By Suzanne Kubota
Senior Internet Editor
FederalNewsRadio.com

When it comes to the federal budget, the GAO’s High Risk List and the deficit, Jeanette Franzel isn’t pulling any punches.

“The condition of federal finances is really dire right now.”

That was the assessment of the Managing Director for Financial Management and Assurance team at the Government Accountability Office speaking with the Federal Drive at the Association of Government Accountants National Leadership Conference.

“We are faced,” said Franzel, “with having to deal with both the short term critical issues as well as rethinking programs in the long term and we don’t want to damage the short term economic recovery.”

Franzel said there is a third factor complicating matters: trying to operate under a continuing resolution that doesn’t seem to have any resolution at all. “We at GAO,” said Franzel, “have been managing at a very prudent level, hoping to, once we get our budget, be on track, but again, there’s risk there.”

Difficult financial times, said Franzel, can make it easier to see what’s needed for a good financial system to run well. For example, “the importance of good financial data and estimates and regular updates is just really heightened in this type of an environment, and financial people are doing that to the best of their ability given the systems and data available right now.”

As for the three major departments she’s been concentrating on, Franzel sounded most concerned about the U.S. Postal Service, despite the President’s FY 2012 budget request granting relief from early payments into the retirement system they’ve been asking for.

Well, the relief will give them temporary breathing room, but the Postal Service still needs fundamental reform and transformation. It’s an antiquated model and they’ve got a lot of installations across the country that are losing money, and they’ve lacked flexibility to be able to make the good business decisions that any business would make as an industry modernizes. So we’re also hoping those types of transformations can take place because that’s really what’s needed in the long term.

DoD and DHS

Saying the Department of Defense has “a long way to go,” Franzel explained DoD’s being, yet again, on GAO’s High Risk List. “DoD has been one of the impediments to GAO’s being able to issue an opinion on the Consolidated Financial Report of the federal government, and the reason is that DoD itself does not get audits and because DoD is material to the Consolidated Financial Report, we can’t give an opinion.”

The Department of Homeland Security is in a similar situation, said Franzel, but for a different reason. “Also unable to have a clean audit opinion,” said Franzel, DHS has “some significant issues with financial systems.” Franzel said that’s understandable “if you think about the creation of the Department of Homeland Security, it came from a lot of different federal agencies across government, so that department is still struggling with integrating its financial management and its systems.”

Asked if she finds it frustrating to see the same issues come up over and over again, Franzel said no.

“It’s always interesting and I can’t think of a time when I actually just got frustrated because the problems are so big that even though they’re not solved yet and they may not be solved for a long time, there’s always progress and there’s always movement, and sometimes there’s back and forth and backsliding but that is part of the process, so actually it’s really a privilege to be part of this process and to help advance agency financial management and to serve the Congress in the process.”

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