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. For example, the Chief Financial Officers (CFO) Act of 1990, contains several provisions related to managerial cost accounting, one of which states 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 Accounting Standards 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 managerial cost accounting (MCA) information at federal agencies. The Federal Financial Management Improvement Act of 1996 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, 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.
At Education, 1 of 10 program offices had an MCA system in place at the time of our review. Education did not take a department-level leadership role to promote and monitor MCA implementation, nor did it have policies and procedures for implementing MCA departmentwide. Rather, according to Education officials, other priorities, such as improving controls over financial reporting, were taking precedence. Transportation has in recent years shown strong leadership in developing MCA systems both departmentwide and at the individual operating administrations (OA). According to Transportation officials, the 12 OAs were developing MCA systems tailored to their respective needs, which should be able to interface with Delphi--an integrated financial management system, a component of which could be used by OAs for cost accounting. One of the two largest OAs, the Federal Aviation Administration (FAA), was mandated to develop a cost accounting system in 1996, and had implemented MCA in two business lines covering over 80 percent of its budget. The other 11 OAs expected to have their MCA models in place by early fiscal year 2006. By policy, Treasury delegated to its bureaus responsibility to implement MCA systems and processes to meet federal standards. Treasury retained oversight responsibility to ensure consistent implementation of MCA departmentwide. Treasury officials, however, had no specific procedures in place to ensure that consistent, periodic department-level oversight was conducted, and they promoted MCA and monitored MCA implementation on an informal and sporadic basis. This contributed to widely disparate implementation and use of MCA among Treasury's operating bureaus and department-level offices. For example, the Bureau of Engraving and Printing and the Financial Management Service (FMS) had established MCA systems and practices, and management utilized cost information to make key decisions. However, at Treasury's largest component, the Internal Revenue Service (IRS), MCA capability was limited. The newly implemented MCA module had less than 1 full year of data, and could only account for costs by activity, output, or program when those activities, outputs, or programs were completely housed within a single cost center.
