Summary: Authoritative bodies have promulgated laws, accounting standards, information system requirements, and related guidance to emphasize the need for cost information and cost management in the federal government. In particular, the (1) Chief Financial Officers (CFO) Act of 1990, (2) Statement of Federal Accounting Standards No. 4: Managerial Cost Accounting Concepts and Standards for the Federal Government, and (3) Joint Financial Management Improvement Program's (JFMIP) Framework for Federal Financial Management Systems established requirements and accounting standards for managerial cost accounting (MCA) information at federal agencies. The Federal Financial Management Improvement Act of 1996 (FFMIA) built on this foundation and required, among other things, CFO Act agencies' systems to comply substantially with federal accounting standards and federal financial management systems requirements. MCA involves the accumulation and analysis of financial and nonfinancial data, resulting in the allocation of costs to organizational pursuits such as performance goals, programs, activities, and outputs. The data analyzed depend on the operations and needs of the organization. Nonfinancial data measure the occurrences of activities and can include, for example, the number of hours worked, units produced, grants managed, inspections conducted, people trained, or time needed to perform certain functions. In light of the requirements for federal agencies to prepare MCA information and its interest in financial management and accountability, Congress asked us to determine the extent to which federal agencies develop cost information and use it for managerial decision making. The objectives of our review were to determine how federal agencies generate managerial cost accounting information as well as how governmental managers use cost information to support managerial decision making and provide accountability.
DOL and VA have different strategies to implement MCA information systems. DOL implemented a departmentwide MCA system upon which 15 of its 18 component agencies have built MCA models tailored to their respective needs. At VA, responsibility for MCA implementation rested with individual component agencies. When we conducted our review, an MCA system was in operation at one of VA's two largest agency components. DOL and VA officials cited several existing and planned uses of MCA information by component agencies including budgeting, resource allocation, financial reporting, and other managerial decision-making purposes. At both agencies, we noted that MCA-related controls needed strengthening. Certain control weaknesses, such as not validating nonfinancial data and not documenting policy and MCA procedures, could limit the reliability of data used by management to analyze costs and to make decisions. We made recommendations to DOL and VA to address these weaknesses. Both agencies provided written comments on our briefing. DOL generally agreed with our report and recommendations. VA, however, generally did not agree with our overall conclusions and recommendations. After considering VA's comments, we continue to believe our conclusions and recommendations regarding VA are well-founded and our responses are provided. We have incorporated the comments from both agencies as appropriate.
