IG gives GSA passing grade on financials

Report likely to satisfy Congress, let DOD continue to buy from agency

GSA CFO KATHLEEN TURCO and acting deputy inspector general Eugene Waszily testify at the subcommittee hearing.

Rick Steele

The General Services
Administration has made enough
improvements in financial management
to satisfy its inspector
general and likely keep its biggest
customer, the Defense Department.


After accounting problems
caused GSA to return more than
$900 million in unspent funds
last year, officials made signifi-
cant progress in applying comprehensive
internal controls and
revamped accounting processes,
Eugene Waszily, GSA acting
deputy inspector general, recently
told the House Government
Reform Subcommittee on Government
Management, Finance
and Accountability.


'[T]his is a global mea culpa for
the tremendous misaccounting
of funds,' Waszily said. 'GSA in
its 2005 audit captured the sins
of eight years of misapplying
funds. I think the agency is righting
the ship now.'


And, more important, it likely
will convince lawmakers that
DOD can continue to buy from the
agency's schedules and governmentwide
acquisition contracts.


In the 2005 DOD appropriations
act, Congress mandated
DOD and GSA's IG to issue two
reports in March 2005 and 2006
on whether GSA's internal controls
complied with DOD's policies
and procedures. If the IG
had found GSA not in compliance,
DOD would not have been
able to contract with GSA's FTS.


Defense makes up between 60
percent and 80 percent of GSA's
business. In fiscal 2004, DOD's
inspector general found DOD
spent an estimated $8.5 billion
with FTS, based on the amount
of fees Defense paid to GSA.


'Without having those controls
in place, that business was going
to cease and desist. DOD has
been clear that unless and until
those controls were in place,
there could be no more use of
GSA,' said Stan Soloway, president
of the Professional Services
Council, an industry association
in Arlington, Va.


It was critical that GSA get its
arms around its fiscal practices, he
said.


For eight years GSA's then Federal
Technology Service misapplied
and miscounted a total of $900
million in funds and obligations
transferred to it from other agencies
for services.


GSA accounted for
the unspent funds in
last year's financial
statement and failed
its audit.


FTS has since
been merged with
the Federal Supply
Service to form the Federal Acquisition
Service.


The accounting practices in
question included neglecting to
close out project accounts after
project completion, placing
funding that's been appropriated
for one year into an IT revolving
fund and awarding contracts
using expired funds,
Waszily said.


DOD, meanwhile, has revised aspects
of its fiscal rules with GSA.


Besides getting its financial
controls in place, GSA would
need to reassess how it approaches
the work it does on behalf of
DOD, Soloway said. GSA typically
will not begin to do procurement
planning and market research
on a given requirement
until they have the money in
hand. Instead, GSA and DOD
will have to perform upfront
planning and other work that
doesn't require payment. That
would increase risk for GSA by
doing work without an obligation
for a contract with GSA, he said.


Financial-management controls
problems such as GSA experienced
will increase across government
as other agencies conduct
interagency contracts, Soloway
said.


Now that GSA has cleaned up
its accounting, agency chief fi-
nancial officer Kathleen Turco
has been meeting with its 47 customer
agencies and offices to
mend fences.


'We had to return money to
client agencies, and some of that
was no longer available for client
use. We can only do business
with them now with new resources,'
she told lawmakers.


The accounting problems did
not stem from GSA's financial systems
but the actions of the procurement
staff, she said. Only the
budgetary accounts in two GSA
funds received audit disclaimers.


The proprietary accounts'such as
for revenues, expenses, assets and
liabilities'received a clean opinion.


The agency will be ready to sign
and submit the statement of assurance
required by June 30
under the Office of Management
and Budget's Circular A-123 on
internal controls for financial reporting,
Turco said.

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