Summary
Authoritative bodies have promulgated laws, accounting standards, information system requirements, and related guidance emphasizing the need for accurate and reliable cost information in the federal government. For example, the Chief Financial Officers (CFO) Act of 1990 contains several provisions related to managerial cost accounting (MCA), one of which provides that an agency's CFO should develop and maintain an integrated accounting and financial management system that provides for the development and reporting of cost information. Statement of Federal Financial Accounting Standards (SFFAS) No. 4, Managerial Cost Accounting Concepts and Standards for the Federal Government, and the Joint Financial Management Improvement Program's (JFMIP) Framework for Federal Financial Management Systems established accounting standards and system requirements for MCA information at federal agencies. In addition, the Federal Financial Management Improvement Act of 1996 required, among other things, that CFO Act agencies' systems comply substantially with federal accounting standards and federal financial management systems requirements. In light of the provision related to MCA information in federal agencies, we were asked to review the status of MCA in 10 of the largest civilian agencies. Our objectives were to determine how (1) federal agencies generate MCA information and (2) agency managers use cost information to support managerial decision making and accountability.
The Department of the Interior (Interior) and the four bureau-level components we reviewed each have systems for generating MCA information. The driving force for implementing MCA at Interior was strong management commitment. However, there is no single or integrated information system from which MCA data are generated. Additionally, there are multiple, independent systems at the department and bureaus from which financial and nonfinancial data are obtained for MCA. Controls over nonfinancial data quality for these systems are generally limited to bureau-level reviews for reasonableness. Those bureau-level controls may not be adequate to help ensure the accuracy, and therefore the usefulness, of MCA data. Further, Interior does not allocate cost elements consistently between bureaus. For example, the Bureau of Reclamation (BOR) uses the number of facilities to determine the cost of building maintenance whereas the department uses a square footage calculation. In addition, Interior does not have written procedures for monitoring the quality and accuracy of the data in its MCA system or a consistent methodology for pricing services at one of its components. In this regard, recognizing the need to help control risks resulting from multiple financial systems as well as a need for better functionality, Interior management is in early stages of implementing an integrated financial system, Financial Business Management System (FBMS), including developing a MCA module, for the department and each of its bureaus. Information from its various systems is routinely used by management at Interior and its bureaus for managerial decision making. At the department level, Interior uses cost information to highlight costs of department-wide activities, support recommendations for such things as changes to work processes, and to prepare budgets and performance targets. The bureaus we reviewed used MCA, among other things, to review and evaluate work processes, set prices and fees, identify workload trends, reallocate resources, and track performance indicators.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Jeanette M. Franzel
Government Accountability Office: Financial Management and Assurance
(202) 512-4063
Recommendations for Executive Action
Recommendation: To promote the implementation and use of reliable MCA methodologies to support more informed managerial decision making in Interior and its bureaus and department offices, the Secretary of Interior should direct department officials to perform an assessment of the internal controls related to nonfinancial data, including key indicators used for executive decision making, such as the Executive Dashboard and determine whether the current internal controls are adequate and meet the department's published guidance.
Agency Affected: Department of the Interior
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To promote the implementation and use of reliable MCA methodologies to support more informed managerial decision making in Interior and its bureaus and department offices, the Secretary of Interior should direct department officials to monitor bureau's development and implementation of written procedures for performance data validation and verification at all bureaus.
Agency Affected: Department of the Interior
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To promote the implementation and use of reliable MCA methodologies to support more informed managerial decision making in Interior and its bureaus and department offices, the Secretary of Interior should direct department officials to continue to monitor the Financial Business Management System implementation plan to determine that MCA functionalities that meet user requirements are included.
Agency Affected: Department of the Interior
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To promote the implementation and use of reliable MCA methodologies to support more informed managerial decision making in the Bureau of Reclamation (BOR), the Secretary of Interior should direct BOR officials to identify and address any inconsistent work output measures between the bureau and departmental systems that are essential to Interior management to help form the basis for consistent cost measurement.
Agency Affected: Department of the Interior
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To promote the effective use of proper cost accounting methodologies to support pricing and other managerial decision making at the National Business Center (NBC), the Secretary of the Interior should direct appropriate NBC officials to monitor compliance to existing policies in relation to the application of direct costs, including annual leave and holidays.
Agency Affected: Department of the Interior
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To promote the effective use of proper cost accounting methodologies to support pricing and other managerial decision making at NBC, the Secretary of the Interior should direct appropriate NBC officials to document all policies and procedures to help ensure the recovery of costs by product lines to help prevent over and under charging of customers.
Agency Affected: Department of the Interior
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To promote the effective use of proper cost accounting methodologies to support pricing and other managerial decision making at NBC, the Secretary of the Interior should direct appropriate NBC officials to complete determination of methodology, and implement a consistent methodology for pricing of services at NBC.
Agency Affected: Department of the Interior
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To promote the effective use of proper cost accounting methodologies to support pricing and other managerial decision making at NBC, the Secretary of the Interior should direct appropriate NBC officials to document policies and procedures for establishing reserves.
Agency Affected: Department of the Interior
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
