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[House Report 106-7]
[From the U.S. Government Publishing Office]

106th Congress                                                   Report
  1st Session           HOUSE OF REPRESENTATIVES                  106-7

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 PRESIDENTIAL AND EXECUTIVE OFFICE FINANCIAL ACCOUNTABILITY ACT OF 1999

                                _______
                                

February 5, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______

  Mr. Burton, from the Committee on Government Reform, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 437]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Government Reform, to whom was referred the 
bill (H.R. 437) to provide for a Chief Financial Officer in the 
Executive Office of the President, having considered the same, 
report favorably thereon without amendment and recommend that 
the bill do pass.

                                CONTENTS

                                                                   Page
   I. Background and Need for the Legislation.....................     1
  II. Legislative Hearings and Committee Actions..................     4
 III. Committee Hearings and Written Testimony....................     4
  IV. Explanation of the Bill.....................................     5
   V. Committee Oversight Findings................................     6
  VI. Budget Analysis and Projections.............................     6
 VII. Cost Estimate of the Congressional Budget Office............     7
VIII. Statement of Constitutional Authority.......................     8

  IX. Committee Recommendation....................................     8
   X. Congressional Accountability Act; P.L. 104-1................     8
  XI. Unfunded Mandates Reform Act; P.L. 104-4, Section 423.......     8
 XII. Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b).     8
XIII. Changes in Existing Law.....................................     8

                 I. Background and Need for Legislation

                             A. BACKGROUND

    All Federal institutions must be accountable to the 
citizens and taxpayers of this Nation for their financial 
management. This is no less true of the White House than it is 
of any other department or agency. The Chief Financial Officers 
Act of 1990 put in place a system of financial accountability. 
H.R. 437 will help improve financial management and 
accountability at the White House by bringing it within the 
scope of this system of accountability. Specifically, the bill 
will ensure that the Executive Office of the President must 
comply, unless exemptions are made, with section 902 of the 
Chief Financial Officers Act of 1990 (31 U.S.C. 901).
    The Executive Office of the President is a collection of 
disparate agencies and offices. Executive Order 8248, of 
September 8, 1939, established the divisions of the Executive 
Office and defined their functions. Various agencies had been 
transferred to theExecutive Office of the President by the 
President's Reorganization Plans I and II of 1939 (5 U.S.C. App.), 
effective July 1, 1939, under authority of the Reorganization Act of 
1939 (5 U.S.C. 133-133r, 133t note).
    The Presidential and Executive Office Accountability Act, 
P.L. 104-331, ensures that those offices constituting the 
Executive Office of the President are subject to the same laws 
as Congress and the rest of the country. In that spirit, H.R. 
437 applies the Chief Financial Officers Act (CFO Act) to the 
Executive Office of the President. It directs the President to 
appoint or designate a Chief Financial Officer (CFO) and, to 
the fullest extent practicable, stipulates compliance by the 
Executive Office of the President with the requirements of 
section 902 of the CFO Act. The CFO Act allows departments and 
agencies flexibility in setting up the Office of the Chief 
Financial Officer. The Executive Office of the President would 
have similar flexibility, so long as accountability is retained 
and reports are produced by a CFO. The CFO should hold a 
position in the organization sufficiently elevated to ensure 
that the President--as the individual with ultimate 
responsibility for the Executive Office of the President--is 
aware of the activities, findings, and recommendations of the 
CFO.

                      B. NEED FOR THE LEGISLATION

    The bill is intended to improve financial management 
practices and accountability in the Executive Office of the 
President (EOP). Over the years, since the creation of the EOP 
in 1939, various Presidents have used Executive orders, 
reorganization plans, and sometimes legislative initiatives to 
reconfigure the EOP to better suit their respective priorities. 
The EOP currently includes the White House Office, the 
Executive Residence of the White House, the Office of the Vice 
President, the Council of Economic Advisers, the Council on 
Environmental Quality, the National Security Council, the 
Office of Administration, the Office of Management and Budget 
(OMB), the Office of National Drug Control Policy, the Office 
of Policy Development, the Office of Science and Technology 
Policy, and the Office of the United States Trade 
Representative. The bill provides for designation of a CFO to 
oversee financial management of the entities of the EOP, 
thereby bringing these entities into conformity with other 
major Executive departments and agencies subject to the Chief 
Financial Officers Act of 1990. In so extending coverage of an 
existing law to the Executive Office of the President, H.R. 437 
echoes the objectives and spirit of the Presidential and 
Executive Office Accountability Act which was enacted in 
1996.\1\
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    \1\ 3 U.S.C. Sec. 401, et seq.
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    The Chief Financial Officers Act of 1990 has been widely 
viewed as the most important legislation addressing financial 
management improvement in the Federal Government since the 
Budget and Accounting Procedures Act of 1950.\2\ The CFO Act, 
as amended, directs the major Executive Branch agencies (24 are 
now covered) to undertake important financial management 
reforms. For example, its provisions call for improvements in 
agency accounting and financial management systems and for 
production of more complete and reliable financial information, 
including preparation of audited financial statements. While 
implementation of the CFO Act is well underway, challenges 
remain in fully achieving its purposes, as most recently 
detailed in the 1998 Federal Financial Management Status Report 
and Five Year Plan.\3\ Extending the coverage of the CFO Act to 
the Executive Office of the President would bring greater 
accountability to financial operations there, allowing its 
entities to benefit from the unique functions performed by a 
CFO.
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    \2\ Pub. L. 81-784, 64 Stat. 832 (1950).
    \3\ The CFO Act requires the Office of Management and Budget to 
submit such a document to Congress each year. See: Federal Financial 
Management Status Report & Five-Year Plan, June 1998. Washington, GPO, 
1998. Also available electronically at http://www.whitehouse.gov/WH/
EXECUTIVE OFFICE OF THE PRESIDENT/OMB/Finance/98plan.pdt.
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    Congressional hearings in the 104th and 105th Congresses 
have focused on activities in the White House that evidence 
undesirable practices relating to fiscal management and 
financial accountability. For example, if there had been a CFO 
on the scene, the unorthodox accounting practices that 
prevailed in the White House Travel Office would not have been 
allowed to continue. A CFO would have provided the Travel 
Office managers with the guidance and expert advice they sorely 
needed, but never received. The Committee believes that 
establishing a CFO in the EOP will improve dramatically the 
organizational structure for financial operations in its 
component units, including the White House Office.
    Such an officer will operate for the most part within the 
framework of the Chief Financial Officers Act, to improve 
coordination, enhance accountability, ensure fiscal 
responsibility, and institute needed technological advances 
throughout the EOP. Although financial management functions are 
currently performed in the EOP primarily by the Financial 
Management Division in the Office of Administration, existing 
practices do not reach the level of attention and 
accountability envisioned by H.R. 437. This bill contemplates a 
well-crafted design and implementation of new and improved 
accounting procedures and calls for increased vigilance on the 
part of the CFO and staff to related fiscal matters. The 
underlying objective is to provide leadership, coordination, 
accountability, so as to ensure the appropriate use of 
taxpayers' dollars.
    The Committee notes that H.R. 437 provides the President 
with discretion to implement this law in a manner that 
recognizes the unique nature of the Executive Office of the 
President. The Committee recommends that the Treasury, Postal 
Service and General Government Appropriations Subcommittee 
appropriates the funds necessary to fulfill the duties of the 
CFO.

             II. Legislative Hearings and Committee Actions

    H.R. 437 is identical to legislation passed in the 105th 
Congress, H.R. 1962.\4\ H.R. 437 was introduced on February 2, 
1999, by Representative Stephen Horn (R-CA), Chairman of the 
Subcommittee on Government Management, Information, and 
Technology. The bill was considered by the Committee on 
Government Reform on February 3, 1999 and passed unanimously by 
voice vote.
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    \4\ On May 1, 1997, the Government Reform and Oversight Committee's 
Subcommittee on Government Management, Information and Technology held 
a hearing on H.R. 1962, which was introduced on June 19, 1997, by 
Representative Stephen Horn. The Subcommittee marked up the bill on 
September 4, 1997. The bill was marked up by the Committee on 
Government Reform and Oversight on September 30, 1997, with an 
amendment in the nature of a substitute. On October 21, 1997 the 
Committee on Government Reform and Oversight reported H.R. 1962 to the 
House of Representatives as Report 105-331. The House of 
Representatives passed the measure, as amended, by a vote of 413-3 on 
October 21, 1997.
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             III. Committee Hearings and Written Testimony

    On May 1, 1997, the Subcommittee on Government Management, 
Information and Technology held a hearing to solicit comments 
from interested parties on the Presidential and Executive 
Office Accountability Act proposal. Witnesses testified 
concerning the intent of the bill; the bill's objectives; the 
reason for various provisions, and the need for certain 
changes.
    The first panel featured Representative John L. Mica of 
Florida, who in the 104th Congress introduced H.R. 3452, the 
Presidential and Executive Office Accountability Act of 1996.
    The second panel consisted of two witnesses testifying in 
support of the Presidential and Executive Office Financial 
Accountability Act. Edward J. Mazur was the Vice President of 
Administration and Finance at Virginia State University, and 
former Controller, Office of Federal Financial Management, 
Office of Management and Budget. Mr. Mazur was the first 
controller to be appointed after the passage of the Chief 
Financial Officers Act, and oversaw its implementation in 
Executive Branch agencies. The second witness was Cornelius E. 
Tierney, Director, Center for Public Financial Management, 
George Washington University School of Business and Public 
Management. He has authored authoritative texts on Federal 
Government accounting and auditing, and was formerly Chairman 
and National Director of the governmental practice section of 
Ernst & Young. He was instrumental in the drafting of the Chief 
Financial Officers Act and in guiding its subsequent 
implementation.
    Subcommittee Chairman Horn opened the hearing with a 
discussion of the Presidential and Executive Office 
Accountability Act of 1996, which passed the House by an 
overwhelming margin of 410 to 5 on September 24, 1996. 
Unfortunately, time was short at that point and several 
provisions of the House-passed bill, including the provision to 
apply the CFO Act to the White House, were removed prior to 
passage by the Senate.

                      IV. Explanation of the Bill

                              a. overview

    This measure brings the agencies of the Executive Office of 
the President, to the fullest extent practicable, within the 
framework and under the requirements of the Chief Financial 
Officers Act. H.R. 437 authorizes the President to appoint a 
Chief Financial Officer in a unit or office within the 
Executive Office of the President and, to the fullest extent 
practicable, mandates adherence to most provisions of the CFO 
Act. In recognition of the decentralized structure of the EOP 
and the unique functions its agencies perform in support of the 
President, H.R. 437 anticipates that some exemptions may be 
necessary. In fact, the bill provides considerable discretion 
for the President to exempt the new CFO from any of a number of 
responsibilities otherwise stipulated by the CFO Act as 
authority and functions to be performed by an agency's Chief 
Financial Officer.
    However, notwithstanding such possible exemptions, the bill 
establishes that the CFO for the EOP shall perform, to the 
extent practicable, the general functions and duties 
established under the CFO Act in order to implement needed 
financial management improvements. The intent of this 
legislation is to foster improved systems of accounting, 
financial management and internal controls throughout the 
component entities of the Executive Office of the President. 
This should facilitate prevention, or at least early detection, 
of waste, fraud and abuse within the Executive Office of the 
President, as well as in the other Executive Branch agencies 
already covered by the CFO Act. Implementation of these 
provisions will promote not only accountability and proper 
fiscal management but also efficiency and cost reductions.

                     b. section-by-section analysis

Section 1. Short title

    Section 1 provides that the Act shall be cited as the 
``Presidential and Executive Office Financial Accountability 
Act of 1999.''

Section 2. Chief Financial Officer in the Executive Office of the 
        President

    Section 2(a) provides that section 901 of Title 31, U.S. 
Code, is amended by adding at the end a new subsection 901(c) 
of Title 31, U.S. Code. The new subsection 901(c) requires the 
appointment or designation of a CFO in the EOP. This officer 
shall be appointed or designated by the President from among 
individuals meeting the standards described in section 
901(a)(3) of Title 31, U.S. Code, i.e., an individual who 
possesses demonstrated ability in general management of, and 
knowledge of and extensive practical experience in financial 
management practices in large governmental or business 
entities. The position of CFO may be established in any office 
of the EOP, including the Office of Administration.
    Section 2(a) provides further that the CFO, to the extent 
that the President determines appropriate and in the interest 
of the United States, shall have the same authority and perform 
the same functions as other CFOs under the CFO Act. The 
President must submit to Congress notification with respect to 
any provision of section 902 of Title 31, U.S. Code that the 
President determines shall not apply to the CFO of the EOP. 
This section provides that the President may designate an 
employee of the EOP, other than the appointed or designated 
CFO, as the ``head of the agency'' for purposes of carrying out 
section 902 of Title 31, U.S. Code, relating to the authority, 
functions and duties of the CFO.
    Section 2(b) provides that not later than 90 days after the 
date of enactment, the President is required to communicate in 
writing with the Chairman of the House Committee on Government 
Reform and the Chairman of the Senate Committee on Governmental 
Affairs, a plan for the implementation of the provisions of 
H.R. 437, as enacted.
    Section 2(c) provides that the CFO shall be appointed or 
designated under the provisions of this bill, as enacted, not 
later than 180 days after the date of enactment.
    Section 2(d) provides that the CFO of the EOP shall receive 
basic pay at the rate payable for Level IV of the Executive 
Schedule under 5 U.S.C. Sec. 5315.
    Section 2(e) provides that the President may transfer such 
offices, functions, powers, or duties thereof, as the President 
determines are properly related to the functions of the CFO 
under 31 U.S.C. 901(c). The personnel, assets, liabilities, 
contracts, property, records, and unexpended balances of 
appropriations, authorizations, allocations, and other funds 
employed, held, used, arising from, available or to be made 
available, of any office, the functions, powers, or duties of 
which are transferred to the CFO of the EOP, as established 
under H.R. 437, shall also be transferred thereto.
    Section 2(f) provides that a separate budget request shall 
apply to the CFO of the EOP. Section 1105(a) of Title 31, U.S. 
Code, is amended by adding paragraph (32) and providing that a 
separate statement of the amount of appropriations requested to 
carry out the provisions of H.R. 437, as enacted, shall be 
included in the EOP's annual budget request.
    Section 2(g) provides for technical and conforming 
amendments.

                    V. Committee Oversight Findings

    Pursuant to rule XIII, clause 3(c)(1), of the Rules of the 
House of Representatives, the results and findings for those 
oversight activities are incorporated in the recommendations 
found in the bill and in this report.

                  VI. Budget Analysis and Projections

    Clause 3(c)(2) of rule XIII, of the Rules of the House of 
Representatives, is inapplicable because the bill does not 
provide new budget authority, new spending authority, new 
credit authority, or an increase or decrease in revenues or tax 
expenditures.

         VII. Cost Estimate of the Congressional Budget Office

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, February 4, 1999.
Hon. Dan Burton,
Chairman, Committee on Government Reform,
U.S. House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 437, the 
Presidential and Executive Office Financial Accountability Act 
of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is John R. 
Righter.
            Sincerely,
                                             ------  ------
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 437--Presidential and Executive Office Financial Accountability 
        Act of 1999

    CBO estimates that, subject to the availability of 
appropriated funds, enacting H.R. 437 would increase costs of 
the Executive Office of the President (EOP) by no more than 
$250,000 a year. The bill would not affect direct spending or 
receipts; therefore, pay-as-you-go procedures would not apply. 
H.R. 437 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    H.R. 437 would require the President to appoint a chief 
financial officer (CFO) for the 12 agencies and offices that 
comprise the EOP. The bill would require the CFO to comply with 
those provisions of the CFO Act that the President determines 
to be appropriate and in the interest of the United States. 
Based on information provided by the Office of Management and 
Budget and the Office of Administration (OA), CBO expects that 
the President would appoint as CFO someone within the OA, which 
already provides centralized financial management and 
accounting services to the EOP. As a result of enacting H.R. 
437, the OA might require an additional employee or two to 
coordinate activities within the EIP. In addition, the OA would 
need to contract with a private firm to audit the consolidated 
annual financial statements of the EOP. We estimate that the 
annual audit would cost around $100,000.
    In total, assuming no major problems exist in the financial 
management and systems of the EOP, CBO estimates that enacting 
H.R. 437 would increase annual costs of the OA by no more than 
$250,000. In addition, it is possible that by improving 
financial systems and communication within the EOP, the 
legislation could lead to a reduction in losses from waste and 
abuse, but CBO cannot estimate the amount of such potential 
savings.
    The CBO staff contact is John R. Righter. This estimate was 
approved by Robert A. Sunshine, Deputy Assistant Director for 
Budget Analysis.

              VIII. Statement of Constitutional Authority

    Pursuant to rule XIII, clause 3(d)(1), the Committee finds 
that clauses 14 and 18 of Article I, Section 8 of the U.S. 
Constitution authorizes Congress to create a Chief Financial 
Officer in the Executive Office of the President.

                      IX. Committee Recommendation

    On February 3, 1999, a quorum being present, the Committee 
ordered the bill favorably reported to the House for 
consideration by voice vote.

         X. Congressional Accountability Act; Public Law 104-1

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(B)(3) of the Congressional Accountability Act (P.L. 104-1).

    XI. Unfunded Mandates Reform Act; Public Law 104-4, Section 423

    The Committee finds that the legislation does not impose 
any Federal mandates within the meaning of section 423 of the 
Unfunded Mandates Reform Act (P.L. 104-4).

    XII. Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b)

    The Committee finds that the legislation does not establish 
or authorize establishment of an advisory committee within the 
definition of 5 U.S.C. App., Section 5(b).

      XIII. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

TITLE 31, UNITED STATES CODE

           *       *       *       *       *       *       *

SUBTITLE I--GENERAL

           *       *       *       *       *       *       *

CHAPTER 5--OFFICE OF MANAGEMENT AND BUDGET

           *       *       *       *       *       *       *

SUBCHAPTER I--ORGANIZATION

           *       *       *       *       *       *       *

Sec. 503. Functions of Deputy Director for Management

  (a) Subject to the direction and approval of the Director, 
the Deputy Director for Management shall establish 
governmentwide financial management policies for executive 
agencies and shall perform the following financial management 
functions:
          (1) * * *

           *       *       *       *       *       *       *

          (7) Develop and maintain qualification standards for 
        agency Chief Financial Officers and for agency Deputy 
        Chief Financial Officers appointed under sections 901 
        and 903, respectively (excluding any officer designated 
        or appointed under section 901(c)).
          (8) Provide advice to agency heads with respect to 
        the selection of agency Chief Financial Officers and 
        Deputy Chief Financial Officers (excluding any officer 
        designated or appointed under section 901(c)).

           *       *       *       *       *       *       *

Chapter 9--Agency Chief Financial Officers

           *       *       *       *       *       *       *

Sec. 901. Establishment of agency Chief Financial Officers

  (a) * * *

           *       *       *       *       *       *       *

  (c)(1) There shall be within the Executive Office of the 
President a Chief Financial Officer, who shall be designated or 
appointed by the President from among individuals meeting the 
standards described in subsection (a)(3). The position of Chief 
Financial Officer established under this paragraph may be so 
established in any Office (including the Office of 
Administration) of the Executive Office of the President.
  (2) The Chief Financial Officer designated or appointed under 
this subsection shall, to the extent that the President 
determines appropriate and in the interest of the United 
States, have the same authority and perform the same functions 
as apply in the case of a Chief Financial Officer of an agency 
described in subsection (b).
  (3) The President shall submit to Congress notification with 
respect to any provision of section 902 that the President 
determines shall not apply to a Chief Financial Officer 
designated or appointed under this subsection.
  (4) The President may designate an employee of the Executive 
Office of the President (other than the Chief Financial 
Officer), who shall be deemed ``the head of the agency'' for 
purposes of carrying out section 902, with respect to the 
Executive Office of the President.

           *       *       *       *       *       *       *

SUBTITLE II--THE BUDGET PROCESS

           *       *       *       *       *       *       *

   CHAPTER 11--THE BUDGET AND FISCAL, BUDGET, AND PROGRAM INFORMATION

Sec. 1105. Budget contents and submission to Congress

  (a) On or after the first Monday in January but not later 
than the first Monday in February of each year the President 
shall submit a budget of the United States Government for the 
following fiscal year. Each budget shall include a budget 
message and summary and supporting information. The President 
shall include in each budget the following:
          (1) * * *

           *       *       *       *       *       *       *

          (31) a separate statement of the amount of 
        appropriations requested to carry out the provisions of 
        the Presidential and Executive Office Financial 
        Accountability Act of 1999.

           *       *       *       *       *       *       *

                                
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