Happy Birthday GAO

Accountability Is Their Middle Name

Some recent reports from GAO:
Economic Development: Efficiency and Effectiveness of Fragmented Programs Are Unclear

Climate Change Adaptation: Aligning Funding with Strategic Priorities

Financial Education and Counseling Pilot Program

Value-Added Taxes: Potential Lessons for the United States from Other Countries' Experiences

Data Center Consolidation: Agencies Need to Complete Inventories and Plans to Achieve Expected Savings

Millennium Challenge Corporation: Compacts in Cape Verde and Honduras Achieved Reduced Targets

Information Sharing Environment: Better Road Map Needed to Guide Implementation and Investments

Pakistan Assistance: Relatively Little of the $3 Billion in Requested Assistance Is Subject to State's Certification of Pakistan's Progress on Nonproliferation and Counterterrorism Issues

Drinking Water: Unreliable State Data Limit EPA's Ability to Target Enforcement Priorities and Communicate Water Systems' Performance

Information Technology: Continued Attention Needed to Accurately Report Federal Spending and Improve Management

Cost and Legal Authority for Selected Financial Literacy Programs and Activities

Domestic Violence, Sexual Assault, Dating Violence, and Stalking: National Data Collection Efforts Underway to Address Some Information Gaps

The Democratic Republic of the Congo: Information on the Rate of Sexual Violence in War-Torn Eastern DRC and Adjoining Countries

Child Fatalities from Maltreatment: National Data Could Be Strengthened

NASA Needs to Better Assess Contract Termination Liability Risks and Ensure Consistency in Its Practices

Child Maltreatment: Strengthening National Data on Child Fatalities Could Aid in Prevention

Combating Terrorism: Additional Steps Needed to Enhance Foreign Partners' Capacity to Prevent Terrorist Travel

Antibiotic Resistance: Data Gaps Will Remain Despite HHS Taking Steps to Improve Monitoring

Tax Gap: Complexity and Taxpayer Compliance

Influenza Pandemic: Lessons from the H1N1 Pandemic Should Be Incorporated into Future Planning

American Samoa and Commonwealth of the Northern Mariana Islands: Employment, Earnings, and Status of Key Industries Since Minimum Wage Increases Began

Tax Administration: Information on Selected Foreign Practices That May Provide Useful Insights

Recently from GAO

International Monetary Fund: Lending Programs Allow for Negotiations and Are Consistent with Economic Literature;

IMF-supported programs in the four countries GAO reviewed--Liberia, Zambia, Hungary, and Iceland--include different sets of objectives, targets, and conditions that reflect country circumstances, based on negotiations between the IMF staff and country officials. In postconflict Liberia, the program focuses on rebuilding capacity and contains a target for maintaining a balanced budget with no borrowing. In Zambia--a country negatively affected by the recent economic crisis--the IMF-supported program is designed to increase economic growth, reduce poverty, and improve governance. Hungary, which faced a rising risk of default, has a program that focuses on restoring investor confidence while reducing debt and expenditures. A banking and currency collapse in Iceland precipitated the IMF-supported program, which contains some controversial approaches to monetary policy and banking reform. All four countries are making progress but face challenges in implementing conditions or achieving targets in their IMF-supported programs. The macroeconomic policies in IMF-supported programs are broadly consistent with the findings of the empirical literature GAO reviewed, although this literature lacks precise guidance for setting policy targets. For low-income countries, empirical evidence generally suggests inflation is detrimental to economic growth after it exceeds a critical threshold, which is broadly consistent with the inflation targets included in the IMF-supported programs we reviewed. For middle- and high-income countries, the literature identified specific policy weaknesses in advance of crises, including high inflation, high public indebtedness, and low international reserves. These weaknesses are consistent with the policies upon which the IMF focuses in the 13 programs in middle- to high-income countries GAO reviewed.

2010 Census: Census Bureau Has Made Progress on Schedule and Operational Control Tools, but Needs to Prioritize Remaining System Requirements

Operation Iraqi Freedom: Preliminary Observations on DOD Planning for the Drawdown of U.S. Forces from Iraq;

DOD has yet to fully determine its future needs for contracted services. Second, the potential costs and other concerns of transitioning key contracts may outweigh potential benefits. Third, DOD lacks sufficient numbers of contract oversight personnel. Fourth, key decisions about the disposition of some equipment have yet to be made. Fifth, there are longstanding incompatibility issues among the information technology systems that may undermine the equipment retrograde process. And sixth, DOD lacks precise visibility over its inventory of some equipment and shipping containers.

Millennium Challenge Corporation: MCC Has Addressed a Number of Implementation Challenges, but Needs to Improve Financial Controls and Infrastructure Planning

Industry best practices and past GAO work have shown that conducting design reviews and updating cost estimates prior to contract solicitation help to ensure that projects can be successfully bid and constructed.

Bureau of Prisons: Methods for Cost Estimation Largely Reflect Best Practices, but Quantifying Risks Would Enhance Decision Making;

BOP uses three general steps to estimate costs for its annual budget submission: (1) estimating cost increases to maintain service levels, such as inmate medical care and utilities; (2) projecting inmate population changes for the budget year and for several years into the future using a modeling program that incorporates data on the current inmate population and estimated incoming population and associated sentences; and (3) estimating costs to both provide additional capacity to house projected inmate population growth and implement new programs, such as activating new prisons. BOP's methods for cost estimation largely reflect best practices outlined in GAO's Cost Estimating and Assessment Guide

Troubled Asset Relief Program: Continued Stewardship Needed as Treasury Develops Strategies for Monitoring and Divesting Financial Interests in Chrysler and GM

U.S. Government Accountability Office: Performance and Accountability Report Fiscal Year 2009

Iraq IFMIS to be operational in 2009

We are making progress in modernizing public financial management (PFM). The Board of Supreme Audit (BSA) has completed the audit of the final accounts of the federal budget for 2005 and the audit of the final accounts for 2006 is underway. We have submitted the final accounts of the federal budget for 2007 to the BSA in October. The audit reports will be submitted to the Council of Representatives and published. We have also adopted, in consultation with the Fund and the World Bank, a three-year action plan that identifies priority measures to modernize PFM, notably as regards budget preparation, execution and reporting; cash management; public procurement; cash management; and the accounting framework. We will step up our efforts to put in place, in cooperation with USAID, the renewed Iraq Financial Management Information System (IFMIS), in order to make this system fully operational in 2009.

14. We have completed about 25 percent of the data collection for the census of public service employees at end-October, but finalization of the project is being delayed due to technical problems. We will make all efforts to have the census completed by end-January 2009. After completion of the census we will move swiftly to eliminate ghost workers and adopt an action plan to computerize the payroll, as a first step for a comprehensive civil service reform. In parallel, the BSA has begun a project to verify the personnel records in line ministries, in order to clean up the existing payroll.

-Iraq: Letter of Intent and Memorandum of Economic and Financial Policies

Related;

Integrated Financial Management Information Systems: A Practical Guide

Auditors on US Government finances

Fiscal Year 2008 Financial Report of the United States Government;

While significant progress has been made in improving financial management since the federal government began preparing consolidated financial statements 12 years ago, three major impediments have continued to prevent us from rendering an opinion on the accrual basis consolidated financial statements over this period of time: (1) serious financial management problems at the Department of Defense, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective process for preparing the consolidated financial statements. In addition to the material weaknesses underlying these major impediments, we noted three material weaknesses involving the federal government’s inability to (1) determine the full extent to which improper payments occur and reasonably assure that appropriate actions are taken to cost-effectively reduce improper payments, (2) identify and resolve information security control deficiencies and manage information security risks on an ongoing basis, and (3) effectively manage its tax collection activities.

via IMF PFM blog

Deception, waste and poor planning

Anti-Corruption Efforts Abandoned

Anti-corruption efforts were abandoned by both American and Iraqi officials, opening the door to waste, fraud and abuse.
“Grafted on to the existing Iraqi legal system and inadequately supported by their U.S. creators, the CPI [Iraq's Commission on Public Integrity" and the IGs [Iraqi Ministry Inspector Generals] have struggled to find their footing in the new Iraq. Anticorruption efforts by the CPA and the U.S. Embassy must be seen in this context, but the absence of progress in fighting corruption in Iraq is disappointing.

One (Iraqi Inspector General) noted: "If we're too active, our minister will fire us," and the chilling, "if I do my job, they'll kill me."

4.8 miles of Electric Beds

Hard Lessons: The Iraq Reconstruction Experience

Official History Spotlights Iraq Rebuilding Blunders

The Organizational Chart for Iraq's Reconstruction


Parking Lot as Situation Room
As a socialist regime, Iraq had millions of state employees and pensioners. Rebuilding officials had no idea how much to pay them. They picked a figure out of the air over a debate in a parking lot, according to the review.

“The decision about emergency payments to Iraqi civil servants took place around a concrete pillar in the parking lot of the Kuwait Hilton. "Having read various background papers, we started talking about if we could do it at five bucks, or we could do it at 50 bucks," David Nummy remembers. "We decided that a good midpoint was 20 bucks. And that's how we established $20 emergency payments."

4.8 miles of Electric Beds
The violence greatly impeded execution, leading to confusion and unfinished projects.

“When finally finished, the waste-water treatment system—which was supposed to serve the entire population of Falluja—will serve just over a third of the city's population, will have cost three times its original price, and will have been completed three years later than originally planned. Moreover, serious questions remain about whether the Iraqis can sustain it after transfer to their control.

It turned out that the U.S. imported a lot of (hospital) beds for Iraq. A representative of the Canadian company that produced them all told (Jack) Holly, (the former logistics chief for the reconstruction effort) that he had received "4.8 miles of electric hospital beds." Over time, the embassy distributed them to various hospitals and clinics—to be operated manually in many cases because of the inadequate power supply.

Bureaucratic Creativity

From a GAO report;

We found that maintenance staff sometimes devise creative solutions, such as the system that the maintenance staff at one site we visited set up to funnel water from a roof leak into a water bottle that then directs the water to a drain. This solution stopped the water from further damaging the building and leaking into areas occupied by staff while deferring the cost of correcting the problem.

Questions Lawmakers should ask the political appointees

Bonus Point: Question for the new Secretary of the Agriculture Department:

**”Forest pests have caused substantial damage in the past and continue to pose a serious threat to the nation’s environment and economy. How have you networked with local, regional, and other organizations such as may be needed to implement cost-effective early warning systems for invasive forest pests, particularly in urban and suburban forests that are at high risk of receiving invasive insects and disease? “

Bonus Point: Question for the new Secretary of the Commerce Department:

** “The 2010 Census is less than 2 years away. What do you think are the key challenges facing its managers, and what advice would you give them to help overcome those challenges?”

-Getting Appointed: Final Exam

Book Recommendation

Backstabbing for Beginners: My Crash Course in International Diplomacy
by Michael Soussan

Although Soussan can be described as a whistle-blower, his own role in all of this was not entirely innocent. Quite early on, Soussan receives a query from a Swiss magistrate puzzled by the fact that he is being asked to set up a contract for a “front” company (that is, one deliberately created to disguise the identity of the person behind the company) to handle one of the oil-for-food transactions: the use of such front companies was illegal under the terms agreed by the UN's Security Council. The Russians are the biggest beneficiaries of the scamming, profiting to the extent of $500m, some of which went directly to then President Putin's chief of staff (for subsequent disbursement to favoured politicians). Surprise, surprise, the UN official assigned to such legal issues is Russian. He tells Soussan that the Swiss magistrate's conscientious inquiry should be ignored - advice that our author goes along with, albeit with theatrically expressed misgivings.

After that, the use of front companies escalates out of all control. Some of the biggest personal beneficiaries turn out to be French officials attached to that nation's foreign ministry - which may help in retrospect to explain France's wholehearted sabotaging of Bush and Blair's attempt to gain UN support for the removal of Saddam by military means: not only would a switch from the sanctions policy put an end to the French profits from it, but if Saddam's ministries ever did fall to the Americans there might be some extremely embarrassing documents to be found in them.

GAO's Performance

U.S. Government Accountability Office: Performance and Accountability Report Fiscal Year 2008

India to create a Debt Management Office

Report of the Internal Working Group on Debt Management

How much spending is enough on strengthening public expenditure management?

The People's Republic of Bangladesh intends to apply for a grant of around US$ 95 million from a Multi-donor Trust Fund (MDTF) administered by the International Development Association (IDA) and with the participation of five development partners, Department for International Development (DFID), European Commission (EC), Canadian International Development Agency (CIDA), Danish International Development Agency (DANIDA) and the Netherlands, toward the cost of Strengthening Public Expenditure Management Program (SPEMP) and it intends to apply part of the proceeds to payment for goods, works and services to be procured under this program.

- Strengthening Public Expenditure Management Program in Bangladesh

Auditing a Dictator, and what you might find

From world's newest edition to democracy- the Maldives- an audit report of its president;

Between 2002 and 2005, at different times a total of Rf 7.2 million ($US 565,000) from the President’s Office budget and fund accounts were handed in cash to two senior officers of the Defence Ministry. Rf 6.3 million ($US 494,000) of this money was given for 'a special government purpose', and the remaining Rf 893,075 ($US 70,000) was given for the establishment and management of a student association in Sri Lanka.

There is no other written record of this money in the President’s Office. There is no way of determining what the required outcome was to be, and if it achieved that outcome. Therefore there is no benefit for the public from Rf 7.2 million given to the two officers of the Defence Ministry.

Indonesia: Progress in Fiscal Institution Building

Recommended reading- Indonesia: Selected Issues, chapter IV;

Progress has been made in strengthening technical capacity at the central government level. Within the Ministry of Finance (MoF), the Fiscal Policy Office (FPO) is now fully operational with a mandate for macro-fiscal projections and analysis, including assessments of fiscal risks. The FPO now prepares fiscal risk statements that are included in the annual budget documents—making Indonesia one of the pioneers in fiscal risk analysis among emerging market economies. Operational management of debt-related risks is undertaken by the Directorate General (DG) for Debt Management, which is responsible for both domestic and external debt management.

Despite some progress, parliament’s technical capacity for fiscal policy analysis is still limited. Parliament’s (DPR) budget committee plays an important role in the budget approval processes, though with excessive emphasis on details which are usually seen as being within the province of the executive (such as close scrutiny of macroeconomic assumptions and detailed review of expenditure items—as opposed to scrutiny at a more aggregated level found in other countries). In contrast with this wide ranging mandate, the DPR had limited qualified technical staff and few with specializations. Some improvement in these areas has been achieved through: (1) increasing the number of technical staff; and (2) greater specialization of staff through the establishment of specific parliament commissions (e.g., the economic commission). These commissions are now able to provide some analytical and technical support to members of parliament, though the DPR’s effectiveness in budget scrutiny and oversight is still inadequate. Intense involvement of the DPR at the pre-budget presentation stages remains (6–7 months before the new fiscal year), but there is only limited focus on medium-term budget issues and on the results of policies embedded in the annual budget. The 2003 State Finances Act calls for an unusually early date for approval by parliament of the annual budget law (2 months before the new fiscal year); nonetheless, DPR committees continue to be involved in budget approval after the annual budget law has been adopted in plenary session. The DPR’s follow-up on the external audits of the Supreme Audit Institution (BKP) remains weak.

Progress has been made in improving the quality of government accounts, but is still incomplete. The adoption of government cash management regulations in July 2007 was an important step in improving the transparency of government banking arrangements. The regulations strengthen the Minister of Finance’s powers to consolidate government bank accounts. On this basis, the MoF conducted a census of government bank accounts operated by ministries and budget users outside treasury control. The ensuing ministry-by-ministry analysis of accounts revealed that over 20,000 government accounts existed. Some of these off-budget bank accounts have either been closed or integrated with the treasury. This was a sizeable step towards establishing an operational treasury single account (TSA). However, there are still a few impediments to the establishment of a TSA. In particular, government deposits held at Bank Indonesia (BI) are poorly remunerated, which impedes the development of active cash management (since the opportunity cost of idle government deposits is small). Transparency also improved following the incorporation of the regional development and investment accounts into financial reports and budget documents. Progress in integrating the operation of other extrabudgetary funds in the budget has been limited

The disclosure of fiscal information to the public has improved significantly.
Several recent amendments to ministerial decrees should help improve fiscal data quality and transparency. In particular, the chart of accounts now requires that the budget, in-year fiscal reports, and annual financial statements use the same terminology, which should simplify budget monitoring. The publication of a comprehensive fiscal risk statement accompanying the annual budget document significantly improves the transparency of fiscal policies and associated risks. In this context, improved reporting of information by SOEs should enable the FPO’s risk management unit to better assess risks for selected key SOEs. The reporting of information on central government debt is now comprehensive and timely, and key contingent liabilities are also disclosed in the annual fiscal risk statement (including those related to public-private partnerships). However, little progress has been made on reporting general government debt (though local government debt remains negligible), and debt accumulated by public enterprises.

Early progress has been achieved in strengthening internal and external audit bodies and in fighting corruption among public officials. The BPK mandate has been strengthened by the adoption of a 2006 law (and associated decrees in 2007). BPK staff headcount has been significantly increased (currently 6,000 staff covering 28 provinces) and training has been improved in both the IG and BPK, though needs remain significant. However, both the MoF’s IG and BPK are experiencing difficulties in accessing taxpayers data needed to investigate potential misconduct of tax officials owing to taxpayers privacy concerns, even though the law provides both institutions such access. Memorandum of understandings between the MoF and the internal and external auditors to address this issue are under discussion. Finally, the role of the Financial and Development Supervisory Agency (BPKP) as an internal audit body has not been reviewed—BPKP is part of the president’s office and has jurisdiction on central government finances. However, it shares internal audit responsibilities related to ministries with the IG, with an unclear distinction between their mandates.

Some recent GAO reports

U.S. Multinational Corporations: Effective Tax Rates Are Correlated with Where Income Is Reported

Defined Benefit Pension Plans: Guidance Needed to Better Inform Plans of the Challenges and Risks of Investing in Hedge Funds and Private Equity

Highway Bridge Program: Clearer Goals and Performance Measures Needed for a More Focused and Sustainable Program

Highway Public-Private Partnerships: More Rigorous Up-Front Analysis Could Better Secure Potential Benefits and Protect the Public Interest