Segment 2 Of 2 Previous Hearing Segment(1)
SPEAKERS CONTENTS INSERTS
Page 9 PREV PAGE TOP OF DOC Segment 2 Of 2
DATA INTEGRITY: FINANCIAL DATA
Thursday, September 30, 1999
House of Representatives, Subcommittee on Oversight, Investigations and Emergency Management, Committee on Transportation and Infrastructure, Washington, D.C.
The subcommittee met, pursuant to call, at 2:00 p.m., in Room 2253, Rayburn House Office Building, Hon. Tillie K. Fowler [chairwoman of the subcommittee] Presiding.
Mrs. FOWLER. The subcommittee will come to order.
Today's hearing will be the first in a series of hearings designed to analyze the quality of data within our Federal agencies. This hearing will focus on the quality of financial data. It is difficult to overestimate the importance of accurate financial data when managing and overseeing an agency. As one expert stated, 'managing an organization without sound financial data is like driving around in the dark without headlights.'
Private companies and non-profit organizations spend significant resources collecting and validating data regarding their revenues, expenses, assets, and liabilities. They go to great lengths to ensure the accuracy of this data. An organization of this type that cannot produce a 'clean' audit report is considered to be in serious trouble.
Therefore, it should be of some concern to all of us that, as of today, only 11 of the Federal government's 24 largest agencies, with budgets in the tens of billions of dollars, have received a clean audit for fiscal year 1998.
An audited financial statement that receives a clean opinion is considered to be reliable. In this context the term reliable indicates that the statements are free from error and bias, and that they faithfully represent what they claim to represent in all material aspects.
Page 10 PREV PAGE TOP OF DOC Segment 2 Of 2
In 1995, the new Republican leadership of the House of Representatives recognized the importance of audited financial statements and required itself to issue such statements for the 15-month period ending December 31, 1994. With the help of the audit process, the House has improved its internal operations; and I am pleased that the House of Representatives has finally received its first clean opinion on the fiscal year 1998 financial statements. We have to start here if we are going to criticize others.
Today we are specifically looking at the three largest agencies in the committee's jurisdiction—the Department of Transportation, the General Services Administration and the Environmental Protection Agency. Each of these agencies has a budget that would place it among the largest 500 companies in the world. However, as of today, GSA is the only agency in our review that issued its fiscal year 1998 audited financial statements on time and with a clean opinion.
Even more troubling, a clean audit opinion on the financial statements does not necessarily mean that the financial data is accurate.
The subcommittee staff reviewed 76 General Accounting Office and Office of Inspector General audit reports issued over the past few years on DOT, GSA and EPA. Sixty-two of the 76 reports indicated that data quality was a problem. For example:
At DOT, $21 billion in property, plant, and equipment, reported on the consolidated financial statements could not be substantiated. At GSA, 55 percent of the records in a building database were wrong, resulting in the underbilling of $12 million in rent. And at EPA, in fiscal year 1997, Superfund State Contracts were misstated by nearly $29 million because revenues were not properly recognized.
While these and other concerns identified by the GAO and Inspectors General are being addressed, there is some evidence indicating that these problems will continue. For instance, on September 28, 1999, only 2 days before the end of fiscal year 1999, EPA finally issued its audited financial statements for fiscal year 1998. Although EPA did receive a clean opinion on these statements, they were due on March 1, 1999. Thus, the audited financial statements were 211 days late. This important example raises the question of the impact on delinquent information when assessing the quality of the data provided.
Page 11 PREV PAGE TOP OF DOC Segment 2 Of 2
The purpose of this hearing is to help us determine exactly how widespread and serious these problems are. Are we driving around in the dark with our headlights off?
I look forward to hearing from the Inspectors General and agency officials on the subject of financial data quality, and I ask unanimous consent to enter into the record a statement from the GAO. Without objection, so ordered.
I would now like to recognize Mr. Traficant for his opening statement.
Mr. TRAFICANT. I would like to thank you, Madam Chair, for convening this hearing. It is evident with the size of the turnout that there are some worried people here today. I think you've touched on most of the salient points for the purpose of the hearing. I would ask that my whole statement be incorporated, but I would like to extemporaneously make a few points from within.
Congress has passed a number of laws to improve agencies' internal controls in financial and management information systems over the years. Congress has done that to ensure that agents and agencies consistently produce on a timely manner that information to Congress.
Many times Congress is treated with disregard, and Congress has invited this disregard by failing to apply an adequate oversight. That is one of the reasons why we are here today. There is concern of the financial liability reporting at the agencies that are here. I don't know how extensive it is, but inaccurate financial data prevents the Congress and our government from performing effectively and efficiently.
Having said that, the subcommittee staff has reviewed about 76 GAO and Office of Inspector General audit reports issued within the last few years. In a number of them the review indicated that data quality was and could be a significant problem. These are not the sexiest types of matters to discuss. They don't make the headlines, but they bog the Congress down. They waste money, they mislead Congress.
Page 12 PREV PAGE TOP OF DOC Segment 2 Of 2
I have a very good past history of having faith in GSA, DOT, but I still think the EPA is responsible for the closing of my mills, but I am going to give them the benefit of the doubt. Having said that, I ask unanimous consent that the remainder of my statement be included in the record.
Mrs. FOWLER. Thank you.
The Chair now calls Mr. John Meche from the Department of Transportation. Mr. Meche is Deputy Assistant Inspector General for Financial and Information Technology Audits.
Next, Mr. Gene Waszily from the General Services Administration. Mr. Waszily is Assistant Inspector General for Auditing.
Finally, Mr. James Rauch from the Environmental Protection Agency. He is Assistant Inspector General for Audit.
Gentlemen, it is a standard procedure for this subcommittee to swear in all witnesses, and so if you would please stand and raise your right hand.
[Witnesses sworn.]
Mrs. FOWLER. We ask that you summarize your testimony in 5 minutes. Without objection, your full written statements will be included in the record.
TESTIMONY OF JOHN L. MECHE, DEPUTY ASSISTANT INSPECTOR GENERAL FOR FINANCIAL AND INFORMATION TECHNOLOGY AUDITS, DEPARTMENT OF TRANSPORTATION; EUGENE L. WASZILY, ASSISTANT INSPECTOR GENERAL FOR AUDITING, GENERAL SERVICES ADMINISTRATION; JAMES O. RAUCH, ASSISTANT INSPECTOR GENERAL FOR AUDIT, ENVIRONMENTAL PROTECTION AGENCY
Mrs. FOWLER. Mr. Meche, if you would proceed.
Mr. MECHE. Good afternoon, Madam Chairman and members of the subcommittee. Thank you for inviting the Inspector General's Office to testify on the quality of financial data in the Department of Transportation.
Page 13 PREV PAGE TOP OF DOC Segment 2 Of 2
In the interest of time, I will summarize my prepared statement. I will cover two topics: the current status of DOT's financial statement information, and challenges ahead to improve the quality of financial data.
Seven years ago we began auditing DOT's financial records. We immediately ran into problems with the quality of data supporting the financial statements. To improve financial management and accounting practices, we have made over 100 recommendations. Progress was slow until the President announced in May 1998, that the goal was to have a clean opinion on the government's financial statements for fiscal year 1999.
Since then, the Department of Transportation has been operating with a sense of urgency. It has done a tremendous amount of work, made lots of improvements, and solved many of the earlier problems. DOT's toughest challenge is its property and equipment accounts, which total about $21 billion. Much of this is old stuff for which records do not exist any more, or can't be found very easily. Most of the property is owned by the Federal Aviation Administration and the United States Coast Guard.
To solve these problems FAA and Coast Guard have put together task forces under the leadership of their Chief Financial Officers. We and the General Accounting Office are working with these teams to find acceptable solutions to the problems, and it is working.
For example, our auditors found equipment values on FAA's books were inaccurate. By using budget information, national contracts, and other financial records, FAA was able to document its equipment cost is $4.5 billion higher than was recorded in its books. This difference becomes very important if FAA is to recoup its full cost through user fees.
Turning to financial systems, DOT's accounting system is old and it was not designed to produce the financial and budgetary data that are needed to prepare today's financial statements. Beginning in fiscal year 1998, all Federal agencies were to have the capability to perform managerial cost- accounting. DOT has recognized its system's limitations and is developing a new accounting system with a cost-accounting capability. This replacement system is scheduled to be fully operational by the end of fiscal year 2001.
Page 14 PREV PAGE TOP OF DOC Segment 2 Of 2
FAA is also developing a separate cost-accounting system. FAA set out to have its cost-accounting system by October 1, 1998, but the project has not gone smoothly. As of today, FAA plans to have a fully operational cost- accounting system by the end of fiscal year 2001. FAA needs this cost- accounting system for management purposes, but it is vital if FAA is to establish and defend user fees if and when Congress authorizes them.
DOT and the rest of the federal government are moving into measuring performance as required by the Government Performance and Results Act. This will require financial systems that can relate cost information to performance data and provide information on cost effectiveness of major programs. Unfortunately, DOT's current financial systems do not produce the data it will need.
In conclusion, DOT is making an extraordinary effort to fix its books and records to support the fiscal year 1999 financial statements. But that is not good enough. It must fix the financial systems and establish controls for the long term. It will take leadership, dedication, commitment, and very hard work to get the job done. DOT has the team in place, and the team is getting its leadership and 100 percent support directly from the Department's Chief Financial Officer.
We stand ready to assist DOT and its Chief Financial Officers in any way we can to make this a success for DOT and the federal government.
Madam Chairman, that concludes my oral comments.
Mrs. FOWLER. Thank you.
Mr. Waszily.
Mr. WASZILY. Thank you. I am very pleased to be here this afternoon to discuss the integrity of financial data at the General Services Administration. I think, more importantly, as a member of the IG community, we are appreciative of the subcommittee's interest in the integrity of financial data, particularly because it effects both the efficiency and economy of government programs as well as it reflects the quality of stewardship over taxpayer money.
Page 15 PREV PAGE TOP OF DOC Segment 2 Of 2
Over the many years, our work within the Office of Inspector General has focused on working with management to enhance the timeliness, completeness and accuracy of financial data provided to General Services Administration managers, the Congress and the public.
From an overall viewpoint, GSA has systems in place that provide reasonable assurance that its financial information is accurate. We are very fortunate we actually got started on financial statement auditing much earlier in the game, and for the past 11 years we have had a clean financial statement from our independent public accountants.
Having said that, both we and the managers at the General Services Administration recognize that more work is needed to improve the accuracy and timeliness of underlying financial information. Because of GSA's primary role as a major provider of goods and services to the entire Federal Government, its financial systems annually process millions of individual transactions. Each is subject to error each time they are either transformed or input into another system, and is subject to loss or delay when data must be physically moved from one location to another.
Therefore, while the Agency has adequate control over its overall financial picture, individual transactions are more vulnerable to error and it is more likely that individual errors can elude detection.
A case in point, earlier the staff of the Subcommittee had asked us to summarize our work on the Public Buildings Service's Rent Billing Account. Through the Public Buildings Service, GSA provides Federal agencies nearly 300 million square feet of office and special purpose space. GSA receives from its customers user charges and uses these funds to pay landlords and utility companies, and to provide building services and repairs. In fiscal year 1997, the Public Buildings Service billed over 20,000 customer accounts for total revenues in excess of $5.1 billion.
We worked with PBS managers to design a statistically valid sample to audit the rent occupancies, and then we actually went out and physically inspected and measured the actual space to test the accuracy of square footage and classification data recorded in their information systems.
Page 16 PREV PAGE TOP OF DOC Segment 2 Of 2
Information that we developed from any miscalculations of rent billings for the sample tenants was then projected to the 1997 second quarter rent roll universe which had a revenue value in excess of $1.2 billion. The results of the study found that more than 55 percent of the rent bills reviewed contained space variances of more than 5 percent when compared to the actual measurements of space.
Because a lot of the overcharges and undercharges in an individual building when you aggregate them would tend to net each other out, the total error that we found in the rent billings for that particular quarter approximated $3 million. By no means are we dismissing the importance of not accounting for $3 million, but percentage-wise it is a relatively small portion of the $1.2 billion rent roll.
The loss of income and the misstatement of much of the information relating to the rent bills also has a direct impact on the Public Buildings Service's relationship with its customers, and it also would have the possibility of distorting any business decisions that they might make based on that information.
From our analysis, what we found is that many of these errors might have taken place as far back as 15-20 years ago, and they compiled over a long period of time. Underlying reasons, maybe not as much emphasis on the need for accurate data, sometimes there were timing errors as far as information not getting into the system in the proper amount of time, proper changes not being made in a prompt manner, and problems just with the patchwork of computer systems that tied together to actually produce the bills at the end of each quarter.
The Public Buildings Service has recognized the importance of this, and they have also recognized that many procedural and technical aspects need to be changed to improve the situation. Currently, the Public Buildings Service has a contractor to work with it to help it clean up the database and, probably more important, to design better controls to ensure that future entries are more accurate.
Page 17 PREV PAGE TOP OF DOC Segment 2 Of 2
In addition to this, it is engaged in a major undertaking right now of bringing on-line a modern automated data system. Despite these efforts, PBS and we are still aware that there are several errors in the system, and it will probably take several years, actually, to clean up the situation.
While our examination of the PBS rent billing system is our most comprehensive look at data integrity, similar findings have been encountered in other GSA systems. Again, it is a situation of quality of information over the transactions themselves. Again, these detract from PBS or other GSA component's decisionmaking ability, and again we are working with a lot of older patchwork computer systems, many of which are in the process of being replaced right now.
That concludes my oral statement.
Mrs. FOWLER. Thank you, Mr. Waszily.
Mr. Rauch.
Mr. RAUCH. Thank you and good afternoon. Madam Chair and members of the subcommittee, I am pleased to have this opportunity to discuss financial data quality at the Environmental Protection Agency.
Over the years, we have performed many financial audits and worked with the Agency on projects to improve its financial management processes, systems and controls. Today, I would like to share with you our perspectives on the current state of financial data quality at the EPA and the Agency's ongoing efforts to make further improvements by implementing cost accounting.
Each year we are required to audit the Agency's financial statements. During these audits, we test the accuracy and reliability of EPA's financial data, evaluate controls, and test compliance with laws and regulations. The results of these audits provide one indicator of the state of financial management at EPA. For 1997, the Agency achieved its goal of obtaining a clean or unqualified opinion on its financial statements.
Page 18 PREV PAGE TOP OF DOC Segment 2 Of 2
During 1998, EPA was faced with implementing new accounting and reporting requirements. Implementing these new requirements was particularly challenging, and EPA was unable to submit its audited financial statements to the OMB by the March 1 deadline. We agreed with the Chief Financial Officer that the Agency should delay issuance of its financial statements until accurate, reliable information could be presented. As a result, we did not receive the Agency's final 1998 financial statements until July, 1999.
Difficulties in presenting budgetary information resulted in the most significant delays. Significant differences existed among the Agency's general ledger accounting records, budgetary reports that had been submitted to the OMB, and numerous draft sets of financial statements that were prepared. These differences existed due to prior period posting errors, problems in recording reimbursable transactions, posting of transactions to improper accounts, and various other unidentified transactions.
Delays also occurred because EPA was not timely reviewing the validity of its open obligations. Consequently, the Agency had to perform a special review to ensure its obligations were fairly presented in the financial statements. This review, which was completed in March, 1999, identified nearly $100 million of open obligations that were no longer needed. Improvements in the Agency's process for reviewing its open obligations would improve the Agency's financial data quality and could result in additional funds being made available to carry out EPA's environmental goals.
For financial data to be useful, in addition to being accurate, timely and reliable, it also needs to be relevant. The Agency's ongoing efforts to implement cost accounting are designed to increase the relevance and usefulness of the financial data available for managing and reporting on the results of EPA's environmental activities. This is in line with the objectives of the Government Performance and Results Act.
Fiscal 1999 is the first year for which EPA has attempted to align its budget and accounting data with information on its environmental results. In March 2000, EPA will report on its environmental results and its costs to achieve these results.
Page 19 PREV PAGE TOP OF DOC Segment 2 Of 2
We have worked with Agency managers in developing procedures to accumulate costs expended in achieving each of its goals. During our 1999 financial statement audit, we are evaluating implementation of these cost accounting procedures across the Agency.
In conclusion, EPA has made much progress in improving the accuracy and reliability of its financial data. Continued emphasis is needed to improve the timeliness of this data. This will be particularly important for the information currently being accumulated on the cost of achieving each of EPA's environmental goals. To effectively implement the Results Act, the Agency will need to be able to routinely produce timely, reliable and meaningful information about the cost of achieving its goals both at year end and throughout the year.
This concludes my prepared remarks. I will be happy to answer questions.
Mrs. FOWLER. I thank each of you. Your full statements will be in the record.
Just have a few questions. Let me state all three questions that I have for each of you:
How reliable does financial data, both for financial statements and day-to-day operations, need to be?
How serious is the problem of financial data quality at each of your respective agencies?
What effect does inaccurate financial data have on each of your agencies?
We will start with Mr. Rauch.
Mr. RAUCH. I believe the data needs to be reliable so that Congress, OMB and the public can have confidence that EPA is properly accounting for the funds that are entrusted to it. Data that is intended for its internal users needs to be precise to allow managers to make the best-informed decisions. Both types of data, I believe, need to be accurate and timely.
Page 20 PREV PAGE TOP OF DOC Segment 2 Of 2
As far as the quality of the data at EPA, it has improved over the years. For the last 2 years, the Agency has received a clean opinion. In the past, we had serious weaknesses in some of our accounts.
However, the timeliness of EPA's financial data needs to be improved. For 1998, it took 10 months to prepare reliable financial statements.
Timeliness of data is particularly important for Agency managers in managing their environmental programs. It needs to be reliable on an ongoing basis throughout the year and not just at year end for reporting for financial statement purposes. The effect of inaccurate financial data, in 1998, as I mentioned, was $100 million of invalid obligations. Had they been discovered sooner, they could have been freed up and used perhaps for environmental activities during 1998.
Another area where we had concerns was accounts receivable. In the past, this had been a material weakness. Last year and this year it is what we call a reportable condition which is less serious than a material weakness, but we still found $24 million that were not recorded timely.
There exists a possibility when data is not recorded timely that the accounts are not going to be received or collected timely or at all.
Mrs. FOWLER. Do you feel confident that the EPA is putting into place mechanisms by which this is going to be done in a more timely manner? At the end of the fiscal year if you discover monies that you could have used otherwise, it is too late. Also, I hope the reason for the late submission of the financial statements is not blamed on the Results Act. I don't think that the Results Act is a good reason for being late, particularly 211 days late.
Mr. RAUCH. That is correct. I would agree with you.
We have been working with the Controller's Office to establish some very tight, rigid time frames for which we need data this year. We have agreed that when we see or when they see that there is a possibility that they are not going to meet the time frames, we are going to sit down and confer on how to react to that.
Page 21 PREV PAGE TOP OF DOC Segment 2 Of 2
I am expecting and I am committing to issuing our financial statement audit by March 1, 2000.
Mrs. FOWLER. That would be great. Especially when we are trying to keep within a balanced budget. If EPA and every other Agency comes to us needing more and more money, when the money is hidden somewhere that they could be using, it would be good to know it in time to make good use of it. I look forward to having a hearing next year and hearing that the financial statements are issued on time.
Mr. Waszily.
Mr. WASZILY. I can certainly echo most of Jim's comments.
In addition, the question of how reliable, particularly from our perspective, we are always shooting for the absolute ideal, but we are realistic to know that human error and other things are to some degree going to distort some of the information. The objective is to get the information as accurate as possible, particularly in situations where we are aware that there are data inaccuracies, to move to correct that.
From a practical standpoint, we also have to look at the cost benefit of installing controls versus the benefit that we are going to gain. We certainly don't want to spend more money trying to control a loss than the loss itself. So those are really our guiding principles.
As far as the effects of inadequate or inaccurate data, it precludes the Agency or minimizes the Agency's ability to do any trend analysis, particularly to pick up a problem area before it becomes a major problem.
Also, this is a measure of our stewardship of taxpayer's money, and if the impression is that we have substantial inaccurate data out there, what does that say to the public about how we are taking care of their resources?
Finally, on the day-to-day basis, it certainly influences our ability to make good business decisions.
Page 22 PREV PAGE TOP OF DOC Segment 2 Of 2
Mrs. FOWLER. You know, you commented on the automated data system at GSA, that it is 25 years old. Is there a deadline when the new system is going to be on-line?
Mr. WASZILY. The Public Buildings Service information system, it is a major undertaking, and it is going to be launched—it is being launched actually in modules, and parts of it are actually operating right now, but, in addition, there will be additional modifications to it and additional features and it will take several years to get it fully implemented.
Mrs. FOWLER. Does several mean 2, 3, 8, or 10 years?
Mr. WASZILY. I believe 2 or 3 years is the objective, although it is already being used for certain purposes.
Mrs. FOWLER. Thank you.
Mr. Meche?
Mr. MECHE. The financial data has to be very reliable. I think the real issue is, if your financial data is in order, you build credibility with Congress and the taxpayers. An independent look at your records shows that you are doing good stewardship. Accurate financial data allows you to make good decisions. Without good data, you may make a bad decision.
One issue facing transportation, especially the FAA, is that they are planning to have user fees. If you get into a situation where you send bills to the airline industry, your financial data needs to be very accurate. You certainly would not want to send a bill and not be able to support why you are billing for that fee. I think it is very important that the data be accurate.
As far as the seriousness of the quality of the data, my answer is twofold. The major problems Transportation has with its financial statement deals with property. We don't sell the government's property like as private industry might, so I don't see its valuation being a serious issue as it pertains to the real world, but the numbers are huge. I think it gets us back to credibility.
Page 23 PREV PAGE TOP OF DOC Segment 2 Of 2
The financial data dealing with the day-to-day activities of the Department must be accurate, such as paying the bills, recording payments, knowing who we paid, and not making duplicate payments. That part of the system works very well based on our work, so I don't have any serious concern for that kind of accountability for the Department of Transportation.
As far as the effect of inaccurate data, we had the same issue in transportation that Mr. Rauch mentioned. We did a review of the inactive obligations and found $672 million of obligations that were no longer needed to pay bills.
And the other issue would be FAA user fees. If they are going to institute those, it is very important that the data support the fees and be beyond question.
Mrs. FOWLER. Thank you.
The chairman recognizes Mr. Traficant for questions.
Mr. TRAFICANT. I have some observations, but first I would like to have my written questions submitted to this panel, and I would like them responded to comprehensively in writing and put on the record.
Mrs. FOWLER. Without objection, so ordered.
Mr. TRAFICANT. Number one, the Department of Transportation, your report says, ''Neither FAA nor the Coast Guard could provide documentation to support acquisition costs for real property reported at $5.3 billion.'' without asking a question, I think you should be able to do that specifically in the future.
Number two, ''FAA had significantly understated the acquisition value of its personal property. This understatement occurred because FAA did not routinely record its equipment purchases in its property records.'' I believe they should routinely record.
I think your models of calculation, although they may give us a reasonable assessment, are inadequate since you have the exact numbers and should use the exact numbers.
Page 24 PREV PAGE TOP OF DOC Segment 2 Of 2
GSA, I want to make a comment. I have worked with GSA for years. It is on the bottom of the ladder all the time, and I want to make one statement for the record.
In regard to most of the audits that have been performed, audit results confirm that, in large part, the General Services Administration is ahead of the other agencies. I want to put that on the record because I want to commend them. I think they have taken some real cuts, some downsizing, and they have done it without hurting people, and they have shown a willingness to resolve some of these matters.
The last one is for Mr. Rauch, and it is not a question. And I don't mean to be sarcastic, but I think I am going to tell it like it is. I have taxpayers every year that come to me with a number of problems with the EPA when they miss deadlines and end up in court and end up paying big, huge fines.
This isn't a question, but there was a legislative mandate of March 1 and it took you until July 1 and you decided that you needed the information before you could do it. I understand that. Here is what I'm saying.
I think Congress should be looking at your delays because EPA has been most aggressive with huge fines and has been very disruptive in industrial communities like mine, and I don't like it. I will be looking for delays from here on in.
Having said that, I have a number of questions that I would like responded to totally and fully with accompanying data.
I yield back the balance of my time.
Mrs. FOWLER. Thank you, Mr. Traficant.
Mr. Isakson from Georgia, do you have any questions?
Mr. ISAKSON. Yes, I would like to ask Mr. Rauch a couple of questions.
One, I am new around here, so if these are stupid, please excuse me. Did you state that obligations were overstated by $100 million?
Page 25 PREV PAGE TOP OF DOC Segment 2 Of 2
Mr. RAUCH. There was $100 million worth of obligations that were on the books that were no longer valid. Money was obligated in prior years in an amount that exceeded what the actual cost was.
Mr. ISAKSON. I understand. I am getting to my question. I wanted to be sure that I had that right.
Then you made the statement that had the Agency known that they were overstated, then that money could have been spent on needed environmental projects. I believe—that is paraphrasing what you said.
Mr. RAUCH. Some of those funds could have been spent. It depends on the type of appropriation.
Mr. ISAKSON. Here is my question. In the Agency—in that Agency that—at the time it overstated those funds, had that been at the end of a fiscal year, according to that analysis, then there would have been $100 million that wasn't spent because it was being held to pay obligations that didn't exist; is that correct?
Mr. RAUCH. That were no longer valid.
Mr. ISAKSON. If that happened at the end of a fiscal year, then what happens in that situation? Does the United States government lapse budgeted funds and they have to be reappropriated or in the next fiscal year can you tap those funds?
Mr. RAUCH. Here again that depends on the type of appropriation.
Mr. ISAKSON. Differentiate for me.
Mr. RAUCH. In the Superfund appropriation, which is a no year appropriation, those monies can be used again.
Mr. ISAKSON. What about a normal nonSuperfund appropriation. Does the money lapse and have to be reappropriated?
Page 26 PREV PAGE TOP OF DOC Segment 2 Of 2
Mr. RAUCH. I can't answer that.
Mr. ISAKSON. I would like to follow up on what Mr. Traficant said. I certainly don't want to beat up on you because you have a tough job, but I can tell you precisely why all of these problems exist.
An American taxpayer every April 15, or whatever their taxable corporate year is, if they don't have these records they go to jail or they get the hell fined out of them. There is a punishment or a penalty that is sufficient if you don't have the financial documentation to either determine what your capital gains—if I made an acquisition of any property, sold it 10 years later and told the IRS I couldn't find my paperwork so I couldn't remember what I paid, so I figured I would pay X number of dollars, they would not accept that. I say that as a statement of fact.
Every citizen has an accountability mechanism for which there is a severe penalty. What Mr. Traficant was referring to with regard to fines at EPA, whether it be soil sediment, erosion control, suspended particles, air quality, which in Atlanta we are now experts on, there is a significant financial penalty.
If it is our policy in the United States government as far as accounting, if those funds don't lapse and in fact can go into the next fiscal year and be spent by the Agency after they find them, you are never going to clean up accounting. In Georgia in our State government, and I think probably most States do it, at the end of fiscal year, if the money is not spent, it is lapsed and it goes back into the treasury. It doesn't go into the Agency's account, it goes back into the general treasury as lapsed funds, and it can't be spent unless reappropriated by the General Assembly. That causes much accounting.
And, secondly, there is an accountability mechanism. I am sure it is not your responsibility, maybe it is something that we ought to do, but generally quality accounting and record keeping comes about because of two things: One is the system that is installed. The second is the penalty if you don't do a good job.
Page 27 PREV PAGE TOP OF DOC Segment 2 Of 2
I would take it since we don't pay taxes—as a government, it doesn't pay taxes to itself, then there is no penalty out there. Unless we put some mechanism that would force the Agency to be more accountable and the employees, who I am sure are doing the best they can, but no penalty, there is no urgency.
So I would suggest we, Madam Chair, look into not like Superfund and things like that or ongoing construction contracts, this wouldn't apply, but if you are talking about normal operational appropriations for programs approved by the Congress in an Agency where you are overstating obligations, therefore not spending the money and then finding the money lapsed, we could change the rules and cause a much better accounting system immediately because the people keeping those records would be motivated, than to not have an overstatement sit there for long.
Mr. Meche, I agree with one thing you said. Of the two problems, one is the property and the other is the accounting. The accounting is significantly important. I agree with Mr. Traficant, it is hard to explain why you can't figure what you paid for something, but it is also understandable if you bought it decades ago when probably it wasn't a requirement that you have the record, so a system can correct that.
But in the report it was stated that DOT had not reported assets that it owned. It reported some assets that had been destroyed as still being there. It made a number of things that it would seem to me to be pretty visually easy for whoever was at that site. How does that system work? Are you dealing with just computers and taking what is there, or do you require an annual inventory of your property in each division and somebody responsible for reporting it?
Mr. MECHE. The situation we encountered was that the accounting records have the property. What is supposed to happen is that you have to go out and inventory it on a regular basis. When dealing with the real property items, you generally don't have to do that every year because the building stays there.
Page 28 PREV PAGE TOP OF DOC Segment 2 Of 2
But, obviously, what our review showed is that there has to be a discipline in the system. We do, in fact, destroy buildings. Things happen to the assets. If you don't have the discipline built into your system, you will have situations like that popping up.
In our opinion, the property issue shows the real weakness in the system. You should not have a building that was demolished 10 years ago in your accountable records. That is a very easy situation to identify and should have been corrected.
Mr. ISAKSON. Thank you.
Mrs. FOWLER. Thank you, Mr. Isakson.
Mr. Traficant.
Mr. TRAFICANT. In your report, Mr. Rauch, implementing new requirements was particularly challenging. EPA in 1998 was unable to submit its audited financial statements to OMB by the March 1 deadline. We jointly agreed with the Chief Financial Officer that the Agency should delay issuance of its financial statement. You thus then complied several months later, July 1, 1999. Did you ask anyone outside of EPA or OMB for an extension? Yes or no.
Mr. RAUCH. We had discussions with OMB—.
Mr. TRAFICANT. Did you ask for an extension?
Mr. RAUCH. No, we didn't. We notified OMB that there was some additional work that needed to be done. We didn't anticipate that it was going to take until September for us to issue that report. When we initially started, we thought it was going to be a matter of a couple of months. As time went on, it took a lot longer than we anticipated.
Mr. TRAFICANT. Did you or anybody at OMB think it might be necessary to notify the Congress of the United States that you weren't going to be able to comply with a legislatively mandated deadline?
Mr. RAUCH. The Congress was aware that we missed that deadline.
Page 29 PREV PAGE TOP OF DOC Segment 2 Of 2
Mr. TRAFICANT. I didn't ask you that. Did you notify the Congress that you wouldn't be able to make the deadline?
Mr. RAUCH. I did not.
Mr. TRAFICANT. To your knowledge, did anybody in the Agency notify the Congress?
Mr. RAUCH. I don't know if—.
Mr. TRAFICANT. I would like, if you have any notices at all, to send them to be included in the record. One of problems we have here is that your oversight is not the OMB, it is the Congress of the United States. These agencies seem to forget that. Thank you.
Mrs. FOWLER. I want to thank each of you for your testimony today. I think we will each have some follow-up questions for the record, but we appreciate your being with us today and answering our questions.
I would like to call the next panel, but what I am going to do is call out of order. If other members of the panel would wait a few minutes, I am going to call Mr. Jack Basso, the Chief Financial Officer for the Department of Transportation. He has to leave by 3:00. We are going to let him give his testimony and ask questions real quick, and then we will do the rest, because I know that he has to be out of here in a few minutes.
[Witness sworn.]
TESTIMONY OF PETER J. BASSO, CHIEF FINANCIAL OFFICER, DEPARTMENT OF TRANSPORTATION
Mr. BASSO. Thank you for accommodating me.
Mrs. FOWLER. I think you have been on the Hill a lot recently.
Page 30 PREV PAGE TOP OF DOC Segment 2 Of 2
Mr. BASSO. Yes.
Let me, first of all, thank the committee for holding this hearing. Let me say I was sworn in in October of 1998 as the Chief Financial Officer of the Department of Transportation, but I must tell you that I have no excuse for the history because I have been there for 30 years and so I take responsibility for history and the currency.
Let me say, first of all, it is extremely important that we deal with the funding deficiencies at the Department of Transportation. The reason that I mention my swearing-in date, because on that day I assured the Secretary that the first and foremost priority I would address is getting a clean opinion for the Department of Transportation on its financial statements, and we are proceeding vigorously to accomplish that.
Secondly, that is not adequate. To simply get a clean opinion is getting an A on a report card. We need to fix the deficiencies that over time have led to the conditions that were reported by the Inspector General, and that is as important, if not more important, than simply being able to deliver a clean opinion.
Let me just comment on a few things.
On property management records, there are no excuses for these things, but there is some history. For example, one of the things that I would note, on some of our property, I had occasion to look at some Coast Guard records, and we actually have a deed signed by Sam Adams, the Governor of Massachusetts, dealing with a piece of property. So that gives you some idea—I wasn't around that long, but I have been there awhile, and that leads to some of the conditions. Some of our property dates back 200 years through various iterations of agencies.
With regard to the FAA, there is a vast amount of property, and attention and priority needs to be given to these issues.
Mr. BASSO. In 1980 I worked on a task force on this very issue; and I think, after a year, we threw up our hands and walked away. And that is probably why we are where we are today, and I am going to do something about it.
Page 31 PREV PAGE TOP OF DOC Segment 2 Of 2
We have very good cooperation on the part of the modal administrations of the Department in dealing with this issue. We have established a procedure with the Inspector General who has worked terrifically with us where we meet, actually literally, about every 2 weeks with the FAA administrator or the Coast Guard commandant or myself and others to get a full report on progress, and progress has been made in cleaning up this property plant equipment problem.
With regard to other areas of data that we have had problems, cost accounting is an example, we want and will deliver in our financial systems an accurate and timely cost accounting system. We have two dimensions to that, that for the Department as a whole and that for the Federal Aviation Administration, given its size and the fact that we are trying to move the user fees. We expect to introduce our full new accounting system in its complete form and operation by the end of fiscal year 2001.
Madam Chair, I would like to assure you if we can do it sooner than that, I would like to complete it. Because I am looking at where that leaves me, and I may not be here at that time, and I would like to get this done on my watch. So we intend to do that and to correct the deficiencies that exist there.
In addition to that, with regard to the Government Performance and Results Act, or the Results Act as it has come to be known, this is a matter we have the Department take very seriously. I think the evidence of that is in both our strategic plans and performance plans we have been rated best in government.
Also—I would like to share with the committee that we did a complete dry run of what we would report to Congress next March this past March to see what we could learn and what needed to be corrected to get in a position to deliver to this committee and the Congress a totally accurate statement; and we found out some things, I will tell you, on our data; and these things are being corrected.
We are using not only our accounting and financial community but also our Bureau of Transportation statistics to assist us in dealing with those issues.
Page 32 PREV PAGE TOP OF DOC Segment 2 Of 2
So in summary what I would like to say is I think, first of all, on the basic fundamental accounting issues we need to have timely and accurate financial data. Our property and plant equipment records need to be accurate, and they will be.
Secondly, with regard to cost accounting, we will have the system in place and we will do it in a timely fashion and with a state-of-the-art system that I think will be an example that this committee can hold up, I hope, as how to do this particularly well.
And last, on the question of the Results Act, we want to be the best in government when we report in that regard; and that means that our financial management records as well as other measures must be able to come before this committee and the committee to be able to say, we are pleased and satisfied with what we received.
That concludes my statement, Madam Chair.
Mrs. FOWLER. Thank you, Mr. Basso.
I will submit my questions for the record.
Mr. Traficant do you have any questions?
Mr. TRAFICANT. I have a couple of questions, and I will have a list also for the record.
But number one on the record, you didn't give this 3 o'clock self-imposed time limit because you simply want to get to the HOV before traffic? No, really?
Mr. BASSO. No, sir. No, sir. Absolutely not.
Mr. TRAFICANT. I have one question for you because you have a tough task there. Are you confident you can fix the deficiencies that you cited in your report in a timely manner under your watch?
Mr. BASSO. Yes, sir, absolutely.
Mr. TRAFICANT. No further questions.
Mrs. FOWLER. I want to thank you, and I will submit my questions for the record, and we appreciate your enthusiasm and vigor with which you are addressing this, and we look forward to seeing much improvement in this. Thank you very much.
Page 33 PREV PAGE TOP OF DOC Segment 2 Of 2
Mr. BASSO. Thank you.
Mrs. FOWLER. I would like to call the rest of Panel II, please.
We have Mr. William B. Early, Jr., the Chief Financial Officer from the General Services Administration; and I believe with him is Mr. Fred Alt, Chief Financial Officer of the Public Buildings Service; and we have Mrs. Sallyanne Harper, who is the Chief Financial Officer from the Environmental Protection Agency.
And if there is someone with you I need to recognize also, will they be up here, too? Great.
As with the first panel, we will swear in the witnesses.
[Witnesses sworn.]
Mrs. FOWLER. We would ask also that—if you could summarize your testimony in 5 minutes and, without objection, your full written statements will be included in the record, and then we will proceed.
TESTIMONY OF SALLYANNE HARPER, CHIEF FINANCIAL OFFICER, U.S. ENVIRONMENTAL PROTECTION AGENCY; AND WILLIAM B. EARLY, JR., CHIEF FINANCIAL OFFICER, GENERAL SERVICES ADMINISTRATION, ACCOMPANIED BY FRED ALT, CHIEF FINANCIAL OFFICER, PUBLIC BUILDINGS SERVICE
Mrs. FOWLER. Ms. Harper, do you want to start?
Ms. HARPER. Madam Chairman and Members of the Subcommittee, let me begin by thanking you for this opportunity to appear before the Subcommittee to discuss EPA's work in support of financial data quality. I do appreciate your interest in this issue, and I share your concern for the accuracy, completeness, and timeliness of financial data across the government.
Page 34 PREV PAGE TOP OF DOC Segment 2 Of 2
It is essential for government agencies to demonstrate to the American taxpayer that public funds are being managed and are carefully being used appropriately to provide the public services for which we are responsible. One of the best ways for agencies to do that is to prepare annual financial statements that are so clear and sound that independent auditors can endorse them without qualification. An 'unqualified' or 'clean' opinion is based on the auditors' observation that an organization's financial statements present a fair picture of its financial position and the state of its resources.
Auditors also need to be assured that the organization's statements were prepared according to the highest professional accounting standards.
A clean audit opinion represents the best standards of financial management, and our aim at EPA is to meet those standards each day of every fiscal year. As you know, auditors did render an unqualified opinion last year on EPA's consolidated financial statements for fiscal year 1997. We encountered new challenges in the preparation of our financial statements for fiscal year 1998. Federal Government accounting standards are currently a work in progress, and we were subject to multiple new reporting standards for the 1998 statements. We found that we needed extra time to do the job right. For this reason, we did, indeed, miss the March 1st deadline in issuing our 1998 statements.
In taking the extra time to prepare a full set of financial statements for fiscal year 1998, we learned a great deal about the improvements we need to make for this year. I have taken a number of steps to assure that our fiscal year 1999 statements will be timely, complete, and accurate. These include expanded automation of some of our processes, early communication and planning with the Office of the Inspector General, and regular status updates on financial statement preparation.
I am also pleased to report that EPA's financial statements for fiscal year 1998, though delayed, were given an unqualified audit opinion. Clearly, it is my goal that future financial statements will be not only accurate and complete but also timely.
Page 35 PREV PAGE TOP OF DOC Segment 2 Of 2
I have great confidence in the quality of EPA's financial data. Our managers make decisions every day using timely, accurate information that is managed and generated by our financial systems. Thanks to progress we have made in performance budgeting under the Government Performance and Results Act, EPA managers and policymakers can now begin to associate the resources we use with the environmental results we hope to achieve.
We did struggle this year to address some difficult areas in preparing our financial statements, but we worked with our Inspector General to find solutions. As a result, I believe that EPA is better equipped for sound, timely financial reporting. I believe we are taking the right steps to address financial management challenges, in partnership with the Inspector General.
Because data quality and data security go hand in hand, I have arranged two independent reviews of financial data security to be carried out by the Department of Treasury and by the National Security Agency-which, as you know, sets government standards in this area.
I am pleased to report that Treasury identified no material noncompliances in the course of its review. I look forward to receiving NSA's final assessment and recommendations.
In all of this work we count on the Subcommittee's continued interest and support. I thank you again for inviting me to meet with you today and discuss these important issues, and I would be happy to answer any questions the Subcommittee may have.
Mrs. FOWLER. Thank you, Mrs. Harper.
Mr. Early.
Mr. EARLY. Thank you, Madam Chair.
The subject of today's hearing, maintaining and ensuring the quality of financial data, is very important to GSA. Since virtually all of our activities are funded through payments we receive from our customers, that is, from other Federal agencies, we need complete and reliable financial information to operate. In this way, we strongly resemble a private business and must watch our finances very carefully.
Page 36 PREV PAGE TOP OF DOC Segment 2 Of 2
Like a private business, we have our annual financial statements audited by an outside accounting firm. I am proud to report that we have always received an unqualified opinion from these accounting firms, and that has been for 11 straight years. This means that the data produced by our accounting system and the controls governing our financial transactions are sufficient for the auditors to render an opinion on the accuracy of the financial statements. Simply put, it means that the Congress and the taxpayers can rely on the financial data from GSA.
In saying that our financial data is reliable, I am not saying that it is perfect. The thousands of transactions that flow through the multibillion dollar Federal Buildings Fund and the other funds we manage are handled correctly the vast majority of the time. That doesn't mean that there are no errors. However, on a day-to-day basis, what legitimately needs to get paid is paid. What legitimately needs to be collected is collected. Accurate and reliable financial data results from correctly processed transactions.
Three years ago, the Administrator declared ''measurements'' to be one of GSA's operational priorities. That has led us to demand more of our computer systems and to replace legacy systems with more robust, modern information systems. The results have been dramatic. Analytical awareness has grown. Financial information is an integral component of decision-making throughout the organization. These factors have, in turn, led to an awareness of data quality and of the need to improve data quality.
We have undertaken several initiatives in recent years to improve data quality, timeliness and accessibility. We are expanding our focus on accurate accounting and recordkeeping to providing better financial management tools. My objective is to get the right data in the hands of the right people at the right time. If GSA employees are supported in this way, they can take appropriate action as events happen rather than trying to explain problems after the fact.
One example of these analytic tools is what we call InfoWizard. This system enables GSA employees to quickly obtain income and expense information for individual GSA buildings through the desktop computer.
Page 37 PREV PAGE TOP OF DOC Segment 2 Of 2
I understand that the subcommittee has a particular interest in the financial data quality of the Public Buildings Service. I have a few general remarks, and Fred Alt is here to address your specific questions.
Approximately 2 years ago, PBS implemented a new commercial off-the-shelf computer system called STAR, or System for Tracking and Administering Real Property. This system updated hardware and software and consolidated a number of databases from old legacy systems. Initially there were problems with the data quality of STAR, as has been recognized by the GSA Inspector General and others. It is important to note that data inherited from older systems caused the vast majority of the problems.
Within the last year, PBS has put a priority on improving their inventory and billing data. They established a task force on data quality and conducted a massive cleanup of the old data several months ago. They devised a metric to measure the data quality of each PBS region and instituted rigorous performance measurements including involvement of the PBS commissioner. These actions are intended to keep the quality of the data high. In the near future, PBS intends to train PBS employees so that maintaining and using sound data will become a strong part of our culture.
Finally, with the start of the new fiscal year, GSA is implementing the first phase of a new core financial management system referred to as Pegasys. This commercial off-the-shelf system will bring transaction processing capability to the point where transactions are created. A clear benefit of this is a reduction of errors associated with data input.
We engaged in the implementation of Pegasys as a multi-phased process. At present we are evaluating the remaining phases of the project to make certain we are getting good value for the taxpayer and that costs are contained.
This concludes my opening statement; and Fred Alt, the CFO for the Public Buildings Service, and I would be happy to answer any of your questions.
Page 38 PREV PAGE TOP OF DOC Segment 2 Of 2
Mrs. FOWLER. I thank you both for your testimony. You must have an astronomer designing these systems at GSA. You have got Pegasys and STAR.
It was a little vague as to when these systems are going to actually be completely in place. Mr. Waszily in his testimony said he thought it would be 2 to 3 years before all of these automated data systems were going to be totally in place and working. It would be helpful if you could identify the time frames we are looking at with making sure we have the correct systems in place at GSA? You all have been doing a great job in 11 years, but we have got to make sure that we have got up-to-date information, and the only way to do it is to have up-to-date information systems.
Mr. EARLY. The accounting system replacement, the first phase will be operational within the next 2 weeks. We are doing a shakedown this week. We would like to go live tomorrow. And to make sure that we don't have any errors, we can delay until the 12th.
The second phase will probably be 12 to 18 months. The management information system for Public Buildings Service, Fred can talk about. STAR is up and operational, and we are working on enhancements and improvements.
Mr. ALT. We began installing STAR on October 1st, 1997, and installed it in all 11 of our regions over the next 6 months after that. As is true with any large system, it is a work in progress. We have had numerous enhancements to make as a result of the initial installation. However, as Mr. Early pointed out, its primary benefit was establishing an integrated database replacing several systems that had redundant data in them.
At the same time, we very clearly assigned data responsibilities with the new system which should help the process over time. Equally important, since it is a monthly billing process, it gives our customers the opportunity to scrutinize the data every month and provide us feedback. So we think, over time, it will be a terrific system.
Mr. EARLY. I think that having up-to-date information systems requires a continual process of change and upgrading. Our present accounting system is a super accounting system. It was designed in the early 1970s and is still working well. We shouldn't be working with one that is that old, however. The management information system in the Public Buildings Service was designed about the same time. Now we are trying to use COTS packages. They will be updated as the COTS provider is modernizing. We think that will cause us to have more current systems at all times. That should mean that we will be having some changes and updating all the time. We really don't want to have one and sit on it forever.
Page 39 PREV PAGE TOP OF DOC Segment 2 Of 2
Mrs. FOWLER. But as far as being satisfied with the financial data that your agency is generating, it sounds like within this year you are going to have systems in place that should give you some higher level of satisfaction with this data and accuracy?
Mr. EARLY. Again, I don't think we will ever be fully satisfied, but, yes. We have made great progress. We are very comfortable with the data that is in hand today. We are still diligently expecting it to get better.
Mrs. FOWLER. Thank you.
Mrs. Harper, do you have any idea roughly what percentage of the financial data that EPA has been generating is inaccurate? I mean the $100 million of open obligations that were no longer needed and had to be deobligated is a lot. Is it just the $100 million? Is there more? Have you been tracking any of that as far as going back and looking at this?
Ms. HARPER. Chairman Fowler, the financial data in all of the EPA systems is highly accurate. Otherwise, we really would not have been able to obtain the clean opinion. Saying that, I recognize that having a clean opinion, just as Mr. Rauch testified, is not adequate in and of itself.
Mr. Isakson raised the point about the $100 million, that if there were penalties attached to it, perhaps we would have been more quick to deobligate. $65.5 million of that $100 million is actually in construction grants, and I think you are familiar with defense construction, and it is the same with our wastewater treatment plant construction. Often there are late large claims, and so there is a reluctance sometimes by the programs to take that money off if there is the possibility that there may be a late large claim.
That said, we have instituted very vigorous checks at 3-month and 6-month intervals on all open obligations under those contracts on the advice of the Inspector General, and we are whittling down that amount very quickly. I will say that the construction grant ones are the ones with which we will most likely face problems. We do have restrictions on our appropriations. Superfund is a no-year appropiation. The others are for a maximum of 2 years and some are only 1 year, so people will lose that money. Grants generally have a life longer than the length of a single appropriation. We are highly motivated to get that money off of those grants and back into the programs.
Page 40 PREV PAGE TOP OF DOC Segment 2 Of 2
Mrs. FOWLER. I heard loud and clear from Mr. Rauch. Are you pretty much committed to seeing if this can be done in a much more timely manner next year? What goal do you have as far as getting this information together and submitted on time?
Ms. HARPER. Yes, ma'am. I don't think I have a higher priority, other than maintaining the clean opinion and cleaning up any other problems we have, than meeting that March 1st deadline. We faced a choice—and, Mr. Traficant, your point is on target. We faced a choice of issuing statements on time that we knew had bad data in them. I made the decision, and I am responsible for the decision to delay the statements to make sure that the data was as accurate as it could be.
Like Mr. Rauch, we did not anticipate it would have stretched out the 210 days. We anticipated perhaps a month or two delay. We have learned a lot from this process. We have put automated systems in place for some of the processes that delayed us. We have stepped up where we had errors in data from prior years. That is cleaned up in 1999. So I am working with the Inspector General on a rigorous time line that will make the March 1st deadline.
Mr. TRAFICANT. I have a number of questions I would like submitted to the panel and be answered comprehensively as possible and be spread across the recordkeeping, but I do have a couple of points.
Number one, GSA. Since coming to Congress I have probably been associated with GSA as much as anybody in this Congress. Much of the duty involving GSA has never been the most high profile and a lot of these big shots are not too interested in that.
I want to say that I am very proud of GSA for the years I have worked with them for the fine job that you do that is, many times, overlooked; and when there is a problem, many times it is overlooked. So I want to make a couple of statements from theirs and then put my words on this recordkeeping.
Simply put, it means that the Congress and the taxpayers can rely on financial data from GSA, number one. Number two, on a day-to-day basis, what legitimately needs to get paid, gets paid. What legitimately needs to be collected, is collected. Accurate and reliable financial data results from correctly processed transactions. I want to commend them.
Page 41 PREV PAGE TOP OF DOC Segment 2 Of 2
Now, Ms. Harper, what is good for Rauch is good for Harper. And I hope Mr. Rauch didn't take it the wrong way, because he is evidently very skilled, very competent and does a good job for our taxpayers, I am sure, as you do. But I am looking at your report here. Because in my years—I continue to have people come before us and say, well, we have done this in the past, but, like Clint Eastwood, they are not like that anymore.
On page 1, quote: We were late this year with completing the Agency's annual audited financial statements. Page 2: Because we were late with our financial statements, questions may arise regarding the reliability of our data. Number 3: In fiscal year 1999, we want to ensure that our financial statements are issued in a timely manner.
Not a question, but our taxpayers are not asked if they want to comply in a timely manner. Our taxpayers ''shall'' comply in a timely manner, and I think we may be a little soft around here, quite frankly.
And finally, in summary: This year we were late in completing our financial statements, but next year we are going to get them done, Mrs. Harper.
Well, I want to tell you something. If I am here, I am going to check to see if you get them done. Because it is evident, Madam Chairwoman, from my experience on this committee, people are more concerned about the OMB than they are about Congress. And I think it is time the executive branch and Congress come to an understanding on oversight. They do not provide your oversight. You do not have to appease them or satisfy them.
That is easier said than done, and I know you will. But I am hoping there will be enough intestinal fortitude and other respective anatomy necessary to put oversight where it belongs back into Congress, and I think that we have become so busy that we overlook this most important function. Thank you.
Mrs. FOWLER. Thank you Mr. Traficant. And that is why the Speaker asked the committees that did not have oversight to reinstitute them, and that is why this subcommittee was reinstituted, and I am so glad you are here because we are going to continue doing good oversight. Thank you.
Page 42 PREV PAGE TOP OF DOC Segment 2 Of 2
Mr. Izakson.
Mr. IZAKSON. Miss Harper, help me because I am trying to learn, and I completely understand why the $65.9 million of the $100 million would not have lapsed because it was contractual payment, construction, whatever.
Ms. HARPER. Construction grants.
Mr. IZAKSON. But I assume the $34.5 million, balance of the $100 million, wasn't for construction contracts.
Ms. HARPER. That is correct.
Mr. IZAKSON. Does that lapse at the end of the fiscal year or did that roll over and you can still spend it?
Ms. HARPER. It is a mix. It depends on when it was put on the grant or contract. Some of our dollars are no-year dollars. Superfund, a very small portion of this I believe was no-year dollars. Some of our funding is in only 2-year appropriations and some are one-year. If they were 1-year appropriations and the grant has been in existence for a while, which I believe these had, it potentially could have lapsed. Because the auditors, however, pointed it out as $100 million available, it is my belief that probably we could have used that money again. I don't know that fact for certain, but I am guessing. They otherwise would not have pointed it out as something that would have been available for our other use.
Mr. ISAKSON. Just so you understand, when I use the word ''penalty'' I was making the reference to a taxpayer's recordkeeping having to do with the IRS. I didn't mean penalty in the sense of imprisonment or something else. I did mean, though, that they would have to come back to get the money reauthorized and go through the whole effort again. And that is enough of a pain to keep good records I would think.
Ms. HARPER. It surely is.
Mr. ISAKSON. Thank you for reviewing that. That clears that up and helps me to understand that.
Page 43 PREV PAGE TOP OF DOC Segment 2 Of 2
Mr. Early, tell me about Pegasys. I believe there is a sentence in your testimony, where you said, Pegasys takes you to a new dimension where you originate transactions. Is that what it said?
Mr. EARLY. Yes, sir.
Mr. ISAKSON. What does that mean?
Let me add the second part. And the next sentence said, and helps you to overhaul the problem of bad data entry. Tell me what it means by originating the transaction.
Mr. EARLY. It means that the person placing the order, the contracting officer, the person buying the supplies, would enter into a PC on their desk the order, the commitment, the obligation. And the system would have edits to say, yeah, that is the right data, the right authorization. You have the vendor identification and so forth, and you are authorized to do that. And it would route it automatically, depending on who you are, to your procurement officer, to your budget officer and, as they release it, to the accounting department. And, therefore, there is no reconciliation.
Today someone types it up, walks it across the hall, puts it in the mail to the fiscal office who then does the same thing, signs it, sends it to the procurement office. They send it to the finance office. They look at it and type it into the system.
The user looks at it, reviews it, and says, there are some errors here; a wrong dollar amount or wrong vendor. The old process if correcting errors in data, is not an efficient use of time.
This new system will have it inputted at the source and, because of it, it will be processed immediately and you will be able to see the process immediately so you will have a real-time view of status of funds.
Mr. ISAKSON. You refer a couple of times to purchasing off-the-shelf software, and it prompted me to ask a question. Once you purchase Pegasys off the shelf, how much customization did you have to do to it?
Page 44 PREV PAGE TOP OF DOC Segment 2 Of 2
Mr. EARLY. We are still in the process of that. The first phase is complete. We were looking at 90 modifications; and we said our policy, our priority, is to accept commercial product. We squeezed those down to 10, and nine of those are going to be incorporated by the vendor into their product that they are selling to the rest of the Federal agencies. And, therefore, in that regard I would say there is only one item that is really customized for us and that will be temporary until we have phase 2 and 3 finished. We are interfacing with our existing accounting system, which requires one major control number. And that is the modification that we will have until we complete implementation, and then that will disappear.
Mr. ISAKSON. Was it written for the private sector or written originally for government, do you know?
Mr. EARLY. It is a government product. The company provides financial systems for the private sector and for the government. Primarily, we are finding that you need a government product because our requirements, our process—mostly our requirements and statutes are so unique that it has got to really be designed for government.
We did look at private sector systems to see if we could get those and federalize those, and through that evaluation this vendor was viewed as the right one to go and to take that Federal product.
The Joint Financial Management Improvement Program (JFMIP) has established core accounting standards, has established specs for those, and this company met those requirements. JFMIP is about to announce the second phase of that this Friday, on commercial products that they have been tested and evaluated and that meet the government standard and would be available for the Federal family to procure.
Mr. ISAKSON. You mentioned InfoWizard. Is that what you called it? But you didn't really say what it did. You said it was a desktop system that gave you instant information. Is that instant accounting cost administration or information?
Page 45 PREV PAGE TOP OF DOC Segment 2 Of 2
Mr. EARLY. It is a matter of access to information, putting it on your desk. It is the use of a commercial accessibility tool that looks at our accounting data, arrays it in models that we write that puts it on the desktop for any user to look at.
So, as an example, for the Public Buildings Service, you can take a look at an individual building, you can look at its cost, you can look at its trend data, you can push a button and have six or eight different analytical tools, graphs, trend lines on its profitability income stream and so forth.
Mr. ISAKSON. I would suspect if what you had been working with was 1970s vintage software you had no capability like that.
Mr. EARLY. That's correct. It was not accessible. You got hardcopy reports 30 days after processing.
Mr. ISAKSON. And wouldn't that also help you to identify problems earlier and get to them rather than accumulate in the system and be a train wreck?
Mr. EARLY. Absolutely. And that helps cause improved data integrity. You can see it real-time and, therefore, it is usable and meaningful to you.
Mr. ISAKSON. I certainly don't have the experience longevity or the endurance of Mr. Traficant, but it sounds like his compliments are well-deserved.
Mr. EARLY. Thank you, sir.
Mrs. FOWLER. Thank you, and I share in the other members comments, we have dealt with GSA for a long time. You do a great job, as evidenced by your recordkeeping in this area and many others, too, to manage things very well throughout this country.
I understand Mr. Traficant had one more question.
Mr. TRAFICANT. I would like to ask unanimous consent that these three agencies be required to make specific notification to this subcommittee when they submit their next required financial statements pursuant to standing law.
Page 46 PREV PAGE TOP OF DOC Segment 2 Of 2
Mrs. FOWLER. That is fine. We will make that request. And we will put that in what we send out to the agencies, too; and I will follow up with letters. I don't think there should be any objection. I think we are fine there.
Are there any further questions for the witnesses?
Mr. TRAFICANT. I would like to make a statement.
We did lose a lot of jobs in the steel industries and we had some problems with the EPA in the past, but if Mr. Rauch or Ms. Harper has taken offense there was no offense meant.
Thank you.
Mrs. FOWLER. We will each have follow-up questions. If you could answer for the record, we would appreciate it.
If there are no further questions, I want to thank each of you for your testimony today. It has been very helpful, and I look forward as we work together to resolve these issues and move together in a timely fashion. Thank you so much.
I want to say this has been a very interesting hearing, and I see it as the first step of raising awareness to the need of quality data, and I am interested how many people would be here today. We were not sure how technical this would be for people. Some might consider it to be a dry topic.
It is not going to be on tonight's news, but it is precisely what good congressional oversight is all about. That is why this subcommittee was formed. We have already built a reputation for pursuing issues that will result in a better and more effective government, regardless how technical or unglamorous the issue might be. So we intend to hold additional hearings on data quality, and I look forward to working with these agencies and others in improving their processes. And I will tell both panels, as I said, to anticipate some follow-up questions.
Page 47 PREV PAGE TOP OF DOC Segment 2 Of 2
If there is no other comments, questions, the meeting of the subcommittee is adjourned. Thank you very much.
[Whereupon, at 3:30 p.m., the subcommittee was adjourned.]
[insert here]