Page 137 - Encyclopedia of Business and Finance

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Chief Financial Officers Act of 1990 and Federal Financial Management Act of 1994

duplication, it empowered the OMB director to consoli- RESPONSIBILITIES OF AUDITORS
date and streamline management reporting processes. The Federal Financial Management Act required the pro-
The CFO Act altered reporting by instituting five- duction and audit of agency-wide financial statements
year strategic planning reports, the production of financial covering all accounts and activities of the twenty-three
statements, and issuance of annual management reports. CFO-covered agencies and a consolidated government-
The director of OMB was required to develop and annu- wide financial statement for the executive branch as a
whole. Additionally, the Act provided that the director of
ally to revise government-wide plans with a five-year hori-
OMB may require audited financial statements of compo-
zon for improving the government’s financial
nents of agencies such as the Departments of the Army,
management systems. The director’s report is supported
Air Force, and Navy. All financial statements produced
by agency reports that identify changes needed to achieve
under the CFO and Federal Financial Management Acts
modern, integrated financial systems. Deliberate long-
must be audited in accordance with generally accepted
range planning is intended to curb the proliferation of
government auditing standards.
unique systems and to provide for the common elements
The inspector general of an agency determines who
necessary for central reporting. The five-year plans to performs the audit. In the absence of an inspector general,
improve financial management include details about the the agency head makes this determination. The inspector
type and form of information that is to be produced,
general, certified public accountant (CPA) firms, or other
including kinds of projects proposed to integrate systems, qualified parties may perform audits. Additionally, the
equipment, and personnel needs, and the costs of imple- comptroller general may conduct the audit at his or her
mentation. discretion or at the request of Congress. The Federal
Under the CFO Act, all covered departments and Financial Management Act specifies that the comptroller
agencies are required to prepare annual financial state- general has responsibility for auditing the consolidated
ments for trust funds, revolving funds, and commercial government-wide financial statements of the executive
activities. A pilot project provided for the preparation of branch.
agency-wide statements in six agencies. A gradual pilot Special provisions apply to the auditing of govern-
approach was adopted with respect to the production of ment corporations. The CFO Act replaced a requirement
agency-wide financial statements because federal account- that these corporations be audited at least once every three
ing standards were inadequate. The Federal Accounting years by the comptroller general with a requirement of
Standards Advisory Board (FASAB) was established one annual audits. The corporation was assigned responsibil-
month before the CFO Act was passed. ity for arranging the audit, and the comptroller general
retained authority to review financial statement audits
The production of agency-wide financial statements
performed by others.
and a consolidated government-wide financial statement
for the executive branch was intended to strengthen SEE ALSO Government Accounting
accountability and to provide the information needed for
effective management, including performance evaluation.
BIBLIOGRAPHY
For example, financial statements include information Chief Financial Officers Act of 1990 (1990). U.S. Congressional
about the ways budgeted funds were spent, the proportion and Administrative News, 101st Congress 2nd Session, Vol. 3,
of taxes and other receivables collected, the condition of Laws (Public Law 101-576). St. Paul, MN: West.
physical assets, and the extent of financial obligations Chief Financial Officers Act of 1990 (1990). U.S. Congressional
and Administrative News, 101st Congress 2nd Session, Vol. 6,
associated with various commitments.
Legislative History (Public Law 101-576). St. Paul, MN:
Under the CFO Act, the director of the OMB is West.
required to submit an annual financial management Ewer, Sid R. (1997). “Federal Government Accountability.” CPA
report to Congress. This report analyzes the status of Journal, 67(3): 22-27.
financial management in the executive branch; summa- Government Management Reform Act of 1994 (1994). U.S.
rizes agency financial statements, audits, and audits Congressional and Administrative News, 103rd Congress 2nd
reports; and reviews reports on internal accounting and Session, Vol. 3, Laws (Public Law 103-356). St. Paul, MN:
West.
administrative controls. Also, government corporations
are required to file an annual management report in addi- Government Management Reform Act of 1994 (1994). U.S.
Congressional and Administrative News, 103rd Congress 2nd
tion to financial statements, which have to include a state-
Session, Vol. 3, Legislative History (Public Law 103-356). St.
ment about internal accounting and administrative Paul, MN: West.
controls. Management reports must include plans for cor- Hodsoll, Frank (1992). “Facing the Facts of the CFO Act.” Pub-
recting internal control weaknesses. lic Budgeting & Finance, 12(4): 72-74.

114 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION