The consolidated financial statements of the U.S. gov¿t. (CFS) is audited each year. Except for the 2008 and 2007 Statements of Social Insurance, the auditor has been unable to provide assurance on the reliability of the CFS due primarily to inadequate systems and lack of sufficient, reliable evidence to support certain material information in the CFS. Unless these weaknesses are adequately addressed, they will, among other things: (1) hamper the fed. gov¿t's. ability to reliably report a significant portion of its assets, liabilities, costs, and other related information; and (2) affect the fed. gov¿t's. ability to measure the full cost as well as the financial and nonfinancial performance of certain programs and activities. Charts and tables.

In March 2004, the Office of Management and Budget (OMB) launched the financial management line of business (FMLOB) initiative, in part, to reduce the cost and improve the quality and performance of federal financial management systems by leveraging shared service solutions and implementing other reforms. In March 2006, it was reported that OMB's approach did not fully integrate certain fundamental system implementation-related concepts and recommended OMB take specific actions. This report discusses: (1) OMB's progress in addressing prior FMLOB recommendations and implementation challenges; and (2) the effectiveness of OMB's monitoring of financial management system modernization projects and their costs. Illus.