Table of Contents 

A MESSAGE FROM THE CONTROLLER OF THE OFFICE OF MANAGEMENT AND BUDGET ..................ii

EXECUTIVE SUMMARY ................................................................................................................................................1

INTRODUCTION ..............................................................................................................................................................4

THE FINANCIAL MANAGEMENT-RELATED INITIATIVES OF THE PRESIDENT’S MANAGEMENT 

AGENDA.............................................................................................................................................................................7

ELIMINATING IMPROPER PAYMENTS ..................................................................................................................10

RIGHT-SIZING THE GOVERNMENT’S REAL PROPERTY .................................................................................11

IMPROVING THE FINANCIAL REPORT OF THE UNITED STATES GOVERNMENT...................................12

THE FINANCIAL MANAGEMENT LINE OF BUSINESS (FMLOB)......................................................................13

STRENGTHENING INTERNAL CONTROLS............................................................................................................14

STRENGTHENING GRANTS MANAGEMENT ........................................................................................................15

STRENGTHENING SOCIAL INSURANCE REPORTING.......................................................................................16

THE FRAMEWORK’S FOUNDATION: CORE ACTIVITIES ................................................................................17

I. Improving Financial Reporting...............................................................................................................................17

II. Strengthening Internal Controls ............................................................................................................................20

III. Improving Financial Systems................................................................................................................................22

IV. Improving Asset Management...............................................................................................................................23

V. Managing Grants...................................................................................................................................................25

VI. Improving Auditing Standards..............................................................................................................................26

CONCLUSION.................................................................................................................................................................27

APPENDICES...................................................................................................................................................................28

APPENDIX A: SUMMARY OF FY 2006 AUDITED FINANCIAL STATEMENT RESULTS BY AGENCY AND SELECTED 

COMPONENTS..................................................................................................................................................................29

APPENDIX B: MATERIAL WEAKNESSES REPORTED BY AUDITORS AND FEDERAL MANAGERS’ FINANCIAL INTEGRITY 

ACT TABLES....................................................................................................................................................................31

APPENDIX C: GOVERNMENT CORPORATIONS REQUIRED TO SUBMIT AUDITED FINANCIAL STATEMENTS TO OMB.......38

APPENDIX D: ACCOUNTABILITY OF TAX DOLLARS ACT AGENCIES REQUIRED TO SUBMIT AUDITED FINANCIAL 

STATEMENTS TO OMB....................................................................................................................................................39

APPENDIX E: COMPLIANCE WITH THE FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996 (FFMIA).....43

APPENDIX F: EXECUTIVE BRANCH MANAGEMENT SCORECARD ....................................................................................44

APPENDIX G: DEBT COLLECTION DEFICIENCIES AND CORRECTIVE ACTIONS .................................................................47

APPENDIX H: THE OFFICE OF FEDERAL FINANCIAL MANAGEMENT’S STRATEGIC OBJECTIVES ......................................48

 

Federal Financial Management Report (2007) i
A MESSAGE FROM THE CONTROLLER OF THE 

OFFICE OF MANAGEMENT AND BUDGET 

There may be no more important responsibility of government than to act as an effective steward 

of the taxpayers’ money. It is therefore no surprise that the President has made improving 

financial performance one of his top management priorities. With the launch of the President’s 

Management Agenda (PMA) in 2001, the President issued a “call to action” for Federal 

managers to achieve a series of critical financial management goals that, if attained, would tell 

American citizens that the “the people’s money” is being properly accounted for and wisely 

spent. I am proud to report that the Federal financial community has been equal to this task, 

achieving significant progress on all the key indicators of success for the PMA initiatives related 

to financial management. Specifically, in FY 2006: 

• Nineteen major agencies, representing more than 75% of all Federal outlays, 

achieved a clean audit opinion. 

• The number of auditor-reported material weaknesses was reduced by 

approximately 15% (from 48 reported in FY 2005 to 41 reported this past year). 

• For the second consecutive year, every major Federal agency issued their audited 

financial statements within 45 days of the close of the fiscal year. Prior to 2001, 

Federal agencies took as long as five months to complete their financial reports. 

• Improper payments declined to $36.3 billion for those programs that originally 

reported a total of $45.1 billion in FY 2004. This represents an approximate $9 

billion improvement in 2 years. 

• The Federal government has disposed of $3.5 billion in excess real property since 

FY 2004. 

While I believe that American citizens can be proud of this progress, I also believe they should 

not be satisfied with it. Much remains to be done before the government can say that it has 

achieved the level of financial management excellence for which we are striving. Federal 

managers must continue to mobilize resources and re-dedicate efforts to strengthen accounting 

practices, implement stronger internal controls, issue financial reports more timely, eliminate 

instances of error and waste, and use financial data to manage costs. As we set out to achieve 

new and better levels of performance, it is critical that the Federal financial community orient 

itself around a common set of priorities, an agreed upon plan for action, and a clear and 

consistent roadmap for improvement. 

Thus, on behalf of the President, the Office of Management and Budget, and the Chief Financial 

Officers Council, I am pleased to present the 2007 Federal Financial Management Report – A 

ii Federal Financial Management Report (2007) 
Framework for Improving Financial Performance. This report, in a user-friendly and 

transparent format, provides the strategic goals and targets for improvement that the Federal 

financial community has established and outlines the prioritized actions that we will undertake to 

ensure success. I am confident that we will achieve the many challenging milestones in this 

plan, and in doing so, meet the President’s vision for improving financial performance in the 

Federal government. 

 

 Linda M. Combs 

 Controller

Federal Financial Management Report (2007) iii

Executive Summary 

The Office of Federal Financial Management (OFFM) within the Office of Management and 

Budget (OMB) has developed a “Framework for Improving Financial Performance” to provide 

direction and clarity on how the President’s improvement goals for financial management will be 

met. This “Framework” is the subject of this Report and also fulfills OFFM’s requirement, 

under section 301(a) of the Chief Financial Officers Act of 1990 (CFO Act) (Pub. L. No. 101-

576) (codified at 31 U.S.C. 3512(a)), for providing Congress and the financial management 

community with a government-wide “Five-Year” financial management plan and status report. 

The Framework (as depicted in the accompanying diagram) is intended to provide the public 

with a simple tool for identifying: (1) the ultimate objective (or “apex”) of the government’s 

financial management improvement efforts (i.e., the financial management goals of the PMA); 

(2) the priority projects currently underway in the Federal financial community to help support 

and facilitate PMA goals (i.e., current government-wide financial management reform 

activities); and (3) the day-to-day financial management activities or core activities that help 

ensure a strong foundation is in place for achieving the PMA’s success.

FRAMEWORK OVERVIEW

The PMA – How We Define and Measure Financial Management Success. The PMA provides 

Federal agencies with a concise set of clear and measurable financial management performance 

goals that allow Federal managers, Congress, and the public to gauge whether taxpayer funds are 

being properly accounted for and wisely spent. These performance measures include, among 

others, the achievement of clean audit opinions, the elimination of material weaknesses in 

internal control, timely financial reporting, the disposal of excess real property, the elimination 

of improper payments, and the reduction in government costs through the strategic use of 

Federal Financial Management Report (2007) 1 
financial data. These measures allow the American public to assess whether taxpayer dollars are 

properly accounted for and wisely spent. 

Reform Activities – Priority Financial Management Initiatives that Support PMA Objectives. To 

support the PMA, the Federal financial community has undertaken a series of improvement 

efforts intended to strengthen key areas of financial management and thus help ensure the PMA’s 

success. These activities include improving and/or strengthening: internal controls, financial 

systems, payment accuracy, real property management, grants management, and financial 

reporting for the government as a whole. For each reform activity, this Report highlights a 

strategic goal, a performance target for fiscal year (FY) 2011 (i.e., a 5 year target), interim or 

short-term objectives, planned actions for the upcoming year, and recent accomplishments. 

Core Activities – The Foundation of Effective Financial Management. The core activities 

represent the universe of day-to-day actions that the Federal financial community must take to 

effectively manage the resources of the Federal government. The core activities further represent 

each major area wherein OFFM has the responsibility to issue government-wide policies and 

requirements. Some core activities (e.g., internal controls) contain critical components or areas 

that are also represented in the reform activities portion of the Framework. This is because 

OFFM, working with the Federal financial community, has determined that this core activity 

required some degree of reform to enhance or strengthen the activity on a “go-forward” basis. In 

this way, the reform activities (or columns) serve to both support the PMA’s success and 

strengthen the foundation of Federal financial activities. 

FY 2006 RESULTS 

As noted above, the financial management-related initiatives of the PMA provide a series of 

critical financial management goals that, if attained, provide the public with confidence that 

taxpayer dollars are being properly accounted for and wisely spent. In FY 2006, Federal 

agencies either maintained or improved on prior year performance levels for all key outcome 

measures. Specific FY 2006 results are as follows: 

Clean Audit Opinions. Nineteen of twenty-four CFO Act agencies, representing more 

than 75% of all Federal outlays, achieved a clean audit opinion. This represents the same 

number of agencies that achieved a clean audit opinion in FY 2005. The FY 2006 results 

place the Federal government on a good track to achieve its FY 2011 target of 22 CFO 

Act agencies achieving a clean opinion. 

Material Weaknesses. The number of auditor-reported material weaknesses was reduced 

by approximately 15% (from 48 reported in FY 2005 to 41 reported this past year). This 

result exceeds the government-wide performance target of a 10% annual reduction in 

repeat auditor-identified material weaknesses. See Appendix B of this Report for a more 

detailed breakdown and description of auditor-reported material weaknesses in FY 2006. 

Timely Reporting. For the second consecutive year, every major Federal agency met the 

government-wide performance target to issue their audited financial statements within 45 

2 Federal Financial Management Report (2007) 
days of the close of the fiscal year. The government-wide performance target is to 

achieve this same result in all future years. 

Improper Payments. Improper payments declined to $36.3 billion for those programs that 

originally reported a total of $45.1 billion in FY 2004. This represents an approximately 

$9 billion improvement in 2 years. These results place the Federal government on a good 

track to achieve its FY 2011 target to eliminate $20 billion in improper payments in the 

programs that were originally reported in FY 2004. 

Excess Real Property. The Federal government disposed of $1.5 billion in excess real 

property in FY 2006 and has disposed of a total of $3.5 billion in real property since FY 

2004. This result puts the Federal government on a good track to achieve its FY 2011 

target to dispose of $11 billion in excess real property. 

LOOKING FORWARD

The reform and core activities highlighted in this Report are intended to position agencies to 

achieve the PMA objectives described above. The reform activities, in particular, reflect the 

Administration’s current priorities for improving financial management, based on the key 

challenges and opportunities in today’s environment. As the environment changes, certain core 

activities may take on new significance and become reform initiatives or the standards for 

current initiatives may change. A regular re-evaluation of the Administration’s reform priorities 

will be guided by the PMA with a focus on results. 

OFFM has been organized to most effectively implement the PMA principles and the reform and 

core activities included in this report. As a result of the PMA, every CFO across the Federal 

Government now shares common goals for improving financial performance, and a financial 

management community exists that works closely with one another to respond to long-standing 

and arising financial challenges. As OMB, Federal CFOs, and the financial management 

community look toward the next 5 years of financial management improvements, the PMA will 

continue to guide our efforts. 

Federal Financial Management Report (2007) 3 
Introduction

OMB’s Office of Federal Financial Management (OFFM) is responsible for the financial 

management policy of the Federal Government and is led by the OMB Controller under the 

direction of the OMB Deputy Director for Management. OFFM’s mission is to promote and 

support first class financial management in the executive branch of the Federal Government. To 

accomplish this mission, OFFM’s objectives1

 are to: 

(1) Achieve successful goals for the financial management-related initiatives of the 

President’s Management Agenda (PMA); 

(2) Coordinate and lead government-wide financial management reforms that support and 

facilitate PMA improvement goals; and 

(3) Issue government-wide financial management policies and requirements that are userfriendly, transparent, consistently complied with by Federal agencies, and facilitate the 

achievement of PMA goals without undue burden on agency and taxpayer resources. 

OFFM has developed a “Framework for Improving Financial Performance” to provide direction 

and clarity on how the above objectives will be met. This “Framework” is the subject of this 

Report and also fulfills OFFM’s requirement, under the Chief Financial Officers Act of 1990 

(CFO Act), for providing Congress and the financial management community with a 

government-wide “Five-Year” financial management plan. 

The Framework is intended to provide the public with a simple tool for identifying: (1) the 

ultimate objective (or “apex”) of the government’s financial management improvement efforts 

(i.e., the financial management goals of the PMA); (2) the priority projects currently under-way 

in the Federal financial community to help support and facilitate the PMA success (i.e., current 

government-wide financial management reform activities); and (3) the day-to-day financial 

management activities or core activities that help ensure a strong foundation is in place for 

achieving the PMA’s success. 

 

1

 For a complete description of OFFM’s strategic objectives, see Appendix H. 

4 Federal Financial Management Report (2007) 
PMA

The PMA provides Federal agencies with a concise set of clear and measurable financial 

management performance goals that allow Federal managers, Congress, and the public to gauge 

whether taxpayer funds are being properly accounted for and wisely spent. These performance 

measures include the achievement of a clean audit opinion, the elimination of material 

weaknesses in internal control, timely financial reporting, the elimination of improper payments, 

the disposal of excess real property, and the reduction in government costs through the strategic 

use of financial data. As noted throughout this Report, Federal agencies are making significant 

progress on each of these areas. However, much work remains until the President’s vision for 

improved financial management is fully achieved. 

Reform Activities

To support the PMA, the Federal financial community has undertaken a series of improvement 

efforts intended to strengthen key areas of financial management and thus help ensure the PMA’s 

success. The Reform Activities include the following seven initiatives (as represented by the 7 

columns in the diagram on the previous page): 

1. Eliminating Improper Payments, 

2. Rightsizing the Government’s Real Property, 

3. Improving the Financial Report of the U.S. Government, 

4. Managing the Financial Management Line of Business, 

5. Strengthening Internal Controls, 

6. Strengthening Grants Management, and 

7. Strengthening Social Insurance Reporting. 

This Report discusses these activities (or columns) in greater detail, highlighting for each 

initiative, the Strategic Goal, FY 2011 Targets, Interim Objectives, FY 2007 Priority Actions, 

and Recent Accomplishments. 

Core Activities

The Core Activities represent the foundation for holding the overall structure in place. In short, 

the core activities represent the universe of day-to-day activities that the Federal financial 

community must undertake to effectively manage the resources of the Federal government. The 

Core Activities include: 

1. Improving Financial Reporting, 

2. Strengthening Internal Controls, 

3. Improving Financial Systems, 

4. Improving Asset Management, 

5. Managing Grants, and 

6. Improving Auditing Standards. 

Federal Financial Management Report (2007) 5 
Of note, some of these core activities (e.g., internal controls) contain critical components or areas 

that are also represented in the reform activities portion of the Framework. This is because 

OFFM, working with the Federal financial community, has determined that this core activity 

required some degree of reform to enhance or strengthen the activity on a “go-forward” basis. In 

this way, the reform activities (or columns) serve to both support the PMA’s success and 

strengthen the foundation of Federal financial activities. This Report includes a detailed 

discussion of each Core Activity. 

Finally, Appendices A-H are included to provide supplementary information for a complete 

representation of the governmental-wide “Five-Year” financial management plan and status 

report for FY 2006. 

The Chief Financial Officer Council and the President’s Council on Integrity and Efficiency

OFFM’s ongoing work with the Chief Financial Officer Council (CFOC) and the President’s 

Council on Integrity and Efficiency (PCIE) is critical to ensure that the Framework described 

above is carried out effectively. The CFOC was established, specifically by the CFO Act, as a 

mechanism for advising and coordinating the activities of its member agencies on matters such 

as improved quality of financial information, financial data and information standards, 

consolidation and modernization of financial systems, internal controls, legislation affecting 

financial operations and organizations, and other financial management efforts. Presently, the 

CFOC has seven “Transformation Teams” that assist in carrying out the Framework’s efforts: 

(1) Central Reporting, (2) Improper Payments, (3) Grants Governance, (4) Financial Systems 

Modernization, (5) Performance Metrics, (6) Financial Standardization, and (7) Financial 

Systems Integration Office (FSIO). In addition, the Audit Committee of the PCIE plays a critical 

role in helping OFFM to develop and oversee financial management policies and requirements 

that help facilitate accurate, reliable, and timely financial reporting. 

6 Federal Financial Management Report (2007) 
The Financial Management-Related 

Initiatives of the President’s Management 

Agenda 

When the CFO Act was signed into law more than 15 years ago, 

the Federal Government was responding to numerous financial 

management challenges. The Comptroller General at the time had 

testified that billions of dollars were “at risk” in the Federal Government’s programs due to 

inadequate financial management systems and controls, and agencies generally could not give 

assurance that their financial statements were accurate and reliable. The CFO Act was a direct 

response to these deficiencies and was aimed toward reforming financial management practices 

within the Federal Government. In short, the Act called for stronger financial leadership, more 

disciplined financial controls, improved financial management systems, and accurate and timely 

financial information for decision-making. Federal CFOs are now in charge of implementing a 

number of management reforms, including the Federal Managers’ Financial Integrity Act of 

1982 (FMFIA) (Pub. L. No. 97-255), intended to strengthen internal controls and accounting 

systems, and the Federal Financial Management Improvement Act of 1996 (FFMIA) (Pub. L. 

No. 104-208), intended to improve financial management systems. If implemented effectively, 

the reform environment created by law, administrative action, and executive order provides a 

solid foundation for continual improvements in the Federal government’s stewardship of the 

public’s tax dollars. 

The primary instrument used by the Administration to implement the principles of the CFO Act 

and other Federal financial management laws is the PMA. The PMA is most clearly embodied 

in the “Improving Financial Performance” initiative. Under this initiative, the President 

identified a limited number of clear, meaningful, and attainable financial goals that every Federal 

agency must meet. Each individual goal is an indicator of financial management excellence, and 

reflects standards established either by law or Administrative action. 

As a primary goal, every agency CFO is responsible for meeting standards that reflect a sound 

foundation of Federal financial management: achieving a “clean” audit, resolving material 

weaknesses in a timely manner, having in place a financial system that meets Federal standards, 

meeting reporting deadlines, and complying with laws and regulations. These standards ensure 

that Federal agencies are properly accounting for taxpayer dollars and can produce financial 

information that is both timely and reliable. Federal agencies must achieve these standards to 

move from “red” to “yellow” status on the PMA stop light scorecard system. CFOs must build 

on these standards, and ensure that financial information is available for managers on demand 

and is actively being used to drive results in key areas of operations. Federal agencies must 

demonstrate that financial information is being used effectively to manage costs to move achieve 

a “green” status score. 

In addition to the Improving Financial Performance Initiative, the President has also established 

additional PMA initiatives to eliminate improper payments and right-size the Federal 

Government’s real estate. Under these initiatives, agencies achieve “yellow” status by putting 

the right tools in place to measure improper payments and identify excess real estate. Agencies 

Federal Financial Management Report (2007) 7 
move to “green” status when improper payment reduction and real estate disposal targets are 

achieved. The accompanying diagram demonstrates the key goals for the financial managementrelated PMA initiatives, with the corresponding FY 2006 results and 5 year performance targets. 

Increase # of Clean Audit Opinions

The reform and core activities highlighted in the remainder of this Report are intended to 

position agencies to achieve the PMA goals and targets described above. For example, OMB 

Circular No. A-123, Management’s Responsibility for Internal Control, Appendix A (Internal 

Control over Financial Reporting) provides guidance for improved agency internal controls, and 

gives agency managers and stakeholders greater assurance that Federal financial statements are 

accurate and reliable. The Financial Management Line of Business (FMLoB) is improving the 

effectiveness and efficiency of the financial services and financial systems available to agency 

managers, allowing them to focus their efforts on utilizing information, instead of producing it. 

The Federal Real Property Asset Management initiative requires agencies to develop and use 

inventory information to ensure property inventories are maintained at the right size, cost, and 

condition to support agencies’ missions and objectives. 

These examples, and the others discussed in this report, reflect the Administration’s reform 

priorities, based on the key challenges and opportunities in the current environment. As the 

environment changes, certain core activities may take on new significance and become reform 

initiatives or the standards for current initiatives may change. A regular re-evaluation of the 

Administration’s reform priorities will be guided by the PMA with a focus on results. 

OFFM has been organized to most effectively implement the PMA principles and the Reform 

and Core Activities included in this report. As a result of the PMA, every CFO across the 

Federal Government now shares common goals for improving financial performance, and a 

financial management community exists that works closely with one another to respond to longReduce # of Material Weaknesses

Timely Financial Reporting

Dispose of Excess 

Real Property

Eliminate 

Improper 

Payments (IP)

$11 Billion in Excess 

Property Disposed

PMA 

GOALS

FY 2011 

PERFORMANCE 

TARGETS

FY 2006 

RESULTS

19 of 24 CFO Act Agencies w/ Clean Opinion 22 of 24 CFO Act Agencies w/ Clean Opinion

$9 Billion 

IP Reduction

From 2004 Base

15% Reduction in Material 

Weaknesses from Prior Year

10% Annual Reduction in Repeat 

Auditor Material Weaknesses 

All Agencies Report 

w/in 45 Days

$1.5 Billion in Excess 

Property Disposed

$25 Billion 

IP Reduction

From 2004 Base

All Agencies Meet 45 Day 

Reporting Deadline Every Year 

Increase # of Clean Audit Opinions

ce # of Material Weaknesses

Timely Financial Reporting

Dispose of Excess 

Real Property

Eliminate 

Improper 

Payments (IP)

$11 Billion in Excess 

Property Disposed

PMA 

GOALS

FY 2011 

PERFORMANCE 

TARGETS

FY 2006 

RESULTS

19 of 24 CFO Act Agencies w/ Clean Opinion 22 of 24 CFO Act Agencies w/ Clean Opinion

$9 Billion 

IP Reduction

From 2004 Base

Redu 15% Reduction in Material 

Weaknesses from Prior Year

10% Annual Reduction in Repeat 

Auditor Material Weaknesses 

All Agencies Report 

w/in 45 Days

$1.5 Billion in Excess 

Property Disposed

$25 Billion 

IP Reduction

From 2004 Base

All Agencies Meet 45 Day 

Reporting Deadline Every Year 

8 Federal Financial Management Report (2007) 
standing and arising financial challenges. As OMB, Federal CFOs, and the financial 

management community look toward the next 5 years of financial management improvements, 

the PMA will continue to guide our efforts. 

Federal Financial Management Report (2007) 9 
Eliminating Improper Payments 

Improper payments occur when Federal funds go to the wrong 

recipient, the recipient receives the incorrect amount of funds, 

documentation is not available to support a payment, or the 

recipient uses the funds in an improper manner. The Improper 

Payment Information Act of 2002 (IPIA) (Pub. L. No. 107-300) 

created a permanent framework for assessing every Federal 

program and dollar for risk of improper payments, annually measuring the accuracy of payments, 

and initiating program improvements to ensure that payment errors and improprieties are reduced 

and ultimately eliminated. This reform activity supports the PMA objective to identify and 

eliminate improper payments. 

STRATEGIC GOAL: 

 Reduce the government-wide improper payment dollar amount and rate. 

FY 2011 TARGET(S):

 Reduce improper payment total of programs that reported in the baseline 

year of FY 2004 from $45.1 billion by $20 billion. 

Improper Payments 

INTERIM OBJECTIVES: 

 Identify the causes of improper payments and develop program specific 

corrective action plans. 

 Measure improper payments in programs that are at significant risk of 

improper payments on an annual basis. 

 Identify the causes of improper payments and develop specific corrective 

action plans. 

FY 2007 PRIORITY ACTIONS: 

 Have measurement plans in place for FY 2008 reporting for all programs at 

a significant risk of improper payments. 

 Conduct State partnership project to enhance program integrity efforts in 

Federally-funded, State-administered programs such as Medicaid. 

 Expand recovery auditing to ensure full participation for all mandated 

agencies.

RECENT ACCOMPLISHMENT(S): 

 Decreased improper payments approximately $9 billion over the past three 

years in the programs originally reporting in the baseline year (FY 2004). 

 Implemented action plans to ensure 100% error measurement reporting for 

all high risk programs. 

 Decreased the government-wide improper payment rate down to 2.9% 

from 3.2% reported in FY 2005, and from 3.9% reported in FY 2004. 

10 Federal Financial Management Report (2007) 
Right-sizing the Government’s Real 

Property 

On February 4, 2004, the President signed Executive Order 

13327, Federal Real Property Asset Management. To meet the 

requirements of the Executive Order, agencies must develop 

and implement the necessary tools (e.g., planning, 

inventory, performance measures) to manage their portfolio of 

real property assets at the right size, in the right condition, and 

at the right cost. This reform activity supports PMA objectives to identify and dispose of excess 

Federal real estate. 

STRATEGIC GOAL: 

 Right-size the Federal real property inventory. 

FY 2011 TARGET(S):

 Dispose of $11 billion in unneeded Federal real property. 

Real Property 

INTERIM OBJECTIVES: 

 Capture inventory data/performance metrics on all constructed assets. 

 Implement agency-specific Asset Management Plans. 

 Dispose of unneeded Federal real property. 

 Obtain legislative authority to reform asset management and disposition, 

including the retention of sales proceeds. 

FY 2007 PRIORITY ACTIONS: 

 Enact the President’s legislative proposal to allow Executive agencies to 

retain a portion of the net proceeds of sale which would be directed toward 

the agency’s real property capital asset needs. 

 Facilitate inter and intra agency coordination on real property efforts such as 

facility security and historic preservation. 

 Ensure that agencies using asset-specific performance data in their decisionmaking process. 

 Increase information sharing among Executive agencies on unneeded assets. 

RECENT ACCOMPLISHMENT(S): 

 Reported to the Government-wide database, inventory, and performance data 

on more than 1.2 million assets. 

 Disposed of more than $4.2 billion in unneeded real property assets since FY 

2004. 

 Established the Performance Assessment Tool using performance measure 

data to assist agencies in their efforts to right-size real property assets. 

Federal Financial Management Report (2007) 11 
Improving the Financial Report of the 

United States Government 

Each year, the Treasury Department and OMB issue the 

Financial Report of the U.S. Government, which presents the 

consolidated financial statements for the Government as a 

whole. This report contains important financial data that 

provide the public with an important view of the Federal 

government’s finances. Improvements are necessary to ensure 

that some of the key information contained in the Report meets audit scrutiny for reliability and 

accuracy. This reform activity supports the PMA objectives for ensuring strong accounting 

practices through the achievement of a clean audit, the elimination of material weaknesses, and 

producing timely financial information to help guide decision-making. 

STRATEGIC GOAL: 

 

 Receive an unqualified or “clean” audit opinion on the Financial Report’s 

consolidated financial statements. 

FY 2011 TARGET(S):

U.S. Financial Report 

 Eliminate one-third of current material weaknesses. 

INTERIM OBJECTIVES: 

 Downgrade intra-governmental transactions material weakness. 

 Achieve an opinion on the Department of Defense’s balance sheet. 

 Improve Agency-Treasury reporting. 

FY 2007 PRIORITY ACTIONS: 

 For intra-governmental transactions, implement Dispute Resolution 

Committee, develop performance metric, and initiate intra-governmental 

Payment and Collection (IPAC) System improvements for intragovernmental transactions. 

 Work collaboratively with Treasury to revise and develop corrective action 

plans for material weaknesses. 

 Continue education and preparation for Treasury’s Government Wide 

Accounting (GWA) initiative. 

RECENT ACCOMPLISHMENT(S): 

 Updated and published standard intra-governmental business rules that are 

effective for all agencies (via OMB Memorandum M-07-03 & Treasury’s 

Bulletin No. 2007-03). 

12 Federal Financial Management Report (2007) 
The Financial Management Line of 

Business (FMLoB) 

The FMLoB is enhancing the fundamental means by which the 

government collects and reports financial information. It is 

standardizing financial business processes and data, and 

achieving efficiencies through the economies of scale that 

accompany the use of shared service solutions. This reform 

activity supports PMA objectives by significantly improving the financial data government 

managers need to make timely and successful decisions and reducing the cost of Government 

operations. 

STRATEGIC GOAL: 

 Implement Government-wide solutions that yield lower cost and risk results in 

financial management activities. 

FY 2011 TARGET(S):

 Migrate majority of agencies to shared service providers and implementing 

FMLoB standardization elements. 

INTERIM OBJECTIVES: 

 Issue migration planning guidance. 

FMLoB 

 Implement common performance metrics. 

 Define and implement common accounting code. 

 Define and implement standard business processes. 

FY 2007 PRIORITY ACTIONS: 

 Define standard interfaces to core financial systems. 

 Define additional standard business processes. 

 Finalize information technology measures and pilot collection. 

 Address FMLoB policy questions. 

RECENT ACCOMPLISHMENT(S): 

 Issued first version of Migration Planning Guidance government-wide. 

 Published competition guidance for shared service providers and agencies. 

 Released exposure draft for common Government-wide accounting code. 

Federal Financial Management Report (2007) 13 
Strengthening Internal Controls 

Effective internal control over financial reporting is the 

foundation for successful financial management. Reliable 

financial information is critical for key decisions being made 

on a daily basis—ranging from routine decisions such as 

purchasing office supplies to more mission-related decisions 

such as building satellites. Federal agencies must strengthen 

internal control over financial reporting in order to sustain 

clean audit opinions within financial reporting deadlines in the wake of increasing financial audit 

scrutiny. This reform activity supports PMA objectives for ensuring strong accounting practices 

as evidenced by the achievement of a clean audits and the elimination of material weaknesses. 

STRATEGIC GOAL: 

 Improve effectiveness of internal control over financial reporting.

FY 2011 TARGET(S):

 Achieve full compliance with A-123, Appendix A by all CFO Act agencies. 

 Eliminate 50% of all current government-wide material weaknesses. 

 Implement full integration of the assessment process with other internal control 

reviews (e.g., Federal Information Security Management Act of 2002, Pub. L. 

No. 107-347 (FISMA), IPIA, etc.) 

Internal Controls 

INTERIM OBJECTIVES: 

 Utilize A-123 assessment results to improve material weakness corrective action 

plans. 

 Obtain consensus between management, the Office of Inspector General, and 

OMB on material weakness corrective action plans. 

 Enhance internal control based on lessons learned and best practices. 

FY 2007 PRIORITY ACTIONS: 

 Facilitate forum on lessons learned from FY 2006 implementation of A-123. 

 Update OMB guidance, as necessary, based on lessons learned. 

 Receive update corrective action plans from agencies that reflect lessons learned 

from FY 2006 implementation of A-123. 

RECENT ACCOMPLISHMENT(S): 

 Completed first year of A-123 implementation in all 24 CFO agencies. 

 Implemented a full scope A-123 assessment (testing all key processes) in 16 of 

the 24 CFO Act agencies. 

 Implemented a multi-year phased-in assessment (testing a portion of the key 

processes) and provided plans for testing the remaining processes within three 

years in 8 of the 24 CFO Act agencies. 

14 Federal Financial Management Report (2007) 
Strengthening Grants Management 

Each year, the Federal Government provides over $450 billion 

of grants to more than 60,000 grantees—State, local and tribal 

governments, colleges and universities and non-profit 

organizations. These dollars are awarded though more than 

1,000 grant programs managed by federal agencies. Improved 

solutions for grants management are essential for the 

strengthening of accountability and increasing the cost 

efficiency of grant programs. This reform activity supports the PMA objective to use financial 

information to manage costs and ensure Federal dollars are wisely and effectively spent. 

STRATEGIC GOAL: 

 Implement Government-wide solutions that increase transparency of grant 

activities, lower administrative costs, and simplify application/reporting. 

FY 2011 TARGET(S):

 Develop searchable public website for grants and sub-grants awards. 

 Migrate all major grant-making agencies migrated to Grants Management Line of 

Business (GMLoB) consortia. 

 Make available FIND and APPLY capabilities on Grants.gov for 100% of all 

discretionary grants.

Grants 

INTERIM OBJECTIVES: 

 Make award data accessible on searchable public website, consistent with the 

Federal Funding Accountability and Transparency Act of 2006 (FFATA) (Pub. 

L. 109-282). 

 Complete required activities under the Federal Financial Assistance Management 

Improvement Act of 1999 (Pub. L. 106-107), Grants Streamlining. 

 Commence migration of major grant-making agencies to GMLoB consortia. 

FY 2007 PRIORITY ACTIONS: 

 Complete action items for FFATA implementation, including agreed upon data 

definitions and pilot launch of award data. 

 Complete Pub. L. No. 106-107 activities, including single location for grants 

administration policies, single catalog for all assistance programs, standard award 

announcement format. 

RECENT ACCOMPLISHMENT(S): 

 Defined action plan for FFATA implementation. 

 Implemented 100% FIND and 75% APPLY functionality on Grants.gov. 

 Consolidated standard grant forms designed for the reporting of financial, 

performance, property and invention by grantees. 

Federal Financial Management Report (2007) 15 
Strengthening Social Insurance 

Reporting 

Federal entitlement programs such as Medicare and Social 

Security are on an unsustainable fiscal path. OMB is working 

with the Treasury Department, the Government Accountability 

Office and the Federal Accounting Standards Advisory Board 

(FASAB) to improve and expand on current social insurance 

reporting through additional disclosures in the Financial 

Report. These disclosures will help alert lawmakers and the public of the impending fiscal crisis 

that will occur if no action is taken. This reform activity supports PMA objectives for producing 

timely and reliable financial information to help guide decision-making. 

STRATEGIC GOAL: 

 Disclosure of comprehensive social insurance and sustainability data that 

facilitates and guides reform efforts to address the long-term fiscal imbalance. 

FY 2011 TARGET(S):

Social Insurance 

 Provide Social Insurance disclosures in the Financial Report used by lawmakers 

and the public to inform debate on entitlement reform. 

INTERIM OBJECTIVES: 

 Receive clean opinion on Statement of Social Insurance (SOSI) Financial 

Report. 

 Develop a “Statement of Fiscal Sustainability” and include as a principal 

statement within the Financial Report. 

FY 2007 PRIORITY ACTIONS: 

 Solicit comments on the FASAB Social Insurance Preliminary Views document, 

obtaining a broad and diverse array of viewpoints and input. 

 Launch FASAB Sustainability Task Force to begin work on improved 

sustainability reporting. 

RECENT ACCOMPLISHMENT(S): 

 Audited SOSI published for the first time at the agency and Government-wide 

level. 

 Achieved clean audit opinion on all agency-level SOSIs. 

 Released proposed “Statement of Fiscal Sustainability” for public comment. 

16 Federal Financial Management Report (2007) 
The Framework’s Foundation: Core Activities 

The Framework’s Core Activities represent the “every day” activities and statutory 

responsibilities of OFFM. Through these activities and responsibilities, OFFM improves, 

strengthens, and manages the Federal Government’s financial management policies, practices, 

and procedures.

I. Improving Financial Reporting 

During FY 2006, OFFM continued to improve Federal 

financial reporting in three key areas: (1) governmentwide financial reporting requirements (OMB Circular No. 

A-136, Financial Reporting Requirements); (2) 

accounting standards; and (3) consolidated governmentwide financial statements (in coordination with the 

Department of the Treasury). 

 

OMB Circular No. A-136, Financial Reporting Requirements 

OMB, in conjunction with the CFO Council, provides updates to OMB guidance relating to 

agency and government-wide financial reporting in the OMB Circular A-136, Financial 

Reporting Requirements (Circular A-136). The A-136 subcommittee under the CFO Council 

was created to perform this work, with all CFO Act agencies represented. Circular A-136

establishes a central reference point for all Federal financial reporting guidance for Executive 

Branch departments, agencies, and entities required to submit audited financial statements, 

interim financial statements, and Performance and Accountability Reports (PAR) under the CFO 

Act2, the Accountability of Tax Dollars Act of 2002 (“ATDA”)3 (Pub. L. 107-289), and Annual 

Management Reports under the Government Corporations Control Act4

 (codified at 31 U.S. C. 

9101 et seq.). This Circular is available on the OMB home page (by clicking the “Circulars” 

link) on the Internet, which is currently located at http://www.whitehouse.gov/OMB/.

Accelerated due dates for PAR reporting became effective in FY 2004. Agencies are required to 

submit their PARs to OMB and the Congress no later than 45 days after the end of the fiscal 

year. Circular No. A-136 made this 45-day deadline a permanent annual requirement for all 

executive agencies. 

Annual revisions to Circular No. A-136 are implemented by OMB in coordination with the CFO 

Council in order to provide clarifications and minor reporting changes for the current fiscal year, 

as well as advanced guidance on upcoming changes to Statements of Federal Financial 

Accounting Standards from the FASAB. Significant goals for FY 2007 are to issue Circular No. 

 

2

 Pub. L. No. 101 – 576 

3

 Pub. L. No. 107 – 289 

4

 31 U.S.C. § 9101 et seq. 

Federal Financial Management Report (2007) 17 
A-136 revisions earlier in the fiscal year and to facilitate streamlined PAR reported so that 

information is easier to read and understand by a variety of users (i.e., Congress, the public, etc.) 

and the cost of PAR development is reduced. 

Accounting Standards 

To facilitate the standard setting process, the FASAB was established as an advisory board under 

the Federal Advisory Committee Act by the Comptroller General, the Secretary of the Treasury, 

and the Director of OMB. The Board is made up of 10 members—4 government members 

(OMB, GAO, Treasury, and the Congressional Budget Office) and 6 non-Federal members from 

private industry and academia. FASAB’s mission is to consider and recommend accounting 

concepts and standards for the Federal government. In 1999, The American Institute of Certified 

Public Accountants (AICPA) formally recognized accounting standards published by FASAB as 

generally accepted accounting principles (GAAP) for federal financial reporting entities (i.e., a 

“stamp of approval” for accounting). 

OFFM maintains an active and ongoing involvement with FASAB, serving as the OMB 

representative on FASAB. OFFM staff act as liaisons to FASAB and as such, identify critical 

accounting standards’ issues and seek input from relevant agencies and OMB offices. An OFFM 

representative also serves on the Accounting and Auditing Policy Committee (AAPC), a 

permanent committee sponsored by the FASAB. The AAPC assists the Federal government in 

improving financial reporting through the timely identification, discussion, and recommendation 

of solutions to accounting and auditing issues within the framework of existing authoritative 

literature. 

The Financial Report of the U.S. Government 

Each year, the Department of the Treasury, in coordination with OMB, prepares the Financial 

Report of the U.S. Government. The Report contains the consolidated, audited financial 

statements of the government as a whole. The Report also serves as an important example of 

improved transparency for reporting government-wide financial information. The Treasury and 

OMB promote the Financial Report to increase awareness of America’s fiscal position. It is 

published on the Web and widely distributed. 

The 2006 Financial Report was published on December 15, 2006. The Treasury first issued the 

Financial Report, for FY 1997, as an important piece of our effort to increase public awareness 

of the government’s future spending obligations. For the past three years, OMB has required the 

Treasury to issue the Report on December 15, rather than on the March 31 statutory deadline, to 

provide financial information early enough to be useful in the budget process. 

For the 10th consecutive year, the GAO issued a disclaimer of opinion on the Financial Report’s

consolidated financial statements. A disclaimer of an audit opinion means that sufficient 

information was not available for the auditor to form an opinion about the reliability of the 

information in the financial statements. Even so, 19 of the 24 most significant Federal agencies 

included in the Report received unqualified or “clean” audit opinions on their financial 

statements. 

18 Federal Financial Management Report (2007) 
In FY 2006, OMB undertook the following collaborative efforts to not only address the audit 

concerns that continue to prevent the GAO from expressing an opinion on the Report’s financial 

statements, but to continue improving transparent government-wide financial reporting: (1) 

worked with the Treasury and the CFO Council to revise the Business Rules for 

Intragovernmental Transactions, (2) proposed a “Statement of Fiscal Sustainability” with the 

Treasury and the GAO for Report’s Social Insurance reporting, and (3) provided valuable shortand long-term measures about the Government’s finances. 

The Business Rules for Intragovernmental Transactions were revised and became effective on 

October 1, 2006 to address the Federal Government’s inability to adequately account for and 

reconcile intragovernmental activity and balances between agencies. The Rules were revised, 

expanded, and strengthened to cover other types of intragovernmental activities not addressed in 

the original business rules. The new rules—located in the Treasury Financial Manual, Volume 

1, Bulletin 2007-3 (http://www.fms.treas.gov/tfm/vol1/bull.html)—are mandatory for all 

Departments and Agencies. As a part of the new business rules, an Intragovernmental Dispute 

Resolution Committee has been established to help facilitate the resolution of accounting, 

reporting, and timing differences or contractual disputes between Federal entities. All 

Departments and Agencies are expected to actively participate in the reconciliation and dispute 

resolution process. 

OMB plans to monitor agencies’ progress regarding the use of the Rules to account for and 

reconcile their intragovernmental activity and balances. Moreover, the CFO Council’s 

Performance Metric team will develop a metric to monitor and drive results based on the Rules. 

OMB will also continue working with Treasury and the CFO Council to improve governmentwide financial reporting and to resolve the Financial Report’s other material weaknesses. 

Also in FY 2006, the OMB, Treasury, and GAO FASAB members developed a “Statement of 

Fiscal Sustainability” to improve and expand on current social insurance reporting through 

additional disclosures in the Financial Report. These disclosures will help alert lawmakers and 

the public of the impending fiscal crisis that will occur if no action is taken. Finally, the 

Treasury and OMB were instrumental in demonstrating that both the deficit total (short-term 

measure) in the President’s Budget and the net operating cost total (long-term measure) in the 

Financial Report complement each other by providing valuable information that together 

provide a full picture of the Government’s finances. 

Federal Financial Management Report (2007) 19 
II. Strengthening Internal Controls 

The OMB Circular No. A-123 (Circular No. A-123), 

Management’s Responsibility for Internal Control, is 

the policy document that implements the requirements 

of the FMFIA. The FMFIA requires that management 

establish and maintain effective internal control to 

achieve the objectives of 1) effective and efficient 

operations, 2) reliable financial reporting, and 3) 

compliance with applicable laws and regulations. The 

FMFIA also requires the head of each Executive agency 

to report annually to the President and the Congress on the effectiveness of the internal controls 

and any identified material weaknesses in those controls. 

Circular No. A-123 contains multiple appendices that address, at a more detailed level, one or 

more of the objectives of effective internal control. The requirements in the appendices are the 

core activities to support the goal of strengthening internal control government-wide. 

Appendix A—Internal Control over Financial Reporting 

Appendix A provides a methodology for agency management to assess, document, test, and 

report on the internal control over financial reporting. The Appendix also encourages an 

integrated approach with other legislative and regulatory requirements to review internal control. 

The new requirements were developed in consultation with the Financial Standardization Team 

of the CFO Council. The Council and OMB produced a supplementary Implementation Guide 

(http://www.cfoc.gov/documents/Implementation_Guide_for_OMB_Circular_A-123.pdf), which 

provides a more hands-on perspective of how to implement the new requirements, and a 

Frequently Asked Questions (FAQ) document, which elaborates on concepts in the Appendix. 

The results of the FY 2006 assessment can be found in Appendix B of this Federal Financial 

Management Report. The FAQ document can be found at 

(http://www.whitehouse.gov/omb/circulars/a123/faq_a123_appx_a.pdf). 

Appendix B—Improving the Management of Government Charge Card Programs 

The Federal Government sponsors more than 2.9 million credit cards to use in purchasing goods 

and services, or for employees when traveling on official government business. These 

transactions represent $26.5 billion dollars spent through the use of purchase, fleet, or travel 

cards, with nearly $17.8 billion spent in the purchase card program alone in FY 2006. These 

programs continue to demonstrate the improved efficiencies of charge card use, through 

administrative savings, refunds earned and streamlined processes. 

OFFM provides oversight of Federal charge card programs. In August 2005, OMB issued 

Appendix B to OMB Circular No. A-123. Appendix B requires agencies to maintain internal 

controls that reduce the risk of fraud, waste, and error in government charge card programs. As 

required by Appendix B, agencies submit updated copies of their Charge Card Management 

Plans to OMB on an annual basis, and submit performance information on either a quarterly or 

20 Federal Financial Management Report (2007) 
annual basis, depending on the size of the agency. OFFM works with agencies to strengthen 

their charge card programs when appropriate. OFFM also works closely with the GSA SmartPay 

program, which manages the primary contracts with the Federal Government’s charge card 

providers, to ensure the program is operating effectively and efficiently. 

Appendix C—Requirements for Effective Measurement and Remediation of Improper 

Payments 

Appendix C implements the requirements of the IPIA. It consolidates previous guidance 

documents that had been issued as OMB memoranda under Circular No. A-123. Appendix C 

addresses all categories of improper payments that include, but are not limited to, programmatic 

disbursements, benefit entitlements, loan guarantees, contract and other types of administrative 

payments. Appendix C also encompasses the requirements mandated under Section 831 of the 

Defense Authorization Act for Fiscal Year 2002 (Pub. L. No. 107-107), that added a new 

subchapter to the U.S. Code (31 USC §§3561-3567). This law is more commonly known as the 

Recovery Auditing Act. 

Federal Financial Management Report (2007) 21 
III. Improving Financial Systems

In FY 2006, OMB continued its work to ensure full 

implementation of the FFMIA. Implementation of FFMIA 

requires agencies to implement and maintain financial 

management systems that substantially comply with: (1) federal 

financial management systems requirements; (2) applicable federal 

accounting standards; and (3) the United States Standard General 

Ledger at the transaction level. Agencies continue to make 

progress in implementing FFMIA, but significant work remains. 

Specifically, 19 CFO Act agencies achieved unqualified financial 

statement audit opinions in FY 2006 while many of these same agencies operate financial 

management systems that do not meet all of the requirements of FFMIA. Full implementation is 

an important component of providing government managers with reliable, useful, and timely 

financial information. 

OMB’s FFMIA compliance oversight efforts have been incorporated into the PMA’s Improving 

Financial Performance initiative. Substantial compliance with FFMIA is one of the initiative’s 

standards of success and agencies must report substantial compliance before they can receive the 

highest rating of “Green.” Under the improving financial performance initiative, OMB monitors 

agency progress towards FFMIA compliance on a quarterly basis. 

In addition to OMB’s oversight of agencies’ financial management systems implementations, 

OMB uses the Financial Management Line of Business (FMLoB) initiative to assist agencies in 

substantially complying with FFMIA. The goal of the FMLoB is to improve the cost, quality, 

and performance of financial management systems by leveraging shared service solutions and 

implementing other government-wide reforms that foster efficiencies in Federal financial 

operations. 

The FMLoB adopted a shared service model, in which qualified providers deliver both financial 

management and financial systems services to multiple agencies. Shared service providers may 

be operated by public agencies or commercial providers. The majority of small Federal agencies 

have moved to shared service providers. Current efforts are focused on the migration of larger 

CFO Act agencies. 

22 Federal Financial Management Report (2007) 
IV. Improving Asset Management

OFFM is improving asset management throughout the 

Federal Government by coordinating asset management 

activities in the areas of real property and financial assets, 

including the collection of debts owed to the 

Government. 

Real Property 

Strengthening the management of the Federal 

Government’s assets has been an important objective of 

this Administration. The government owns approximately $1.2 million real property assets with 

a replacement value in excess of $1.2 trillion and holds title to approximately one in every four 

acres of the United States’ entire land mass. The Administration continues to require that 

Federal real property assets be accounted for, and that effective plans be made for purchases, 

management, maintenance, and operation. 

 

The Administration has taken specific steps to improve the management of real property on a 

government-wide level by implementing the requirements of Executive Order 13327, “Federal 

Real Property Asset Management,” signed on February 4, 2004. This order directed all major 

agencies to establish the position of a Senior Real Property Officer (SRPO), who is held 

accountable for the effective management of agency real properties. The Executive Order also 

created an interagency Federal Real Property Council to develop guidance, serve as a 

clearinghouse for best practices, and facilitate the efforts of the agency SRPOs. 

Using the Executive Order as a framework, the Administration is using the PMA to track and 

hold agencies accountable for achieving the goals and objectives of the Real Property Asset 

Management initiative. Specifically, agencies are being held accountable for improved accuracy 

of their real property inventory and performance measurement data reporting and 

implementation of specific actions that will lead to the disposal of unneeded assets, improve the 

condition of mission critical assets, and ensure that assets are managed at the right cost. 

Debt Collection 

The Debt Collection Improvement Act of 1996 (DCIA) (section 31001 of Pub. L. No. 104-134) 

established a framework for improved federal debt collection government-wide by centralizing 

the management of delinquent obligations in the Department of the Treasury and providing 

agencies with more effective debt collection tools, such as centralized administrative offsets and 

administrative wage garnishments. The DCIA requires agencies to take prompt action to 

recover debts, aggressively monitor all accounts, properly screen potential borrowers in the case 

of credit programs, and resolve the outstanding debt through a variety of options, including 

referring the debt to the Department of Justice for litigation and the Department of the Treasury 

for administrative offset and cross-servicing. Compliance with DCIA yields significant and 

measurable savings for the taxpayer. 

Federal Financial Management Report (2007) 23 
DCIA requires OMB to report annually on any deficiencies in the standards and policies of 

Federal agencies for compromising, writing down, forgiving, and discharging indebtedness, and 

progress made in improving those standards and policies. 

OMB Circular No. A-129, Policies for Federal Credit Programs and Non-Tax Receivables 

(Circular No. A-129), requires agencies to submit an annual report providing OMB with 

information on: (1) internal debt collection processes; (2) agency identified deficiencies in 

current policies; (3) actions taken by agencies to comply with DCIA and Circular No. A-129; 

and (4) intended actions to improve debt collection policies and practices. For FY 2006 these 

reports were due by December 31, 2006, and OMB has received report submissions from the 24 

CFO Act agencies. 

Overall, agencies have strong policies and procedures in place consistent with the requirements 

of DCIA and Circular No. A-129, and continue to strive to improve their debt collection 

practices. In FY 2006 several agencies updated their internal policies and procedures to ensure 

compliance with DCIA, Circular No. A-129, or the Federal Claims Collections Standards 

(FCCS) as a result of their internal reviews of existing processes. A number of agencies have 

reported that they are still working to come into compliance with specific aspects of DCIA, A129, or the FCCS. See Appendix G: Debt Collection Deficiencies and Corrective Actions, which 

includes a table of notable deficiencies and corrective actions that were reported to OMB. 

OMB will continue to work with the agencies as well as the Financial Management Service’s 

Debt Management Service within the Department of the Treasury to ensure that agencies are in 

compliance with the DCIA, Circular No. A-129, and the Federal Claims Collections Standards. 

24 Federal Financial Management Report (2007) 
V. Managing Grants 

OFFM, working cooperatively with the grant-making 

agencies and the grantee community, establishes 

government-wide policy and requirements to ensure that 

grants are managed properly, Federal dollars are spent in 

accordance with applicable laws and regulations, and 

federal grants are free from fraud and waste. Each year, 

the Federal Government provides over $450 billion in 

grants to State, local and Tribal Governments, colleges 

and universities, and other non-profit organizations—

roughly one-sixth of the Federal budget. OFFM issues and maintains OMB grants management 

circulars and Government-wide guidelines for educational institutions; State, local, and Indian 

Tribal Governments, and non-profit organizations regarding cost principles (OMB Circular Nos. 

A-21, A-87, and A-122), administrative requirements (OMB Circular Nos. A-102 and A-110), 

and audit (OMB Circular No. A-133). In addition, OFFM: 

• Determines government-wide audit policy for Federal grantees. 

• Issues annual updates to the Compliance Supplement to OMB Circular No. A-133, which 

provides guidance to non-Federal auditors of approximately 40,000 State and local 

Governments and nonprofit Federal grant recipients. 

• Oversees the Federal Audit Clearinghouse that receives and distributes single audit reports 

within the Federal Government and maintains a Government-wide database of single audit 

results. 

• Oversees the implementation of the Federal Financial Assistance Management Improvement 

Act of 1999 (Pub. L. 106-107). This Act seeks to improve the effectiveness and performance 

of Federal grant programs, simplify grant application and reporting requirements, improve 

the delivery of services to the public, and facilitate greater coordination among those 

responsible for delivering such services. Under this Act, OMB has worked with the Grants 

Governance Transformation Team within the Chief Financial Officer’s Council to achieve 

many milestones that streamline the grant process and reduce administrative burden on the 

grantees. 

• Provides technical and policy advice to the OMB’s Office of E-Government and Information 

Technology on the implementation of Grants.gov (a single electronic portal for grantees to 

find grant opportunities and submit applications on-line) and the Grant Management Line of 

Business. 

• Provides leadership and coordination among federal agencies in the implementation of a 

searchable website for federal grants, contracts and loans as required under the FFATA. 

Federal Financial Management Report (2007) 25 
VI. Improving Auditing Standards

OMB provides auditing standards to implement the audit 

provisions of several key pieces of legislation, such as the 

Inspector General Act of 1978 (5 U.S.C. App.), FMFIA, 

CFO Act, Government Management Reform Act of 1994 

(GMRA) (Pub. L. No. 103-356), and the FFMIA The 

periodic review and improvement of auditing standards is 

important in ensuring the integrity and transparency of 

agencies’ financial data and internal controls so that 

taxpayer resources are protected from waste, fraud, and 

mismanagement. 

OMB Bulletin No. 06-03, Audit Requirements for Federal Financial Statements, was released on 

August 23, 2006 to provide new procedural guidelines to enhance and update the minimum 

requirements for audits of Federal financial statements. The Bulletin was updated by OFFM in 

conjunction with the Financial Statement Audit Network of the President’s Council on Integrity 

and Efficiency (PCIE). The changes in the Bulletin apply to audits of financial statements of all 

executive departments, agencies, and government corporations. 

The most significant changes in the Bulletin expanded the definition of “material weakness” and 

“significant deficiency,” to align the definitions more closely to those of the private sector. The 

revised definitions in OMB Bulletin 06-03 are consistent with the Public Company Accounting 

Oversight Board (PCAOB) Auditing Standard No. 2 and American Institute of Certified Public 

Accountants (AICPA) Statement on Auditing Standards No. 112. As of this writing, the PCAOB 

released proposed changes that would further clarify these definitions. OFFM will continue 

monitoring the activities of the PCAOB and other audit organizations to determine if further 

changes are needed in this area of the Bulletin. 

 

26 Federal Financial Management Report (2007) 
Conclusion 

Over the past 5 years, the Federal Government has made significant progress in achieving the 

President’s vision for improving financial management. Overall, Federal agencies have achieved 

more clean audit opinions, fewer auditor-identified material weaknesses, more timely financial 

reporting, more disposals of excess real estate, and have made fewer improper payments. Over 

the next 5 years, the Federal Government is well positioned to build on that progress by 

improving results in all of these key performance areas of the PMA. 

The reform and core activities highlighted in this Report are intended to position agencies to 

achieve the objectives described above. The reform activities, in particular, reflect the 

Administration’s current priorities for improving financial management, based on the key 

challenges and opportunities in today’s environment. As the environment changes, certain core 

activities may take on new significance and therefore may be considered for a future reform 

initiative. A regular re-evaluation of the Administration’s reform priorities will be guided by the 

PMA and a focus on results. 

OFFM has been organized to most effectively implement the PMA principles and the reform and 

core activities included in this Report. As a result of the PMA, every CFO across the Federal 

Government now shares common goals for improving financial performance, and a financial 

management community exists that works closely with one another to respond to long-standing 

and arising financial challenges. As OMB, Federal CFOs, and the financial management 

community look toward the next 5 years of financial management improvements, the PMA will 

continue to guide our efforts. 

Federal Financial Management Report (2007) 27 
APPENDICES 

28 Federal Financial Management Report (2007) 
Appendix A: Summary of FY 2006 Audited Financial Statement 

Results by Agency and Selected Components 

In FY 2006, agencies subject to the CFO Act were required to prepare annual financial 

statements subject to audit. OMB also designates those individual entity components that must 

prepare audited financial statements. 

CFO Act Agency: FY 2006 Audit Opinion 

Department of Agriculture (USDA) Unqualified 

Department of Commerce (DOC) Unqualified 

Department of Defense (DOD) Disclaimer 

Department of Education (Education) Unqualified 

Department of Energy (DOE) Disclaimer 

Department of Health and Human Services (HHS) Unqualified 

Department of Homeland Security (DHS) Disclaimer 

Department of Housing and Urban Development 

(HUD) Unqualified 

Department of the Interior (DOI) Unqualified 

Department of Labor (DOL) Unqualified 

Department of Justice (DOJ) Unqualified 

Department of State (State) Unqualified5

Department of Transportation (DOT) Qualified 

Department of the Treasury (Treasury) Unqualified 

Department of Veterans Affairs (VA) Unqualified 

Agency for International Development (USAID) Unqualified 

Environmental Protection Agency (EPA) Unqualified 

General Services Administration (GSA) Unqualified 

National Aeronautics and Space Administration 

(NASA) Disclaimer 

National Science Foundation (NSF) Unqualified 

 

5

 The Department of State received a disclaimer of opinion on the financial statements published on November 15. 

The Department subsequently reissued its financial statements on December 15, 2006 with an unqualified opinion. 

Federal Financial Management Report (2007) 29 
CFO Act Agency: FY 2006 Audit Opinion 

Nuclear Regulatory Commission (NRC) Unqualified 

Office of Personnel Management (OPM) Unqualified 

Small Business Administration (SBA) Unqualified 

Social Security Administration (SSA) Unqualified 

Agency Component:

Food and Nutrition Service (USDA) N/A* 

Forest Service (USDA) Unqualified 

Rural Development (USDA) Unqualified 

Department of Army General Funds (DOD) Disclaimer 

Department of Navy General Funds (DOD) Disclaimer 

Department of Air Force General Funds (DOD) Disclaimer 

Military Retirement Trust Fund (DOD) Unqualified 

U.S. Army Corp of Engineers Civil Works Program 

(DOD) Disclaimer 

Department of Army Working Capital Fund (DOD) Disclaimer 

Department of Navy Working Capital Fund (DOD) Disclaimer 

Department of Air Force Working Capital Fund 

(DOD) Disclaimer 

Centers for Medicare and Medicaid Services (HHS) Unqualified 

Federal Aviation Administration (DOT) Qualified 

Highway Trust Fund (DOT) Unqualified 

Internal Revenue Service (Treasury) Unqualified 

Civil Service Retirement and Disability Fund (OPM) Unqualified 

Federal Employees Health Benefits Program (OPM) Unqualified 

Federal Employees Life Insurance Program (OPM) Unqualified 

* Component received an OMB waiver from audit for FY 2006. 

30 Federal Financial Management Report (2007) 
Appendix B: Material Weaknesses Reported by Auditors and Federal 

Managers’ Financial Integrity Act Tables 

OMB audit guidance requires auditors to disclose material weaknesses in internal control over 

financial reporting. The FMFIA and OMB guidance require the head of each executive agency 

to annually report whether there is reasonable assurance that the agency’s controls are achieving 

their intended objectives and whether the agency’s financial management systems conform to 

government-wide requirements. 

Agency heads are required to identify material weaknesses related to agency programs and 

operations (pursuant to Section 2 of FMFIA) and nonconformances with government-wide 

financial systems requirements (pursuant to Section 4 of FMFIA). Reporting material 

weaknesses under FMFIA is not limited to weaknesses over financial reporting. 

The following tables include: the number of material weaknesses reported by independent 

auditors, the number of material weaknesses reported by agency heads under Section 2 of 

FMFIA, and the number of financial system nonconformances reported by agency heads under 

Section 4 of FMFIA. 

Table Definitions: 

• Beginning – the number of material weaknesses (beginning balance) reported in the 

Independent Auditor’s Report for the prior fiscal year. 

• New – the number of new material weaknesses reported in the Independent Auditor’s 

Report for the current fiscal year which could include reportable conditions reported by 

the auditors from the prior fiscal year whose severity has risen to the level of a material 

weakness. 

• Resolved – the number of material weaknesses reported in the Independent Auditor’s 

Report for the current fiscal year that were reported as resolved by the auditors or whose 

severity has been reduced to that of a reportable condition. 

• Consolidated – the number of material weaknesses reported in the Independent 

Auditor’s Report that were combined with other repeat material weaknesses from a prior 

fiscal year or with a new material weakness from the current fiscal year 

• Ending – the number of material weaknesses (ending balance) reported in the 

Independent Auditor’s Report for the current fiscal year. The number is calculated by 

adding the number of new material weakness reported by the auditors from the current 

fiscal year to the number of material weaknesses reported the prior fiscal year and then 

subtracting the number of weaknesses resolved and consolidated weaknesses during the 

current fiscal year. 

 

Federal Financial Management Report (2007) 31 
Fiscal Year 2006: 

Auditor-Reported Material Weaknesses 

Beginning New Resolved Consolidated Ending

Agriculture 20002

Commerce 00000

Defense 11 1 0 0 12

Education 00000

Energy 11101

HHS 21012

Homeland 10 1 0 1 10

HUD 20200

Interior 20101

Justice 20101

Labor 00000

State 20200

DOT 32212

Treasury 10001

VA 30003

AID 11101

EPA 00000

GSA 10100

NASA 30012

NSF 00000

NRC 11002

OPM 00000

SBA 10001

SSA 00000

Totals 48811441

32 Federal Financial Management Report (2007) 
FY 2006 Auditor-Reported Material Weaknesses by Category 

Property, Plant, 

and Equipment 

20%

Financial Systems 

and Security 26%

Budgetary 

Reporting 5%

Intra-governmental 

Reconciliation 5%

Funds Balance 

with Treasury 5%

Accounts Payable 

and Other 

Liabilities 12%

Financial 

Management and 

Reporting 27%

Federal Financial Management Report (2007) 33 
Fiscal Year 2006: 

FMFIA Section 2 – Consolidated Totals 

Section 2 

Operational

Section 2 

Financial 

Reporting

Beginning New Resolved Consolidated Reassessed Ending

Agriculture Unqualified Qualified 2 2 0 0 0 4

Commerce Qualified Unqualified 1 0 0 0 0 1

Defense Qualified Qualified 33 12 7 4 0 34

Education Qualified Unqualified 0 2 0 0 0 2

Energy Unqualified Qualified 0 1 0 0 0 1

HHS Qualified Qualified 1 3 0 1 0 3

Homeland Qualified No Assurance 12 1 0 0 0 13

HUD Unqualified Unqualified 0 0 0 0 0 0

Interior Unqualified Unqualified 4 0 1 0 3 0

Justice Qualified Qualified 1 2 0 0 1 2

Labor Qualified Unqualified 0 1 0 0 0 1

State Unqualified Unqualified 0 0 0 0 0 0

DOT Qualified Qualified 3 1 2 0 0 2

Treasury Qualified Qualified 6 1 1 0 0 6

VA Qualified Qualified 1 1 1 0 0 1

AID Qualified Qualified 0 4 0 0 0 4

EPA Unqualified Unqualified 0 0 0 0 0 0

GSA Unqualified Unqualified 1 0 1 0 0 0

NASA Qualified Qualified 1 3 1 0 0 3

NSF Unqualified Qualified 0 0 0 0 0 0

NRC Qualified Unqualified 0 2 0 0 0 2

OPM Unqualified Unqualified 1 0 1 0 0 0

SBA Unqualified Qualified 1 0 0 0 0 1

SSA Unqualified Unqualified 0 0 0 0 0 0

 TOTAL 68 36 15 5 4 80

Number of Material Weaknesses Adequate and Effective 

Management Controls*

34 Federal Financial Management Report (2007) 
Fiscal Year 2006: 

FMFIA Section 2 – Operational 

Yes

Yes, with 

Material 

Weaknesses

No Beginning New Resolved Consolidated Reassessed Ending

Agriculture X 0 0 0 0

Commerce X 1 0 00 0

Defense X 31 9 74 0

Education X 0 2 00 0

Energy X 0 0 0 0

HHS X 0 1 00 0

Homeland X 2 10 0 0 3

HUD X 0 0 0 0

Interior X 2 0 0 0

Justice X 0 1 00 0

Labor X 0 1 00 0

State X 0 0 0 0

DOT X 1 0 10 0

Treasury X 6 0 10 0

VA X 0 1 00 0

AID X 0 2 00 0

EPA X 0 0 0 0

GSA X 0 0 0 0

NASA X 1 1 10 0

NSF X 0 0 0 0

NRC X 0 2 00 0

OPM X 1 0 1 0

SBA X 0 0 0 0

SSA X 0 0 0 0

 TOTAL 11 12 1 45 21 11 4 2 49

Number of Material Weaknesses Adequate and Effective 

Management Controls*

0 0

1

29

2

0 0

1

0 0

2 0

1

1

0 0

0

5

1

2

0 0

0 0

1

0 0

2

0 0

0 0

0 0

Federal Financial Management Report (2007) 35 
Fiscal Year 2006: 

FMFIA Section 2 – Financial Reporting 

Yes

Yes, with 

Material 

Weaknesses

No Beginning New Resolved Consolidated Reassessed Ending

Agriculture X 2 2 00 0

Commerce X 0 0 0 0

Defense X 2 3 00 0

Education X 0 0 0 0

Energy X 0 1 00 0

HHS X 1 2 01 0

Homeland X 10 0 0 0 0 10

HUD X 0 0 0 0

Interior X 2 0 1 0

Justice X 1 1 00 1

Labor X 0 0 0 0

State X 0 0 0 0

DOT X 2 1 10 0

Treasury X 0 1 00 0

VA X 1 0 10 0

AID X 0 2 00 0

EPA X 0 0 0 0

GSA X 1 0 1 0

NASA X 0 2 00 0

NSF X 0 0 0 0

NRC X 0 0 0 0

OPM X 0 0 0 0

SBA X 1 0 00 0

SSA X 0 0 0 0

 TOTAL 12 11 1 23 15 4 1 2 31

Number of Material Weaknesses Adequate and Effective 

Management Controls*

4

0 0

5

0 0

1

2

0 0

1 0

1

0 0

0 0

2

1

0

2

0 0

0 0

2

0 0

0 0

0 0

1

0 0

36 Federal Financial Management Report (2007) 
Fiscal Year 2006: 

FMFIA Section 4 – Financial Management Systems 

Yes

Yes, with 

Non -

conformances*

No Beginning New Resolved Consolidated Reassessed Ending

Agriculture X 1 00 0 1 0

Commerce X 0 0 0 0 0

Defense X 1 00 0 0

Education X 0 0 0 0 0

Energy X 0 00 0 0 0

HHS X 1 10 0 0

Homeland X4 0 1 0 0 3

HUD X 0 0 0 0 0

Interior X 0 00 0 0 0

Justice X 3 11 0 1

Labor X 0 00 0 0 0

State X 0 0 0 0 0

DOT X 1 00 0 0

Treasury X 1 00 0 0 1

VA X 0 20 0 0 2

AID X 0 0 0 0 0

EPA X 0 00 0 0 0

GSA X 1 0 1 0 0

NASA X 3 01 0 1

NSF X 0 0 0 0 0

NRC X 0 10 0 0

OPM X 0 0 0 0 0

SBA X 0 00 0 0 0

SSA X 0 0 0 0 0

 TOTAL 15 8 1 16 5 4 0 3 14

Systems Conform to 

Requirements Number of Nonconformances

0

1

0

2

0

2

0

1

0

0

1

0

1

0

0

Federal Financial Management Report (2007) 37 
Appendix C: Government Corporations Required to Submit Audited 

Financial Statements to OMB 

Government Corporation: FY 2006 Audit Opinion

Commodity Credit Corporation Unqualified 

Community Development Financial Institutions Fund Unqualified 

Corporation for National and Community Service Unqualified 

Export-Import Bank of the United States Unqualified 

Federal Crop Insurance Corporation Unqualified 

Federal Deposit Insurance Corporation Not Received1

Federal Home Loan Banks Not Received1

Federal Housing Administration Fund Unqualified 

Federal Prison Industries, Incorporated Unqualified 

Financing Corporation Not Received1

Government National Mortgage Association Unqualified 

Millennium Challenge Corporation Unqualified 

National Credit Union Administration Central Liquidity Facility Not Received1

Overseas Private Investment Corporation Unqualified 

Pension Benefit Guaranty Corporation Unqualified 

Resolution Funding Corporation Not Received1

Rural Telephone Bank Unqualified 

Saint Lawrence Seaway Development Corporation Unqualified 

Tennessee Valley Authority Unqualified 

1

 Agency has a calendar year end; the financial statements were not due as of the printing of this report. 

38 Federal Financial Management Report (2007) 
Appendix D: Accountability of Tax Dollars Act Agencies Required to 

Submit Audited Financial Statements to OMB 

 

Agency: FY 2006 Audit Opinion 

Advisory Council on Historic Preservation Not Received 

African Development Fund Unqualified 

Appalachian Regional Commission Not Received 

Architectural and Transportation Barriers Compliance Board Unqualified 

Armed Forces Retirement Home Unqualified 

Barry Goldwater Scholarship and Excellence in Education Fund Not Received 

Broadcasting Board of Governors Unqualified 

Christopher Columbus Fellowship Foundation Not Received 

Central Intelligence Agency Disclaimer 

Chemical Safety and Hazard Investigation Board Unqualified 

Commission on Civil Rights Unqualified 

Commission of Fine Arts Unqualified 

Commission for the Preservation of America’s Heritage Abroad Not Received 

Committee for Purchase from People Who Are Blind or 

Severely Disabled Not Received 

Commodities Futures Trading Commission Unqualified 

Consumer Product Safety Commission Unqualified 

Court Services and Offender Supervision Agency for DC Not Received 

Defense Nuclear Facilities Safety Board Unqualified 

Federal Financial Management Report (2007) 39 
Agency: FY 2006 Audit Opinion 

Delta Regional Authority Not Received 

Denali Commission Unqualified 

Equal Employment Opportunity Commission Unqualified 

Farm Credit Administration Unqualified 

Farm Credit System Financial Assistance Corporation N/A1

Farm Credit System Insurance Corporation Not Received2

Federal Communications Commission Unqualified 

Federal Election Commission Qualified 

Federal Financial Institutions Examination Council Appraisal 

Subcommittee Unqualified 

Federal Housing Finance Board Unqualified 

Federal Labor Relations Authority Not Received 

Federal Mediation and Conciliation Service Unqualified 

Federal Mine Safety and Health Review Commission Unqualified 

Federal Retirement Thrift Investment Board Not Received2

Federal Trade Commission Unqualified 

Harry S. Truman Scholarship Foundation Not Received 

Institute of American Indian and Alaska Native Culture and Arts 

Development Not Received 

Institute of Museum and Library Services Unqualified 

Inter-American Foundation Unqualified 

James Madison Memorial Fellowship Foundation Not Received 

40 Federal Financial Management Report (2007) 
Agency: FY 2006 Audit Opinion 

Japan-U.S. Friendship Commission Unqualified 

Marine Mammal Commission Unqualified 

Merit Systems Protection Board Unqualified 

Morris K. Udall Scholarship and Excellence in National 

Environmental Policy Foundation Not Received 

National Archives and Records Administration Unqualified 

National Capital Planning Commission Unqualified 

National Commission on Libraries and Information Science Not Received 

National Council on Disability Unqualified 

National Credit Union Administration Not Received2

National Endowment for the Arts Unqualified 

National Endowment for the Humanities Unqualified 

National Labor Relations Board Unqualified 

National Mediation Board Unqualified 

National Transportation Safety Board Unqualified 

Nuclear Waste Technical Review Board Unqualified 

Occupational Safety and Health Review Commission Unqualified 

Office of Government Ethics Unqualified 

Office of Navajo and Hopi Indian Relocation Commission Not Received 

Office of Special Counsel Unqualified 

Peace Corps Disclaimer 

Presidio Trust Qualified 

Federal Financial Management Report (2007) 41 
Agency: FY 2006 Audit Opinion 

Railroad Retirement Board Unqualified 

Securities and Exchange Commission Unqualified 

Selective Service System Qualified 

Smithsonian Institution Not Received 

SI/John F. Kennedy Center for the Performing Arts Not Received 

SI/National Gallery of Arts Not received 

SI/Woodrow Wilson International Center for Scholars Unqualified 

Trade and Development Agency Unqualified 

U.S. Court of Appeals for Veterans Claims Unqualified 

U.S. Holocaust Memorial Museum Unqualified 

U.S. Interagency Council on Homelessness Not Received 

U.S. International Trade Commission Unqualified 

Vietnam Education Foundation Not Received 

White House Commission on the National Moment of 

Remembrance Unqualified 

1

 The Farm Credit System Financial Assistance Corporation has completed its mission and is no longer in existence. 2

 Agency has a calendar year end; the financial statements were not due as of the printing of this report.

42 Federal Financial Management Report (2007) 
Appendix E: Compliance with the Federal Financial Management 

Improvement Act of 1996 (FFMIA) 

Under the FFMIA, Federal agencies are required to maintain financial management systems that 

substantially comply with Federal financial management system requirements, applicable 

Federal accounting standards, and the U.S. Standard General Ledger at the transaction level. 

FFMIA provides that both the head of the agency and the independent auditor publish a 

determination of compliance on an annual basis. The table below indicates the FY 2006 

compliance findings for each CFO Act agency. 

 

AgencyHead Auditor

Agriculture N N 

Commerce Y Y 

Defense N N 

Education Y N 

Energy N N 

HHS N N 

Homeland N N 

HUD Y N 

Interior Y N 

Justice N N 

Labor Y N 

State Y N 

DOT N N 

Treasury N N 

VA N N 

AID Y Y 

EPA Y Y 

GSA Y Y 

NASA N N 

NSF Y Y 

NRC N N 

OPM Y Y 

SBA N N 

SSA Y Y 

TOTAL 12 7 

Federal Financial Management Report (2007) 43 
 Appendix F: Executive Branch Management Scorecard 

The Office of Management and Budget, in consultation with Federal agencies, professional 

associations, and academics, has established Standards for Success for each government-wide 

initiative of the President’s Management Agenda (PMA). For the Improving Financial 

Performance initiative, a limited number of clear, meaningful, and attainable financial goals were 

established that every Federal agency must meet. Each individual goal is an indicator of 

financial management excellence, and reflects standards established either by law or 

Administrative action. 

Each quarter, agencies receive ratings reflecting both their current status in meeting the standards 

and the progress they are making. The ratings use a familiar Red, Yellow, and Green stoplight 

format, and every agency CFO is responsible for moving their agency toward Green. Agencies 

who do not meet individual goals must prepare action plans for meeting them as well as 

demonstrate ongoing progress in achieving results. 

The “Yellow” standards reflect the core competencies of Federal financial management: 

achieving a clean audit, resolving material weaknesses in a timely manner, having in place a 

financial system that meets Federal standards, meeting reporting deadlines, and complying with 

laws and regulations. The standards ensure the financial data produced by Federal agencies is 

both timely and reliable. 

The “Green” standards measure the ultimate objective of financial management reform: ensuring 

that financial information is available for managers on demand and that information is actively 

being used to drive results in key areas of operations. 

Agencies must present evidence to OMB that the standards have been met, and OMB assesses 

many factors including: the goals that agencies are looking to achieve, how agencies are using 

data strategically to drive the goals, and how agencies will measure the results to know the 

desired goals were achieved. In order to maintain ‘Green’ status, agencies need to have a plan to 

continually expand their efforts so that all managers have the financial information needed to 

operate their programs. 

The following charts show the current Standards for Success for the Improving Financial 

Performance Scorecard, as well as the current Status and Progress scores for each agency. The 

fourth quarter results provided here present the agencies’ ratings as of September 30, 2006. 

These ratings were prior to the publication of the fiscal year 2006 audited financial statements. 

44 Federal Financial Management Report (2007) 
 The President’s Management Agenda 

Improving Financial Performance Standards for Success 

(as of 4th Quarter FY 2006)

Explanation of Current Status Score 

Agency: 

• Meets all Yellow Standards for Success; 

• Currently produces accurate and timely 

financial information that is used by 

management to inform decision-making and 

drive results in key areas of operations; AND

• Is implementing a plan to continuously 

expand the scope of its routine data use to 

inform management decision-making in 

additional areas of operations. 

Agency: 

• Receives an unqualified opinion on its 

audited annual financial statements; 

• Meets financial reporting deadlines; 

• Reports in its audited annual financial 

statements that its systems are in 

compliance with the Federal Financial 

Management Improvement Act; 

• Has no chronic or significant Anti-Deficiency 

Act Violations; 

• Has no repeat material auditor-reported 

internal control weaknesses; 

• Has no material non-compliance with laws 

or regulations; AND

• Has no repeat material weaknesses or nonconformances reported under Section 2 and 

Section 4 of the Federal Managers’ 

Financial Integrity Act that impact the 

agency’s internal control over financial 

reporting or financial systems. 

Agency: 

• Receives an opinion other than 

unqualified on its annual financial 

statements; 

• Does not meet financial reporting 

deadlines; 

• Cannot report in its audited annual 

financial statements that its systems are 

in compliance with the Federal Financial 

Management Improvement Act; 

• Commits chronic or significant AntiDeficiency Violations; 

• Has repeat material auditor reported 

internal control weaknesses; 

• Is in material non-compliance with laws 

or regulations; OR

• Has repeat material weaknesses or nonconformances reported under Section 2 

and Section 4 of the Federal Managers’ 

Financial Integrity Act that impact the 

agency’s internal control over financial 

reporting or financial systems. 

Explanation of Progress Score 

Green – Implementation is proceeding according 

to plans.

Yellow – Slippage in implementation schedule, 

quality of deliverables, or other issues requiring 

adjustments by agency in order to achieve 

initiative on a timely basis.

Red – Initiative in serious jeopardy. Unlikely 

to realize objectives without significant 

management intervention.

Federal Financial Management Report (2007) 45 
Executive Branch Management Scorecard 

Financial Management (Baseline – Current) 

FY02 Q2 FY03 Q4 FY04 Q4 FY05 Q4 FY07 Q1 FY02 Q2 FY03 Q4 FY04 Q4 FY05 Q4 FY07 Q1

AGRICULTURE RRRRR GGGGG

COMMERCE RRYGG GGGGG

DEFENSE RRRRR GGYYY

EDUCATION RRGGG GGGGG

ENERGY RYGGR GGGYG

EPA RGGGG YGGGG

HHS RRRRR YGYGG

HOMELAND RRRR GGYR

HUD RRRRY YGYGG

INTERIOR RRRRR YYGGG

JUSTICE RRRRR GGGYG

LABOR YYGGG GGGGG

STATE RRYGG GGGGY

DOT RRRRR GGGGY

TREASURY RRRRR YYYYG

VA RRRRR GGRYY

AID RRRRY YGGGY

Corps of Eng RRRRR YYYYG

GSA YYRGG GGGGG

NASA RRRRR GGRRY

NSF GGGGG GGGGG

OPM RYYRY GGGGG

SBA RRRRR YYGGG

SMITHSONIAN RRRRG YYYGG

SSA YGGGG GGGGG

Current Status Progress

46 Federal Financial Management Report (2007) 
Appendix G: Debt Collection Deficiencies and 

Corrective Actions 

Agency Deficiency Corrective Actions 

Agriculture 

(USDA) 

Some agencies within USDA have not been 

compliant with the requirement to write-off 

delinquent debt greater than two years old if 

there are no estimated material collections. 

USDA is aggressively working to 

coordinate write-off plans across the 

agencies, and all delinquent debt greater 

than two years old will either be written-off 

or reported to OMB by March 31, 2007. 

Health and 

Human 

Services 

(HHS) 

The Centers for Medicare and Medicaid 

Services have not been reporting all eligible 

discharged/closed out debt to the Internal 

Revenue Service on Form 1099C. 

HHS will develop and implement 

procedures to comply with the requirement 

during FY 2007. 

Social 

Security 

Administration 

(SSA) 

The Old-Age and Survivors Insurance and 

Disability Insurance (OASDI) and 

Supplemental Security Income (SSI) 

programs have not been compliant with the 

requirement to write-off delinquent debt 

greater than two years old if there are no 

estimated material collections. 

This has been corrected for the OASDI 

program, and will be corrected for the SSI 

program during FY 2007. 

Homeland 

Security 

(DHS) 

DHS’s debt collection regulations have not 

been published in the Code of Federal 

Regulations, and an agency-wide debt 

collection policy has not been adopted. 

The regulations are under final review by 

the DHS Office of General Counsel, and 

the policy is currently under internal review 

and comment. 

State (DOS) Detailed procedures for recording the writeoff of debts in the accounting system are 

not fully developed. 

These procedures will be finalized after 

the implementation of a new domestic 

financial management system in FY 2007. 

Labor (DOL) (1) The Mine Safety and Health 

Administration (MSHA) and Occupational 

Safety and Health Administration (OSHA) 

have not consistently been referring debt 

delinquent over 180 days to Treasury for 

collection. (2) MSHA and the Employment 

Standards Administration have not been 

compliant with the requirement to write-off 

delinquent debt greater than two years old if 

there are no estimated material collections. 

DOL management is currently 

strengthening policies and procedures to 

ensure compliance with DCIA and Circular 

No. A-129. 

Defense 

(DOD) 

(1) A Taxpayer Identification Number (TIN) 

is not currently provided on all certified 

vouchers submitted to a disbursing office 

for payment. (2) The Department is not 

currently participating in the Treasury Offset 

Program (TOP) as a paying agency. 

(1) Necessary system changes are 

currently underway, and DOD is targeting 

compliance in 2008. (2) DOD is 

scheduled to begin participating in the 

TOP program during FY 2007. 

Justice (DOJ) The Federal Bureau of Investigation (FBI) 

must implement a uniform debt 

management policy to encompass all 

aspects of managing receivables. 

The FBI has a target date of March 2007 

for finalizing these policies. 

Federal Financial Management Report (2007) 47 
Appendix H: The Office of Federal Financial 

Management’s Strategic Objectives 

A. General

1. Provide effective leadership on government-wide financial management improvement 

initiatives that results in positive performance on key indicators of financial management 

success, including: 

a. More unqualified audit opinions (22 out of 24 by FY 2011). 

b. Less material weaknesses (10% reduction in repeat weaknesses per year). 

c. More timely financial reporting (all agencies achieve 45 day deadline). 

d. Less improper payments (reduction in improper payment amount for programs 

originally reported in FY 2004 of $20 billion by FY 2011). 

e. More disposals of excess real property ($11 billion by FY 2011). 

2. Achieve the objectives of the PMA initiatives to Improve Financial Performance, 

Eliminate Improper Payments, and Improve Federal Real Property Asset Management, 

by ensuring that Federal agencies use accurate, timely and reliable financial information 

to achieve measurable results. 

3. Issue Government-wide financial management policies and requirements that are user 

friendly, transparent, consistently complied with by Federal agencies, and facilitate 

improved financial management without undue burden on agency and taxpayer resources. 

B. Specific

1. Improper Payments. Coordinate and implement the PMA initiative on improper 

payments to ensure that agencies are taking the necessary steps to report improper 

payment measurements on all high risk programs and reduce Government-wide improper 

payments. 

2. Real Property. Coordinate and implement the PMA initiative on real property asset 

management to ensure that agencies are meeting rightsizing goals including the 

disposition of unneeded assets. 

3. Financial Systems Oversight. Implement the FMLoB initiative, achieving lower risk and 

lower cost results in financial system modernizations and activities through leveraging of 

shared service providers and other standardization efforts. Also, coordinate the oversight 

of Federal financial systems implementations to ensure that agencies are implementing 

and maintaining financial systems that are in compliance with OMB requirements and the 

FFMIA. 

48 Federal Financial Management Report (2007) 
4. Strengthening Internal Controls. Improve the effectiveness of Government-wide 

internal controls, such that all CFO Act agencies are compliant with Circular No. A-123 

with no scope limitations, and a 10% Government-wide reduction in repeat material 

weaknesses is achieved. 

 

5. Government-wide Financial Reporting. Contribute to the achievement of a clean audit 

opinion on the government-wide financial statement by helping to develop and 

implement solutions that eliminate existing material weaknesses and prevent the 

occurrence of new weaknesses. 

 

6. Grants. Implement Government-wide solutions that increase transparency of grant 

activities, lower administrative costs, and simplify application/reporting. 

 

Federal Financial Management Report (2007) 49