits to achieve improved accountability?

My question for the readers of this blog is what can be done so the IGs can live up to their promise of being the vanguards for greater government accountability?

MONDAY: Kelly Stefanko, CPA, deputy city auditor, City of Norfolk, VA, on "Changing the Face of AGA to Appeal to Generations X and Y"

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Comments

[Anna]

AGA has a research project on Process Based Reporting. ITs topic is the cost of mission delivery and the effectiveness of mission delivery. There is one report on the first phase of this already on the AGA website under Research and then Research Publications. The second phase with federal agency case studies and pilots is underway and the report on that phase will be available in late 2008. The project focuses on how managerial cost accounting can match up with outcome measurement in terms of major processes. A new statement is being developed that will have both unit cost and results and show what it takes in terms of cost to produce results.

[Mike Kristek]

The May 2008 Government Executive has an intersting article related to this subject titled Business Sense. In that article the author states that "... Congress decisons about those activities [appropirations] never will depend on the kind of financial information that the CFO act calls for. ...The Defense Depattment needs better managerial cost accounting, not fiancial accounting." I believe this is true in all departments. However, I believe there are few IG shops doing cost accounting disclosure statement reviews to determine if costs are properly being controlled and accounted for. This is an area where the IGs should concentrate and not on the financial audits.

Mike Kristek