Federal Financial 

Management Rep

2006 

Executive Office of the Preside

Office of Management and Bud

Washington D.C. 
Table of Contents 

Page 

Executive Summary....................................................................................................................1

Office of Federal Financial Management .................................................................................4

Improving Financial Reporting.................................................................................................5

Achieving Accountability – FY 2005 Financial Results........................................................5 

Reducing Material Weaknesses..............................................................................................6 

Financial Management Improvement Initiatives.....................................................................9

Strengthening Internal Controls..............................................................................................9 

FMLOB: Achieving Standardization and Efficiencies..........................................................9 

Full Implementation of Federal Financial Management Improvement Act.........................10 

Status of the Debt Collection Improvement Act of 1996 .....................................................11 

Strengthening Asset Management........................................................................................12 

Improving Payment Accuracy & Recovery Auditing ..........................................................13 

Strengthening Control over Federal Charge Cards...............................................................14 

The Chief Financial Officers Council .....................................................................................16

CFO Council Committees........................................................................................................17

Financial Management Policies and Practices......................................................................17 

Financial Reporting Acceleration.........................................................................................18 

Financial Systems Integration ..............................................................................................19 

Grants Policy ........................................................................................................................20 

Improper Payments...............................................................................................................21 

Performance Measurement...................................................................................................21 

Future Outlook..........................................................................................................................23

Appendices.................................................................................................................................24

Appendix A: Summary of FY 2005 Financial Statement Results by Agencies and 

Selected Components......................................................................................................25

Appendix B: Material Weaknesses Reported by Auditors and Federal Managers’ 

Financial Integrity Act Tables ........................................................................................27

Appendix C: Government Corporations Required to Submit Audited Financial 

Statements to OMB.........................................................................................................31

Appendix D: Accountability for Tax Dollars Act Agencies Required to Submit Audited 

Financial Statements to OMB.........................................................................................32

Appendix E: Executive Branch Management Scorecard .................................................34

Federal Financial Management Report (2006) i 

Executive Summary 

The President’s Management Agenda (PMA) has provided a clear strategic direction for 

financial management in the Federal Government. The PMA has changed the paradigm for 

financial reporting and ushered in a new level of financial accountability. The PMA’s Improved 

Financial Performance initiatives recognize that an agency’s ability to produce timely and 

accurate information is rooted in the quality of its internal processes and internal controls. The 

PMA’s focus on accelerated reporting and internal controls establishes clear objectives for 

strengthening this essential foundation for driving financial management improvements. 

Under the PMA, there has been ongoing improvement in the number of agencies that 

demonstrate their ability to use timely and accurate financial information to make decisions 

about program management. The ultimate goal is for managers to have ready access to reliable 

financial information for use in their daily decision-making. 

Timeliness Continues to Improve in FY 2005 

This year every major Federal agency completed its Performance and Accountability Report 

(PAR) by November 15, 2005. This is the first time every PAR was completed by the deadline 

set in 2001 by the Office of Management and Budget (OMB). Furthermore, nearly 80% of the 

government corporations that have a September 30 year end also met the accelerated deadline 

one year ahead of schedule. In addition, 36 of the agencies subject to the Accountability of Tax 

Dollars Act (ATDA) met the accelerated deadline, a 33% increase over the number of ATDA 

agencies reporting last year. By the end of December 2005, 48 of 73 ATDA agencies had 

reported. Timely reporting is vital to ensure taxpayer money is spent honestly and wisely. The 

timely financial reporting by Federal agencies reflects this Administration’s commitment to 

strengthening government transparency and accountability. Before the Bush Administration 

came to office, agencies took as long as five months to complete their financial reports. Now 

agencies are producing financial statements within 45 days after the close of the fiscal year. 

Additionally, for a second year, the issuance of the consolidated Financial Report of the United 

States Government was accelerated to December 15, 2005 – one month after the agencies 

reported. Just two years ago, the Government-wide report was issued in late February 2004, five 

months after the fiscal year being reported (FY 2003) had ended. 

Audit Results Are Also Improving 

Throughout the process of implementing accelerated financial reporting, the number of “clean” 

audit opinions has remained stable. This year, 18 Federal agencies received clean audit opinions 

by November 15. One additional agency’s auditor subsequently reissued its audit opinion as 

unqualified in mid-December to bring the total unqualified opinions to 19. 

Three agencies improved their audit results over last year (Department of Justice, Department of 

Housing and Urban Development, and the Small Business Administration) after successfully 

implementing corrective actions to resolve previous year’s issues. Two agencies’ audit results 

Federal Financial Management Report (2006) 1 
declined relative to last year (the Department of Energy and the General Services 

Administration) and both have active efforts underway to address the reasons for the decline. 

Agencies also reduced the total number of auditor-reported material weaknesses from FY 2004 

to FY 2005 (from 50 to 48). In addition, while our goal is to eliminate restatements of 

previously issued financial statements, there were fewer in 2005 than in the previous year, and 4 

of the 7 restatements in 2005 either improved the opinion or retained the already clean opinion. 

As processes and internal controls continue to improve, restatements should continue to decline. 

Strengthening Internal Control Remains a Focus Area 

Recognizing the importance of effective internal control within federal agencies, OMB continues 

to emphasize the expectations for management accountability and responsibility in maintaining 

effective internal control. In December 2004, OMB revised Circular A-123, Management’s 

Responsibility for Internal Control (A-123). The revisions to A-123 contained in Appendix A 

provide agencies with a framework for assessing and managing financial reporting risks more 

strategically and effectively. 

Effective in FY 2006, the strengthened management requirements for assessing the effectiveness 

of internal control over financial reporting are being implemented. Appendix A of the A-123 

requires management to undertake a more rigorous assessment process and for agency heads to 

provide a separate management assurance on the internal control over financial reporting. In 

July 2005, OMB worked closely with the Chief Financial Officers Council (CFO Council) to 

issue a step-by-step guide for implementing Appendix A of Circular A-123. Key milestones 

relative to this effort will be incorporated into the Improved Financial Performance initiative 

scorecard under the President’s Management Agenda. OMB will continue to play an active role 

in overseeing A-123 implementation. 

Improper Payments Have Declined 

During fiscal year 2005, the Federal Government made substantial progress in meeting the 

President’s goal to eliminate improper payments. Most notably the government-wide improper 

payments total reported last year decreased by approximately $7.8 billion, due to dramatic 

improvements implemented by HHS in the stewardship of Medicare funds. In addition, agencies 

demonstrated improved error detection and measurement, providing improper payment data on 

programs for which no improper payment statistics had been available in the past. 

Much of the success achieved in the past year can be attributed to the PMA initiative to eliminate 

improper payments, which established an effective accountability framework for ensuring that 

Federal agencies initiate all necessary financial management improvements for addressing this 

critical problem area. With agencies working to deploy more innovative and sophisticated 

approaches for addressing improper payments, the prospects for additional and significant 

improper payment reductions in the coming years are promising. The CFO Council continues to 

play a critical role in these efforts by ensuring that agency best practices, such as those employed 

by HHS in the Medicare Program, are disseminated and utilized at other agencies. 

2 Federal Financial Management Report (2006) 
Moving Forward 

The Federal financial management community has made great progress in the 15 years since the 

CFO Act became law. The PMA has built upon this progress by setting a clear direction for 

further improvements in financial management. The PMA set aggressive goals and raised the 

bar for demonstrating accountability and achieving financial management results, based on 

consistent success criteria and persistent measurement of progress and benefits. 

The PMA will continue to guide our activities in the coming year. Our financial management 

focus areas continue to include: sustaining clean and timely audited financial statements, 

reducing the number of material weaknesses, strengthening internal control, reducing improper 

payments, improving real property management, and routinely using timely and accurate 

financial information to make management decisions. 

OMB will continue to aggressively monitor agency financial management plans and progress. 

Our policies will continue to set a high standard for financial accountability, transparency, and 

results. 

 

 Linda M. Combs 

 Controller 

Federal Financial Management Report (2006) 3 
Office of Federal Financial Management 

OMB’s Office of Federal Financial Management (OFFM) – headed by the OMB Controller and 

under the direction of the OMB Deputy Director for Management – is responsible for the 

financial management policy of the Federal Government. OFFM’s specific responsibilities 

include implementing the financial management improvement priorities of the President, 

establishing government-wide financial management policies of executive agencies, and carrying 

out the financial management functions of the CFO Act. In short, the mission of OFFM is to 

promote and support first class financial management in the executive branch of the Federal 

Government. 

OFFM is structured to address financial management issues, and includes subject matter experts 

to provide leadership across its areas of responsibility. OFFM is comprised of three separate 

issues-oriented branches with the following objectives: 

• Financial Standards and Grants Branch – develops financial management policies 

for Federal agencies and grant recipients; facilitates the development of timely, 

accurate and useful financial information to support management decisions; and 

ensures accountability and effective customer service for Federal grants programs. 

• Financial Integrity and Analysis Branch – ensures that Federal financial programs 

are measuring and achieving intended results, eliminating inefficiencies and 

improprieties, and managing their financial activities in accordance with superior 

practices. 

• Federal Financial Systems Branch – ensures that the government-wide Federal 

financial management systems architecture is producing the information needed to 

support first class financial management. 

Each OFFM branch works directly with agency Chief Financial Officers (CFOs) and Inspectors 

General (IGs), as well as the CFO Council, to provide guidance to agencies in relevant areas of 

financial management. 

4 Federal Financial Management Report (2006) 
Improving Financial Reporting 

The President’s Management Agenda (PMA) was launched early in the Bush Administration to 

address specific deficiencies and problems in the Federal Government’s management practices. 

One of the five government-wide PMA initiatives is Improved Financial Performance. This 

initiative in part directs agencies to produce more timely and reliable financial information, 

improve the integrity of their financial activities, and have sound and dependable financial 

systems. 

Under the PMA’s Improved Financial Performance initiatives, agency Chief Financial Officers 

(CFOs) share responsibility – both individually and through the efforts of the CFO Council – for 

improving the financial performance of the government. It is through this initiative, in 

conjunction with the other government-wide and program initiatives of the PMA, that the 

government is improving its financial reporting practices. 

Achieving Accountability – FY 2005 Financial Results 

Every major Federal agency completed its Performance and Accountability Report (PAR)1 by 

November 15, the first time every CFO Act agency met the accelerated reporting deadline. This 

deadline was set by OMB in 2001 and effective beginning in fiscal year 2004. By comparison, 

the comparable requirement for private-sector financial reports is 75 days after the year’s end. 

Accelerated reporting has shifted the paradigm from one of heroic year-end effort to a more 

disciplined approach throughout the year. 

This year, 19 Federal agencies received “clean” audit opinions. Three agencies improved their 

audit results over last year (the Department of Justice, Department of Housing and Urban 

Development, and the Small Business Administration) after successfully implementing 

corrective actions to resolve previous year’s issues. Two agencies’ audit results declined relative 

to last year (Department of Energy and the General Services Administration) and both have 

active efforts underway to address the reasons for the decline. 

In addition to the CFO Act agencies, agencies subject to the Accountability of Tax Dollars Act 

(ATDA) also worked to issue their audited financial statements by November 15. Last year was 

the first year that many of these 75 ATDA agencies were required to produce audited financial 

statements. For FY 2005, 36 met the accelerated deadline, 33% more than last year. (Please see 

Appendix D for additional information.) By the end of December 2005, 48 ATDA agencies had 

submitted audited financial statements to OMB. Also noteworthy is that nearly 80% of the 

government corporations, which have a September 30 year end, met the November 15 deadline. 

This is over twice the number of government corporations that met the timeline compared to last 

 

1

Agencies subject to the Chief Financial Officers Act and the Accountability of Tax Dollars Act must submit an annual PAR, 

which contains important information about the financial condition and operations of the agency, including an auditor’s opinion

on the agency’s financial statements. Information provided in the PAR supports agency management and accountability for the 

taxpayers money, and enables the public and Congress to assess the performance of an agency relative to its mission and 

activities. 

Federal Financial Management Report (2006) 5 
year. OMB has made the November 15 reporting deadline (or 45 days after the fiscal year end if 

other than September 30) mandatory for government corporations beginning in fiscal year 2006. 

Despite the accelerated reporting time frame, 18 of the 24 major Federal agencies received 

unqualified audit opinions by the reporting deadline in FY 2005. (Appendix A contains the 

summary of FY 2005 agency financial statement results.) Five agencies – the Departments of 

Defense, Energy, Homeland Security, General Services Administration, and the National 

Aeronautics and Space Administration – received disclaimers on their statements. One agency – 

the Department of State – initially received a qualified opinion, but it was subsequently reissued 

in December as unqualified, bringing the total to 19 unqualified opinions. Noteworthy progress 

was made by the Department of Justice and Department of Housing and Urban Development 

whose audit opinions improved from disclaimers to unqualified opinions for FY 2005. In 

addition the Small Business Administration’s audit opinion improved to an unqualified opinion 

in FY 2005 from a qualified opinion the prior year. 

Reducing Material Weaknesses 

In FY 2005, agencies also continued to work to fully achieve the President’s goal of Improved 

Financial Performance by reducing their material weaknesses. These material weaknesses 

include those that are auditor-reported, as well as those pursuant to Sections 2 and 4 of the 

Federal Managers’ Financial Integrity Act (FMFIA) of 1982. (Appendix B of this report 

provides the number of auditor-reported material weaknesses, as well as the number of FMFIA 

internal control weaknesses and systems nonconformances.) Auditor-reported material 

weaknesses are those instances identified during a financial statement audit in which the internal 

control of an organization does not properly mitigate the risk of a material misstatement on the 

financial statements. Material weaknesses pursuant to FMFIA are those instances identified by 

management (rather than by an auditor) in which the internal control of the organization is not 

properly mitigating the risk of not meeting its objectives in programmatic operations, financial 

reporting, or compliance with applicable laws and regulations. 

Material internal control weaknesses are reported by independent auditors as part of the annual 

financial statement audit process. Across the government in FY 2005, a total of 11 new 

weaknesses were reported while 13 weaknesses were reported as resolved or consolidated – a net 

decrease of two weaknesses from FY 2004. The majority of new weaknesses were related to 

financial management and reporting. As agencies focus more on internal control, as directed by 

the revised Circular A-123, the initial result could be an increase in the number of internal 

control weaknesses identified, although over time internal control weaknesses should be reduced. 

In FY 2005, the overall majority of the auditor-reported weaknesses were related to: deficiencies 

in financial management and reporting; financial systems and security; and property, plant, and 

equipment. The following chart shows the distribution of the auditor material weaknesses by 

category: 

6 Federal Financial Management Report (2006) 
FY 2005 Auditor Material Weaknesses By Category

34%

17% 19%

4%

10%

4%

6% 2% 4% Financial Management and Repo rting

Financial Sys tems and Security

P ro perty, P lant, and Equipment

Intra-go vernmental Reco nciliatio n

Acco unts P ayable and Other Liabilities

Credit Refo rm

Fund Balance with Treas ury

Grants Management

Budgetary Repo rting

In FY 2005, the Department of Interior made noteworthy improvement by resolving two auditorreported material weaknesses while reporting no new weaknesses from its auditors. In total, the 

Department of Interior has reduced auditor reported material weaknesses by nine (net) since the 

beginning of FY 2001. 

Agency progress to correct internal control weaknesses is monitored on a quarterly basis as part 

of the PMA scorecard, as agencies must not have any material internal control weaknesses in 

order to achieve “green” status. This fiscal year, additional emphasis will be placed on 

preventing new weaknesses from surfacing. OMB is working closely with the agencies to assist 

them in developing detailed corrective actions plans to reduce existing material weaknesses and 

to prevent new ones. 

In accordance with FMFIA, OMB also requires the head of each executive agency to report 

annually on whether there exists reasonable assurance that the agency’s internal controls are 

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

conform to government-wide requirements. The head of each agency is required to identify 

material weaknesses related to agency programs and operations pursuant to Section 2 of FMFIA, 

as well as nonconformances with government-wide financial systems requirements pursuant to 

Section 4 of FMFIA. 

In FY 2005, ten agencies provided assurance that the management controls were adequate and 

thus reported no material weaknesses under FMFIA section 2. The most progress in resolving 

FMFIA material weaknesses (Section 2) was achieved by the Department of Defense, with a net 

reduction of 13. 

Federal Financial Management Report (2006) 7 
FMFIA Issues Identified by Agency Heads

Section 2 

(Internal Control Weaknesses) 

Section 4 

(Systems Nonconformances) 

Beginning FY 2004 89 21

New 33 5

Resolved 36 10

Consolidated 0 0

Reassessed 3 1

Beginning FY 2005 83 15

New 20 6

Resolved 33 5

Consolidated 1 0

Reassessed 1 0

Ending FY 2005 68 16

As shown above, the overall number of agency-identified FMFIA internal control weaknesses 

and systems nonconformances decreased by nearly 14% in FY 2005 compared to 11% FY 2004. 

8 Federal Financial Management Report (2006) 
Financial Management Improvement Initiatives 

During FY 2005, the Administration continued its efforts to improve the financial management 

of the Federal Government through several different focused initiatives. 

Strengthening Internal Controls 

OMB recognizes the importance of effective internal control within Federal agencies and will 

continue to be clear about our expectations for management accountability and responsibility in 

maintaining effective internal control. OMB Circular A-123, Management’s Responsibility for 

Internal Control (A-123) defines Federal agencies’ internal control responsibilities. The recent 

revisions to this circular provide agencies with a framework for assessing and managing 

financial reporting risks more strategically and effectively. Appendix A of the circular requires 

management to undertake a strengthened assessment process and prepare a separate management 

assurance on the internal control over financial reporting. The strengthened process requires 

management to document and test the controls over financial reporting, similar to the process 

that public corporations must follow under the Sarbanes-Oxley Act. Beginning in FY2006, these 

strengthened management requirements for assessing the effectiveness of internal control over 

financial reporting will be implemented. 

To better assist the agencies in implementing the new requirements of A-123, OMB and the CFO 

Council have collaborated on a host of additional guidance. In July 2005, the CFO Council 

produced a step-by-step technical implementation guide to Appendix A of the A-123 circular. 

Concurrent with the release of the implementation guide, OMB issued additional technical 

guidance in the form of “Frequently Asked Questions” to provide more insight into the revisions 

of the Circular. These new tools are available on the OMB website. 

(www.whitehouse.gov/financial/fin_report.html) 

OMB also required agencies to submit agency-specific implementation plans by August 31, 

2005. Agencies are also completing risk assessments, identifying key processes and controls, 

and testing these controls to determine their effectiveness. This effort will culminate in the 

agencies’ first management assurance statement for internal control over financial reporting as of 

June 30, 2006. Key milestones from the agency-specific plans will also be incorporated into the 

Improved Financial Performance initiative of the PMA scorecard to ensure agencies are held 

accountable for meeting their internal control assessment and improvement goals.

FMLOB: Achieving Standardization and Efficiencies 

Improving the investments of agencies in financial management systems is one of the President’s 

top management priorities. Critical first steps were taken to meet this challenge by developing a 

common set of core financial system requirements and by creating a software certification 

process that independently tests those requirements. Consequently, most major agencies have 

purchased certified commercial-off-the-shelf financial management systems and many have 

completed their implementation. 

Federal Financial Management Report (2006) 9 
 

An additional step in meeting the financial management systems challenge was taken with the 

inauguration of the Financial Management Line of Business (FMLOB) initiative in FY 2004. 

The FMLOB established the “Centers of Excellence” concept, which provided for crossservicing of multiple financial systems, achieving cost and quality economies and providing a 

competitive alternative to more expensive stand-alone solutions. 

Centers of Excellence may be operated by public agencies, private firms, or a mix of 

public/private partnerships. A small number of agencies were selected in fiscal year 2005 to 

operate as Centers of Excellence. Currently, several other agencies have begun migrating to 

Centers of Excellence. 

 

In addition, OMB and the CFO Council are working together to disseminate best practices on 

financial system implementations. Through forums and other means, the Federal financial 

community is working to ensure that mistakes of the past are not repeated and that agencies 

initiating complex modernization efforts have a clear understanding of significant risks and 

appropriate mitigation strategies. 

Full Implementation of Federal Financial Management Improvement Act 

In FY 2005, OMB continued to work to ensure full and thorough implementation of the Federal 

Financial Management Improvement Act (FFMIA) of 1996. Such full implementation is an 

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

financial information. 

In general, the implementation of FFMIA builds upon the foundation originally laid by the CFO 

Act. Specifically, FFMIA requires CFO Act agencies to apply and maintain financial 

management systems that substantially comply with: (1) federal financial management systems 

requirements; (2) applicable federal accounting standards; and (3) the United Stated Standard 

General Ledger at the transaction level. FFMIA also requires both the agency head and the 

auditor to state whether the agency’s financial management systems comply with FFMIA’s 

system requirements. 

Despite 19 CFO Act agencies achieving unqualified audit opinions in FY 2005, many continue 

to use financial management systems that are not integrated and produce data that is not standard 

or timely. While many agencies continue to make progress in implementing FFMIA, significant 

work remains. 

 

OMB efforts for full FFMIA implementation include oversight of agencies’ financial statement 

audits, as well as incorporating FFMIA requirements into the PMA’s financial management 

performance goals. This balanced, yet robust, approach blends the rigors of the audit process 

with substantive goals agreed to by both OMB and agency management. Further oversight of the 

deployment of agencies’ financial management systems, combined with the disciplined 

processes inherent in the PMA and the Financial Management Line of Business initiative, will 

help lead to more complete FFMIA implementation and thereby enhance the government’s 

overall performance. 

10 Federal Financial Management Report (2006) 
Status of the Debt Collection Improvement Act of 1996 

The Debt Collection Improvement Act of 1996 (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. 

 

The agency annual report submissions address each agency’s current and ongoing 

responsibilities under the debt collection provisions of the Debt Collection Act of 1982 as 

amended by DCIA and OMB Circular No. A-129 Policies for Federal Credit Programs and 

Non-Tax Receivables. 

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

centralizing the management of delinquent obligations overdue by 180 days 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, resolve the outstanding debt through a 

variety of options, including referring the debt to the Department of Justice for litigation and, 

Department of the Treasury for administrative offset and cross-servicing. 

OMB has received annual report submissions from the 24 CFO Act agencies. The submissions, 

which were due December 31, 2004 and included follow up submissions, provided OMB with 

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

current policies; (3) actions taken by agencies to comply with DCIA and A-129; (4) the status of 

debt subject to litigation, and (5) intended action to improve debt collection policies and 

practices. All agencies appear to be making a significant effort to comply with DCIA and A129 and improve their debt collection processes. 

All agencies reported that they have internal policies and procedures in place to address debt 

collection and provided an overview of their policies, citations for internal policy, or statutory 

citations. Several agencies have updated their internal policies and procedures to ensure 

compliance with DCIA, A-129, or the Federal Claims Collections Standards (FCCS) as a result 

of their internal reviews of existing processes. Agencies that have updated their policies and 

procedures include USDA, DoD, EPA, GSA, NASA, SSA, State, and VA. A number of 

agencies have reported that they are still working to come into compliance with specific aspects 

of DCIA, A-129, or the FCCS. For example, the Food and Safety Inspection Service at USDA is 

working for a system solution to generate form 1099C to replace manual reporting. Also, the 

Justice Management Division and the Executive Office of United States Trustees (EOUST) at 

the Department of Justice are working to ensure that interest and penalties are properly assessed 

on past due receivables held by EOUST. Additionally, DHS bureaus have established debt 

management policies that DHS indicates are consistent with the DCIA, A-129, and FCCS 

requirements. DHS is currently working to establish department-wide debt management policies 

to ensure consistency in application across DHS. In all instances, the agencies have stated that 

corrective action is underway to ensure compliance. 

Federal Financial Management Report (2006) 11 
Overall, agencies reported that the debt collection policies currently in place are applied 

consistently. In the limited instances where an agency reported that internal policy was not 

consistently applied, the inconsistency was limited to a bureau within the agency. Agencies will 

also be placing continued emphasis on improving the reporting of closed-out /discharged debt to 

the IRS on Form 1099-C and assuring the reporting balances with the agency Treasury Report on 

Receivables (TROR) submission. 

 

OMB continues to work with the agencies as well as the Financial Management Services’ Debt 

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

compliance with the DCIA. Agencies continue to improve their internal policies and procedures, 

address any known deficiencies, consistently apply policies and accurately report closedout/discharged debt. 

OMB is pleased to report that overall agencies have in place strong policies and procedures 

consistent with the requirements of DCIA and A-129, and agencies continue to strive to improve 

their debt collection efforts. As improved debt collection yields significant and measurable 

savings for the taxpayer, OMB plans to continually evaluate opportunities to strengthen agency 

and government-wide performance in this critical area of financial management. 

Strengthening Asset Management 

 

Strengthening the management of the Federal Government’s assets has been an important 

objective of this Administration. According to its FY 2005 financial statements, the Federal 

Government owns approximately $680 billion in Property, Plant, and Equipment (PP&E). 

The government also holds title to approximately one in every four acres of the United States’ 

entire land mass. It owns sites and structures, monuments, memorials, cemeteries, as well as the 

items in its museums and libraries, including major works of art and historical documents. The 

Administration continues to expect its assets be accounted for, and that 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, who is held accountable for 

the effective management of agency real properties. 

 

The Executive Order also created an interagency Federal Real Property Council (FRPC) to 

develop guidance, serve as a clearinghouse for best practices, and facilitate the efforts of the 

agency senior real property officers. One of the first orders of business of the FRPC was to 

establish 10 Guiding Principles that are used in governing the work of the four established 

Committees to implement Government-wide rightsizing of the Federal Real Property portfolio. 

The committees met throughout FY 2005 to further refine their guidance and responsibilities 

under the real property initiative to ensure that by early 2006, all appropriate agencies have 

consistent Asset Management Plans to coordinate their real property rightsizing efforts, have 

reported constructed asset level information into the Federal Real Property Profile, and have 

12 Federal Financial Management Report (2006) 
developed a three year implementation timeline to execute their real property portfolio change 

management as well as track progress against specific performance measures. 

 

The Administration is also continuing its monitoring effort of the Federal Real Property Asset 

Management initiative by tracking agency implementation and progress through the President’s 

Management Agenda. In February of 2004, a new Federal Real Property Asset Management 

initiative was added to the scorecard of the largest Federal landholding agencies. The agencies 

were given a “score” on the status and progress of their real property management improvement 

efforts on the quarterly PMA scorecard beginning in third quarter of 2004 and were scored on the 

initiative throughout 2005. Agencies have shown significant progress toward improving their 

status scores in 2005, demonstrating that agencies are putting the necessary tools in place to 

right-size their real property inventories. 

 

Over the next several years, it is the goal of this Administration for all major agencies to develop 

and implement effective asset management plans. Agencies and the FRPC will continue to work 

toward the development of a comprehensive and descriptive database of all Federal real 

properties and the appropriately identified performance measures. The asset management plans, 

database, and performance measures will assist agency management in making informed 

decisions about what properties are needed, are being utilized effectively, or qualify for disposal. 

And, through the PMA, the Administration will continue to hold agencies accountable to use 

improved planning and data gathering to implement specific rightsizing activities that will reduce 

surplus assets, improve the condition of mission critical assets, and ensure that assets are 

managed at the right cost. 

 

Improving Payment Accuracy & Recovery Auditing

During fiscal year 2005, the Federal Government made substantial progress in meeting the 

President’s goal to eliminate improper payments. Most notably the government-wide improper 

payments total reported last year decreased by approximately $7.8 billion, with the FY 2005 total 

estimated at $37.3 billion for the programs that reported measurements last year. This decrease 

represents nearly a 17% drop from the totals reported in FY 2004. The largest portion of this 

dramatic decrease was a result of advances in the Medicare program, which reduced the 

improper payment dollars from $21.7 billion to $12.1 billion through strengthened due diligence 

that ensured the necessary documentation was in place to support payment claims. 

Other highlights from FY 2005 include: 

• Food Stamps – The Department of Agriculture reported an error rate of less than 6%, the 

lowest error rate in the history of the program. 

• Unemployment Insurance – The Department of Labor reduced improper payments in this 

large State-administered program by $600 million. 

• Public Housing/Rental Assistance – The Department of Housing and Urban Development 

continued the steady decline of improper payments in this program, reducing improper 

payments by an additional $200 million as reported in their FY 2005 PAR. 

Federal Financial Management Report (2006) 13 
Much of the success achieved in the past year can be attributed to the PMA initiative to eliminate 

improper payments, which established an effective accountability framework for ensuring that 

Federal agencies initiate all necessary financial management improvements for addressing this 

critical problem area. The CFO Council continues to provide critical support to agencies in their 

efforts to eliminate improper payments by disseminating best practices, sponsoring partnerships 

with state and local governments, and ensuring that agencies have access to information on 

innovative and sophisticated approaches taken in the commercial sector. 

Federal agencies also made advances in recovering improper payments made to vendors. 

Notable accomplishments from FY 2005 include: 

• DFAS-Internal Review maintains a post-payment process that reviews commercial 

payments within 180 days of disbursement. In FY 2003 this process identified $122 

million in duplicate payments, of which $119 million has been recovered. Of $40 million 

identified in FY 2004, $30 million has been recovered. 

• DOD’s internal review of agency-wide commercial payments identified $469.5 million 

for recovery, of which $414.9 million has been successfully recaptured. Through its 

recovery auditor, an additional $1.9 million was identified as paid improperly—100% of 

this amount has been recovered. 

• TRICARE Management Activity (DOD) recovered approximately $1.6 million in 

hospital costs for which the institutions failed to submit amended cost reports. 

• Of the $10.6 million in overpayments identified by the Department of Energy during FY 

2005, only a fraction of a percent was deemed unrecoverable. 

• Immigration and Customs Enforcement, under the Department of Homeland Security, has 

recovered $1.2 million (more than 50%) of the $2.2 million identified. The Department 

anticipates recovering most of the amount identified in the near term. 

• The Department of Justice has recovered $765 thousand out of the $1 million identified 

as improperly paid to contractors this year. Approximately $1 million in additional funds 

has been recovered from amounts identified in prior years. 

Strengthening Control over Federal Charge Cards 

The Federal Government sponsors more than 2.5 million credit cards to use in purchasing goods 

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

transactions represent $24 billion dollars spent through the use of purchase, fleet and travel 

cards, with nearly $17 billion spent in the purchase card program alone in FY 2005. These 

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

administrative savings, refunds earned, and streamlined processes. 

14 Federal Financial Management Report (2006) 
Evidence of agency progress in improving the management of Federal charge card programs is 

captured through the CFO Council’s Metric Tracking System. As of August 2005, 16 of 24 

agencies achieved green status for eliminating payment delinquencies in individually-billed 

travel cards, 18 agencies achieved green status for centrally-billed travel cards, and 16 agencies 

achieved green status for purchase cards. In addition, the average government-wide delinquency 

rate for individually billed travel accounts is below 3% through September 30, 2005. This 

achievement ranks the Federal government as good as or better than the private sector for these 

types of charge accounts. 

OMB issued new, consolidated guidance as Appendix B to OMB Circular A-123, Management’s 

Responsibility for Internal Control on August 5, 2005. These new requirements will help ensure 

that agencies take the necessary steps to further mitigate the risks of misuse, delinquency, and 

other forms of waste and abuse. For example, the new guidance mandates split disbursement and 

salary offset in all travel card programs, and establishes new rules for strategic sourcing and 

credit worthiness. 

Federal Financial Management Report (2006) 15 
The Chief Financial Officers Council 

The Chief Financial Officers (CFO) Act of 1990 created the CFO Council 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 control, legislation affecting financial operations and 

organizations, and other financial management matters. 

The CFO Council consists of the CFOs and Deputy CFOs of the 24 major Federal departments 

and agencies covered by the CFO Act and is chaired by the OMB Deputy Director for 

Management. Other members include the OMB Controller and the Fiscal Assistant Secretary of 

the Treasury. The CFOs of the Executive Office of the President and the Corporation for 

National and Community Service also participate in the efforts of the CFO Council. 

CFO Act Agencies

• Department of Agriculture 

• Department of Commerce 

• Department of Defense 

• Department of Education 

• Department of Energy 

• Department of Health and Human Services 

• Department of Homeland Security* 

• Department of Housing and Urban Development 

• Department of the Interior 

• Department of Justice 

• Department of Labor 

• Department of State 

• Department of Transportation 

• Department of the Treasury 

• Department of Veterans Affairs 

• Agency for International Development 

• Environmental Protection Agency 

• General Services Administration 

• National Aeronautics and Space Administration 

• National Science Foundation 

• Nuclear Regulatory Commission 

• Office of Personnel Management 

• Small Business Administration 

• Social Security Administration 

* The Department of Homeland Security became a CFO Act agency under P.L. 108-330, which was enacted on 

October 4, 2004. 

16 Federal Financial Management Report (2006) 
CFO Council Committees 

The CFO Council accomplishes its goals through its committee structure, which was recently 

restructured to better align with emerging issues and the needs of the federal financial 

community. In general, the committees serve to reinforce the President’s Management Agenda 

and to assist the agency CFOs. One former committee, the Best Practices Committee, is no 

longer operating as a separate committee because its primary objective of exposing the CFOs to 

new ideas and strategies from “best practice” organizations and industry has been incorporated 

into the overall operation of the Council. 

The following is a description of each committee, its recent accomplishments, and its plans for 

the future. Please note that a new committee – the Grants Policy Committee – was recently 

created to oversee the implementation of Public Law 106-107 (grants streamlining) and to work 

closely with the Grants Executive Board which oversees the Grants.gov and the Grants 

Management Line of Business E-Gov initiatives. 

Financial Management Policies and Practices 

Chair: Vacant 

Since its inception in early FY 2004, the Financial Management Policies and Practices 

Committee (the Committee) has been comprised of representatives from Federal agencies who 

work collaboratively to identify and address emerging issues to improve financial management 

in the Federal Government. 

The committee is structured around three subject areas: 

• Financial Policy – to address emerging issues that will ultimately improve financial 

management and reporting in the Federal Government. 

• Accounting Standards – to ensure CFO Council participation in the standard setting 

process by providing viewpoints on proposed Federal Accounting Standards 

Advisory Board (FASAB) Standards, Interpretations, Technical Bulletins, 

Technical Releases or Concepts. 

 

• Internal Control – to ensure coordination and consistency among internal control 

policies promulgated for executive departments and agencies. 

The committee worked jointly with OMB to review existing internal control reporting, identify 

necessary changes, and redraft OMB Circular A-123, Management’s Responsibility for Internal 

Control. The revisions, issued December 2004 significantly improved the Federal Government’s 

ability to verify that effective control is in place. In addition, the committee and OMB jointly 

prepared an Implementation Guide released in July 2005. OMB has provided extensive outreach 

Federal Financial Management Report (2006) 17 
training to communicate changes to agencies and contractors. OMB also fostered agency forums 

in order to share implementation ideas. 

The committee established a separate subcommittee whose purpose was to revise and update 

OMB’s Circular A-136 Financial Accounting Requirements, first released in December 2004. 

The subcommittee’s first revision in August 2005 incorporated OMB Bulletin 01-09 Form and 

Content of Agency Financial Statements and other updates and changes. The subcommittee will 

continuously revise A-136 annually with new accounting standards and other significant policy 

changes to improve the quality of the Performance and Accountability Report (PAR). One of the 

subcommittee’s top priorities is to look for ways to better communicate financial results to the 

users of the PAR (i.e., OMB, GAO, the public, Congress, etc.). 

Over the next five years, the Committee will continue to: 

• Identify and address emerging issues in financial management and reporting; 

• Participate actively in the accounting standard-setting process; and 

• Monitor implementation of the new A-123 requirements for providing assurance 

over financial controls. 

Financial Reporting Acceleration 

Chair: Donald Hammond, Fiscal Assistant Secretary, Department of the Treasury 

The Financial Reporting Acceleration Committee was established as a result of the 

Administration’s initiative to accelerate agency and government-wide financial reporting to 

November 15 and December 15, respectively. The specific purpose of the committee is to help 

agencies identify and eliminate common barriers to meeting these deadlines. Fiscal year 2005 

was the fourth year of operation for this committee. 

Building on the success experienced with the FY 2004 reports, the committee’s emphasis this 

past year was to focus attention on key common challenges that were highlighted during the FY 

2004 process to facilitate further progress for FY 2005 reporting. The committee continued its 

focus on taking a broad perspective of financial reporting recognizing that improving data and 

business processes is at the heart of supporting more timely and useful financial reporting. 

The FY 2005 results indicate the committee has essentially accomplished its primary objective. 

All 24 CFO Act agencies completed their financial statements no later than November 15 and the 

government-wide financial report was issued on December 15. 

During FY 2005, the committee initiated two projects: (i) recommendations for streamlining the 

array of agency reporting requirements, and (ii) recommendations for modification of the 

intragovernmental business rules to support more efficient agency reporting and 

intragovernmental balance consolidation. Each of these areas were selected after extensive 

discussion as the two key areas that could increase the efficiency of agency reporting, enhance 

data quality and consistency and provide the most opportunity for recurring benefit. 

18 Federal Financial Management Report (2006) 
Recognizing the significance of each of these efforts, two subcommittees were organized. Each 

subcommittee undertook independent efforts to analyze their respective areas and develop 

recommendations. These were open processes that sought input and participation from across 

the government financial management community. By the end of the year, the committee had 

reached agreement on proposed directions and recommendations for each project and had 

distributed these to the full CFO Council for comment. 

FY 2006 will be the final year for the Financial Reporting Acceleration Committee. The 

committee will finalize the reports described above and present them to OMB and Treasury for 

their consideration and further action. Additionally, the committee will frame issues for the CFO 

Council to consider on the future of financial reporting. This last item will be available to serve 

as a reference for policy makers to consider as they determine the next steps in advancing the 

government’s financial reporting and financial management to being truly effective and useful. 

Financial Systems Integration 

Chair: Samuel T. Mok, Chief Financial Officer, Department of Labor 

The Financial Systems Integration Committee addresses interagency financial management 

standards and issues as part of the broader effort to meet the President’s goals for improved 

financial management. 

During the past year, the committee continued to examine how information technology can be 

leveraged to more effectively and efficiently deliver financial services. By working with the 

broader CFO community to develop best practices and by actively participating in key financial 

management initiatives, the committee plays a leadership role in steering the Government’s 

financial management future. 

For example, the committee took an active role in promoting the Financial Management Line of 

Business (FMLOB) initiative. The FMLOB initiative seeks to eliminate redundant investments 

across agency lines and take advantage of the enormous economies of scale that exist in the 

public sector. Standardizing service delivery and developing more efficient reporting will 

achieve substantial cost savings and strengthen internal control. The FMLOB initiative seeks to 

achieve these goals through the development of “Centers of Excellence” hosted by the public and 

private sectors. Through consolidation and standardization of processes and services, COEs will 

meet the Government’s financial services needs. 

The committee continues to promote implementation of numerous e-Government initiatives, 

including e-Gov Travel and e-Payroll, as well as explore the use of better technology 

frameworks to enhance agencies’ ability to accurately capture, analyze, and report growing 

volumes of financial information to stakeholders. As part of this effort, the committee reviews 

and provides guidance on requirements for core financial management systems and testing of 

systems. 

Federal Financial Management Report (2006) 19 
Through improved interaction between agencies’ financial management systems and enhanced 

use of information technology, the committee’s work will achieve a better-managed and more 

accountable Federal government. 

Grants Policy 

Co-Chair: Thomas Cooley, Director, Office of Budget, Finance and Award Management and 

Chief Financial Officer, National Science Foundation 

Co-Chair: Susan J. Grant, Chief Financial Officer, Department of Energy 

The Grants Policy Committee was established in the second quarter of FY 2005, to oversee and 

coordinate the implementation of the grants streamlining efforts mandated by the Federal 

Financial Assistance Management Improvement Act of 1999 (Public Law 106-107). This 

Committee was created under the Executive Leadership of the Chief Financial Officer’s Council 

to coordinate proposals resulting from grants streamlining initiatives, serve as a decision-making 

body for grant policies, and provide policy directives for E-Gov technical solutions. The Grants 

Policy Committee works closely with the Grants Executive Board, which oversees the activities 

of Grants.gov and the Grants Management Line of Business E-Gov initiatives. 

The Committee recommends government-wide policies needed to implement the vision of P.L. 

106-107. That vision includes:

• One place for all grants administration policies - Title 2 Code of Federal Regulations 

• One Catalog with all assistance programs listed - program registration in the Catalog of 

Federal Domestic Assistance (CFDA) required

• One announcement format of assistance opportunities - Standard format and synopses are 

available electronically

• One electronic portal for grantees:

o To register (CCR; profiles; certifications and assurances)

o To search (FIND; links to full announcements; links to CFDA)

o To apply (APPLY; using government-wide standard data sets)

During FY 2005, the GPC undertook extensive planning and reorganization activities, such as 

activating two work groups, developing an organizational chart to ensure effective and 

appropriate representation by agencies on work groups and/or teams, and establishing a baseline 

plan of tasks, milestones, and schedules. The Committee is well positioned to support the goals 

of P.L. 106-107 in FY 2006. 

20 Federal Financial Management Report (2006) 
Improper Payments 

Chair: Clarence Crawford, Associate Director for Management and Chief Financial Officer, 

Office of Personnel Management 

Initially chartered in November of 2001, the Improper Payments Committee continues to assist 

agencies in identifying and reducing improper payments within their programs and activities. In 

its efforts, the committee works closely with the Inspector General (IG) community through the 

Improper Payments Joint Working Group. 

In FY 2005, the second full year that agencies were required to report their compliance with the 

recently-enacted Improper Payments Information Act (IPIA) of 2002, the Committee served as a 

venue for assisting the agencies to develop new and innovative strategies for detecting and 

eliminating improper payments. As part of this effort, the Committee sponsored a series of 

“Industry Days” intended to inform agencies on solutions available in the commercial sector. In 

addition, the Committee has established new Federal-State partnerships, where efforts are 

focused on developing solutions for addressing improper payments in state-administered grant 

programs. 

These efforts are yielding significant benefits as evidence by the dramatic decreases in the 

government-wide improper payment total and the establishment of error measurements in 

programs where no data had been available in the past. 

Performance Measurement 

Chair: Kathleen Turco, Acting Deputy Administrator and Chief Financial Officer, General 

Services Administration 

The Performance Measurement Committee’s objective is to establish a performance 

measurement system based on key financial management indicators so that government 

managers, Congress, and other stakeholders can assess the financial management health of both 

the Federal Government as a whole and each individual agency. To achieve this goal, the 

committee is working to develop and refine: (i) a series of baseline and target financial metrics; 

(ii) a rigorous, consistent, and systematic agency reporting process; and (iii) a centralized 

system/database where data and results can be readily viewed by interested parties. 

Although officially formed in FY 2004, members of the CFO Council began working on a 

financial performance measurement system as early as FY 2002. In December 2004, the 

Performance Measurement Committee publicly reported nine financial management indicators. 

Using the metric web portal, managers and other interested parties have a tool for assessing 

Federal financial performance. For example, one can see how agencies are meeting goals to 

reduce unreconciled balances, reduce delinquent accounts receivables, increase the use of 

electronic payments, and reduce travel and purchase card delinquencies. Having the means to 

track performance on indicators such as these help to guide financial management reforms and 

target resources to areas where better stewardship of federal financial resources is truly needed. 

Federal Financial Management Report (2006) 21 
Since last December, the Committee has been conducting a consistency assessment of agency 

reporting to ensure the validity and reliability of data and completing the definition of additional 

metrics and targets for public reporting. This fiscal year, the committee is well positioned to 

build on these accomplishments including reporting new measures and enhancing the existing 

reporting system. 

22 Federal Financial Management Report (2006) 
Future Outlook 

Over the next five fiscal years and beyond, we envision a Federal Government that, as a whole, 

increasingly achieves first class financial management practices. OMB, the CFO Council, and 

the individual agency CFOs are leading the effort to improve the government’s financial 

management for the benefit of the American taxpayer. 

OFFM is positioned to assist agencies in improving their financial management practices, and it 

will continue to work closely with agency CFOs, agency IGs, and the CFO Council to strive 

toward achieving results through improved financial performance and management. 

Each of the three branches of OFFM will continue to oversee efforts to: 

• Achieve unqualified opinions on all agency audited financial statements; 

• Receive the first-ever unqualified opinion on the government-wide audited financial 

statement; 

• Increase the routine use of timely and accurate financial information in day-to-day 

decision making and in operational execution; 

• Reduce both auditor-reported and FMFIA material weaknesses; 

• Identify and eliminate improper payments in agency programs and activities; 

• Increase the number of sound and dependable financial systems; 

• Successfully implement new agency financial management systems where 

appropriate; 

• Strengthen asset management through the work of the Federal Real Property Council 

and agency Senior Real Property Officers; 

• Strengthen control over agency federal credit cards; and 

• Improve the internal control at federal agencies, including a focus on internal control 

training and the improvement of internal control over financial reporting. 

The CFO Council – chaired by the OMB Deputy Director for Management – is also wellpositioned to appropriately address the emerging issues and needs of the Federal financial 

community. Each of the CFO Council committees serves to assist the agency CFOs in key 

financial management issues and initiatives. 

In the next five fiscal years, we expect the CFO Council and its committees to, where 

appropriate, identify issues and projects, provide a forum for discussion, survey agencies, 

develop strategies, share best practices, and make proposals. With regard to federal financial 

management systems, we anticipate the Financial Systems Integration Committee to continue to 

evaluate ways in which agencies, and the government as a whole, can improve systems 

integration and increase systems sharing. We also plan to address the challenge of maintaining a 

capable financial workforce in the federal government through improved recruitment of 

accounting and related disciplines. OFFM and the CFO Council look forward to continued 

efforts toward improved financial management and accountability throughout the Federal 

Government. 

Federal Financial Management Report (2006) 23 
APPENDICES 

24 Federal Financial Management Report (2006) 
Appendix A: 

Summary of FY 2005 Financial Statement Results by 

Agencies and Selected Components

In FY 2005, agencies subject to the CFO Act were required to prepare annual audited financial 

statements. OMB also designates those individual agency components that must prepare audited 

financial statements. 

CFO Act Agencies: FY 2005 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) Unqualified 

Department of Transportation (DOT) Unqualified 

Department of the Treasury (Treasury) Unqualified 

Department of Veterans Affairs (VA) Unqualified 

Agency for International Development (USAID) Unqualified 

Environmental Protection Agency (EPA) Unqualified 

Federal Financial Management Report (2006) 25 
General Services Administration (GSA) Disclaimer 

National Aeronautics and Space Administration (NASA) Disclaimer 

National Science Foundation (NSF) Unqualified 

Nuclear Regulatory Commission (NRC) Unqualified 

Office of Personnel Management (OPM) Unqualified 

Small Business Administration (SBA) Unqualified 

Social Security Administration (SSA) Unqualified 

Agency Components:

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) Unqualified 

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 

* Agency component received an OMB waiver from audit for FY 2005. 

26 Federal Financial Management Report (2006) 
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 Federal Managers’ Financial Integrity Act (FMFIA) of 1982 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 of 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 (2006) 27 
Fiscal Year 2005: 

Auditor-Reported Material Weaknesses 

28 Federal Financial Management Report (2006) 
Fiscal Year 2005: 

Section 2 Reporting in Agency FMFIA Reports 

Yes

Yes, with 

Material 

Weaknesses

No Beginning New Resolved Consolidated Reassessed Ending

Agriculture X 2 1 1

Commerce X 1

Defense X 46 10 22 1

Education X 0

Energy X 0

HHS X 3 1 3

Homeland** X 9 4 1

HUD X 1 1

Interior X 4 1 1

Justice X 1

Labor X 0

State X 0

DOT X 3 1 1

Treasury X 71

VA X 1

AID X 1 1

EPA X 0

GSA X 0 1

NASA X 1

NSF X 0

NRC X 0

OPM X 1 1 1

SBA X 21

SSA X 0

 TOTAL 10 14 0 83 20 33 1 1 68

Number of Material Weaknesses Adequate and Effective 

Management Controls*

2

1

33

0

0

1

12

0

4

1

0

0

3

6

1

0

0

1

1

0

0

1

1

0

*Agency head has provided overall assurance that the agency has adequate and effective management controls, 

except for the material weaknesses identified. 

**In FY 2005 the Department of Homeland Security was required to provide a separate management assurance over 

financial reporting. While it reported an overall qualified assurance (FMFIA Section 2), it provided no assurance 

over financial reporting. The 12 weaknesses reporting in this table reflect all FMFIA Section 2 weaknesses reported 

by the Department. 

Federal Financial Management Report (2006) 29 
Fiscal Year 2005: 

Section 4 Reporting in Agency FMFIA (or Accountability) Reports 

* Agency head has provided overall assurance that the agency has adequate and effective management controls, 

except for the non-conformances identified. 

30 Federal Financial Management Report (2006) 
Appendix C: 

Government Corporations Required to Submit 

Audited Financial Statements to OMB 

Government Corporation FY 2005 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. 

Federal Financial Management Report (2006) 31 
Appendix D: 

 Accountability for Tax Dollars Act Agencies Required to 

Submit Audited Financial Statements to OMB 

 

Agency FY 2005 Opinion

Advisory Council on Historic Preservation Not received 

African Development Fund Unqualified 

Appalachian Regional Commission Unqualified 

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 Unqualified 

Central Intelligence Agency Disclaimer 

Chemical Safety and Hazard Investigation Board Extension1

Commission on Civil Rights Disclaimer 

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 Unqualified 

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 Extension1

Delta Regional Authority Not received 

Denali Commission Extension1

Equal Employment Opportunity Commission Unqualified 

Farm Credit Administration Unqualified 

Farm Credit System Financial Assistance Corporation Not received2

Farm Credit System Insurance Corporation Not received2

Federal Communications Commission Disclaimer 

Federal Election Commission Qualified 

Federal Financial Institutions Examination Council Appraisal Subcommittee Not received 

Federal Housing Finance Board Unqualified 

Federal Labor Relations Authority Unqualified 

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 Unqualified 

Institute of American Indian and Alaska Native Culture and Arts Development Not received 

Institute of Museum and Library Services Extension1

Inter-American Foundation Unqualified 

James Madison Memorial Fellowship Foundation Not received 

Japan-U.S. Friendship Commission Unqualified 

Marine Mammal Commission Unqualified 

1

 Extension not to exceed 60 days. 

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

32 Federal Financial Management Report (2006) 
Agency FY 2005 Opinion

Merit Systems Protection Board Unqualified 

Morris K. Udall Scholarship and Excellence in National Environmental Policy Foundation Unqualified 

National Archives and Records Administration Qualified 

National Capital Planning Commission Not received 

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 Qualified 

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 

Railroad Retirement Board Unqualified 

Securities and Exchange Commission Unqualified 

Selective Service System Unqualified 

Smithsonian Institution Unqualified 

SI/John F. Kennedy Center for the Performing Arts Unqualified 

SI/National Gallery of Arts Not received 

SI/Woodrow Wilson International Center for Scholars Not received 

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 Unqualified 

U.S. International Trade Commission Unqualified 

Vietnam Education Foundation Not received 

White House Commission on the National Moment of Remembrance Extension1

Federal Financial Management Report (2006) 33 
Appendix E: 

Executive Branch Management Scorecard 

The Office of Management and Budget (OMB), in consultation with the agencies, professional 

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

initiative of the President’s Management Agenda. 

Each quarter, OMB grades each agency on its current status, as well as its progress, toward 

meeting the established standards. An agency’s status and progress are rated using the familiar 

stoplight colors of red, yellow, and green. 

The following Executive Branch Management Scorecard shows the Current Status and Progress 

scores on the Improving Financial Performance initiative of the PMA. The fourth quarter 

scorecard provided here presents the agencies’ ratings as of September 30, 2005. These ratings 

were prior to the publication of the fiscal year 2005 audited financial statements. 

34 Federal Financial Management Report (2006) 
 Improved Financial Performance 

Explanation of Current Status Score (as of Quarter 4 FY 2005) 

Agency: 

• Meets all Yellow Standards for Success; 

• Currently produces accurate 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 AntiDeficiency Act Violations; 

• Has no material auditor-reported 

internal control weaknesses; 

• Has no material non-compliance with 

laws or regulations; AND

• Has no 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 

Anti-Deficiency Violations; 

• Has material auditor reported 

internal control weaknesses; 

• Is in material non-compliance with 

laws or regulations; OR

• Has 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 (2006) 35 
FY02 Q2 FY03 Q4 FY04 Q4 FY05 Q3 FY05 Q4 FY02 Q2 FY03 Q4 FY04 Q4 FY05 Q3 FY05 Q4

AGRICULTURE RRRRR GGGGG

COMMERCE RRYGG GGGGG

DEFENSE RRRRR GGYRY

EDUCATION RRGGG GGGGG

ENERGY RYGGG GGGYY

EPA RGGGG YGGGG

HHS RRRRR YGYGG

HOMELAND RRRR GGYY

HUD RRRRR YGYGG

INTERIOR RRRRR YYGYG

JUSTICE RRRRR GGGYY

LABOR YYGGG GGGGG

STATE RRYGG GGGGG

DOT RRRRR GGGGG

TREASURY RRRRR YYYYY

VA RRRRR GGRYY

AID RRRRR YGGGG

Corps of Eng RRRRR YYYYY

GSA YYRRG GGGGG

NASA RRRRR GGRRR

NSF GGGGG GGGGG

OPM RYYRR GGGGG

SBA RRRRR YYGGG

SMITHSONIAN RRRRR YYYGG

SSA YGGGG GGGGG

Current Status Progress

Executive Branch Management Scorecard

Financial Management (Baseline - Current)

36 Federal Financial Management Report (2006) 
http://www.whitehouse.gov/omb/financi