Federal Financial

Management Report

2004

Executive Office of the President

Office of Management and Budget

Washington D.C.
Table of Contents 

 Page

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

Office of Federal Financial Management .......................................................................... 5

Improving Financial Reporting.......................................................................................... 6 

Achieving Accountability – FY 2003 Financial Results ........................................... 6 

Reducing Material Weaknesses................................................................................. 8 

Financial Management Improvement Initiatives.............................................................. 10

Strengthening Asset Management. ............................................................................ 10 

Eliminating Improper Payments................................................................................ 11 

Strengthening Controls over Federal Credit Cards.................................................... 12 

The Chief Financial Officers Council ................................................................................ 13 

CFO Council Committees .................................................................................................. 14 

Best Practices............................................................................................................. 14 

Financial Management Policies and Practices........................................................... 15 

Financial Reporting Acceleration ............................................................................. 16 

Financial Systems and E-Government....................................................................... 18 

Improper Payments.................................................................................................... 19 

Performance Measurement ........................................................................................ 20

Five Year Outlook ............................................................................................................... 22

Appendices: 

Appendix A: Summary of FY 2003 Financial Statement Results by Agencies 

and Selected Components.......................................................................................... 23 

Appendix B: Material Weaknesses Reported by Auditors and Federal 

Managers’ Financial Integrity Act Tables ................................................................. 25 

Appendix C: Government Corporations Required to Submit Audited Financial 

Statements to OMB.................................................................................................... 29 

Appendix D: Executive Branch Management Scorecard ........................................ 30 

Federal Financial Management Report (2004) i 
Federal Financial Management Report (2004) 1 

Executive Summary 

Expanding our Horizon – Focusing on Results as well as Compliance 

Financial management extends beyond receiving an unqualified audit opinion. Integrity and 

reliability – the things to which an unqualified audit attests – should be a given. First class 

financial management requires integration of the financial impact of agency activities in 

operational execution and senior management decision making. It is accompanied by 

accountability standard setting, performance tracking and other analyses. These are 

characteristics we should seek in the Federal Government, just as they are sought in the private 

sector. 

Only a few short years ago, such a standard was not prevalent in the Federal Government. 

Through the President’s Management Agenda (PMA), the Office of Management and Budget 

(OMB) has set aggressive goals to achieve respectability in the government’s financial 

management practices. It is not surprising that this results-focused approach has forced 

significant and challenging process modifications at many agencies. The degree of 

transformation reflects just how far we have had to come to catch up to accepted practices of 

well-run financial management organizations. 

Aligning for Success 

OMB’s Office of Federal Financial Management (OFFM) and the Chief Financial Officers 

(CFO) Council were not exempt from this need to restructure in support of higher performance 

goals. For instance, OFFM has realigned and added subject experts who can provide leadership 

across its areas of responsibility. As part of this restructuring, the Branch Chiefs at OFFM now 

partner with the chairpersons of the CFO Council committees to help set the agendas and 

facilitate the achievement of objectives. 

Similarly, the CFO Council – composed of CFOs and Deputy CFOs of the major agencies – has 

also reassessed its working committees, while refreshing and updating its focus. Existing 

committees such as the Financial Reporting Acceleration and Improper Payments Committees 

have been, and continue to be, very influential in providing forums for sharing best practices and 

influencing OMB guidance. New committees, such as the Financial Management Policies and 

Practices group, are actively engaged in studying emerging issues. CFO Council Committees 

will continue to partner with representatives of other groups, such as the President’s Council on 

Integrity and Efficiency (PCIE) and the Chief Information Officers (CIO) Council. (Reports 

from the chairpersons of each of the committees are included in this report.) 

Financial management systems are deserving of CFO attention and they are getting it. Through 

the combined efforts of the CFO Council Financial Systems and E-Government Committee and 

the OMB-sponsored Financial Management Line of Business Project, CFOs are setting the 

course for the financial management system architecture of the future. 
2 Federal Financial Management Report (2004) 

Evidence of Progress 

Are the efforts described above paying off? The answer is an indisputable “yes”. Where it took 

agencies five months to prepare audited financial reports in the past, it now takes 45 days for 

many and only two-and-a-half months for most. Agencies are building on the momentum from 

our Fiscal Year (FY) 2003 reporting acceleration successes to achieve the November 15th

reporting date in 2004. Interim reports, unheard of before 2002, are now being completed just 21 

days after the close of each calendar quarter. 

It is often said that such achievements can only be accomplished by extraordinary efforts. Hard 

work is always a factor, but these results are a tribute to detailed planning, effective management 

and excellent execution. 

While the acceleration targets are critical, they are not our ultimate objective. Rather, the 

discipline and improved control needed to accelerate financial reporting is only the foundation 

for ensuring the availability of useful financial information. The incorporation of timely and 

accurate financial information into management decision-making and operational assessment 

continues to be our main goal. 

Progress toward this goal was made during FY 2003, as shown by the addition of two agencies, 

the Social Security Administration and the Environmental Protection Agency, that achieved 

“green” status under the Improved Financial Performance initiative of the PMA. These agencies 

were later joined by the Department of Education in the first quarter of FY 2004. Today, not 

only do the managers in these agencies have more timely and accurate information, they are 

increasingly using it in program assessment and planning. 

Emerging Issues – Internal Control 

The internal control environment of any entity is an area of focus for both management and the 

auditor. Federal Government agencies are no exception. There are several existing laws 

governing the agencies in assessing and representing the quality of their internal control. For 

example, agency heads are required to provide reasonable assurance of compliance with the 

Federal Manager’s Financial Integrity Act (FMFIA) with respect to both management control 

and financial management systems. Agency heads are also required to certify that their systems 

satisfy specified requirements under the Federal Financial Management Improvement Act 

(FFMIA). Additionally, the Federal Information Security Management Act (FISMA) provides 

for government-wide management and oversight of information security risks and agency 

information security programs. As such, FISMA requirements provide an additional standard for 

financial systems control. 

Not all Federal agencies are yet able to provide these assurances; however, all continue to make 

progress in eliminating barriers to compliance. Because financial systems are a major part of the 

universe to which these statutes apply, it is entirely possible that positive assurance from the 

collective group of agencies will emerge over a period of years due to the time required for new 

system design, development and implementation. 
Federal Financial Management Report (2004) 3 

Both OMB and the CFO Council are keenly aware of the internal control challenges and related 

new assurance requirements that have been reported in the private sector. We are actively 

engaged with the Inspector General community in reviewing these requirements and their 

potential applicability to Federal Government agencies. 

 

Emerging Issues – Reporting Information on Social Insurance Programs

During FY 2003, the Federal Accounting Standards Advisory Board (FASAB) issued Statement 

of Federal Financial Accounting Standard (SFFAS) No. 25, Reclassification of Stewardship 

Responsibilities and Eliminating the Current Services Assessment. Among the provisions of this 

standard is the requirement that the Statement of Social Insurance, which is currently reported in 

the stewardship section of the Financial Report, become a basic financial statement with full 

audit scrutiny. This Statement provides estimates for important components of the Social 

Security and Medicare programs, and it is accompanied by an expansive discussion of 

underlying assumptions and sensitivity analyses. This requirement will enhance the value and 

the prominence of what is one of the most extensively presented components of the Financial 

Report of the United States Government. 

Additional Emerging Challenges and Opportunities 

An assessment of the current environment indicates that financial managers will be required to 

address a myriad of emerging issues. In addition to those already discussed, we anticipate 

increased challenges in the following areas: finding experienced financial professionals for the 

Federal workforce; working within the constrained resources of independent contract auditors; 

establishing innovative financial management systems service alternatives; improving 

management of Federal asset portfolios; and increasing customer focus. We will continue to 

work with the CFOs, the CFO Council, and others in the financial community to appropriately 

address these and other emerging challenges. 

Outlook for the Future 

While we have seen many achievements in the past fiscal year, there remains a long way to go. 

OMB and the CFO community will continue to set and achieve higher standards of performance. 

Such issues as improved asset management and the elimination of improper payments – assessed 

at $35 billion on programs accounting for half of the Federal Government’s annual outlays – 

must be subject to better management. These challenges are not easy. If they were, they would 

have been targeted and achieved years ago. But the Federal financial community is actively 

engaged in efforts to address these and other important issues because the American taxpayer 

expects no less. 

A High Standard of Stewardship 

It is my opinion that the Federal Government should be held to as high, if not higher, a standard 

of financial management as the private sector. American citizens do not have the option of 

“taking their business” elsewhere – they cannot elect to stop new investments (tax payments) 

until the company (Federal Government) improves its financial management practices. 
4 Federal Financial Management Report (2004) 

Accordingly, I believe it is incumbent upon every financial professional in the government to 

execute his or her duties according to the standards of excellence consistent with this stewardship 

responsibility. That is what we strive to do. And that is what we will continue to do. 

 Linda M. Springer 

 Controller 
Federal Financial Management Report (2004) 5 

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 first class financial management in the executive branch of the 

Federal Government. 

This past fiscal year, OFFM restructured itself to better address financial management issues, 

adding subject matter experts to provide leadership across its areas of responsibilities. Now, 

OFFM is comprised of three separate issues-oriented branches with the following objectives: 

 Financial Standards and Grants Branch – to develop financial management policies 

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

accurate and useful financial information to support management decisions; and 

ensure accountability and effective customer service for Federal grants programs. 

 Financial Integrity and Analysis Branch – to ensure 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 – to ensure 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. 
Improving Financial Reporting 

The federal government IS results oriented. Of course we are. The citizens and taxpayers expect 

it of us, and they deserve nothing less. We ask if we are accomplishing desired results at an 

acceptable cost, and if the answer is “no” or “we don't know,” then we figure out what to do 

about it. 

 Clay Johnson III, OMB Deputy Director for Management 

 May, 2004 

The President’s Management Agenda (PMA), announced in August 2001, was launched to 

address specific deficiencies and problems in the Federal Government. Through both the 

government-wide and special program initiatives of the PMA, we are working to improve the 

financial performance of the government and to better ensure the stewardship of taxpayer dollars. 

One of the government-wide PMA initiatives is 

Improved Financial Performance, in which agency Chief 

Financial Officers (CFOs) – both individually and 

through the auspices of the CFO Council – share 

responsibility. This initiative involves agencies having 

more timely and reliable financial information, working 

to develop sound and dependable financial systems, and 

identifying and eliminating improper payments in their 

programs and activities. However, such aspects of financial performance alone are not 

sufficient. Rather, agencies must also strive toward first class financial management, in which 

their financial information is regularly used for more informed day-to-day decision making and 

in operational execution. 

Improved Financial Performance 

 Timely and Reliable Financial 

Information 

 Integrity in Financial Activities 

 Sound and Dependable Financial 

Systems 

 Eliminating Improper Payments 

The benefits of CFO efforts, however, is not confined to financial performance. Rather, having 

such timely and reliable financial information also assists the decision making processes of other 

PMA initiatives. For instance, the Budget and Performance Integration initiative makes direct 

use of such information to assess the performance of agency programs, make improvements 

where possible, and better determine what citizens are getting for their tax dollars. Additionally, 

having specific cost and pricing information is essential to the competitive sourcing and

electronic government initiatives. 

Again, our focus is on achieving results. The work of the CFOs and the CFO Council is vital for 

realizing the goals of the President’s Management Agenda. 

Achieving Accountability – FY 2003 Financial Results 

For the FY 2003 reporting cycle, agencies continued to make steady progress toward achieving 

the objectives of the Improved Financial Performance initiative of the PMA. Recognizing that 

issuing unqualified opinions five months after the fiscal year-end had limited usefulness, this 

6 Federal Financial Management Report (2004) 
Federal Financial Management Report (2004) 7 

Administration announced the acceleration of the combined performance and accountability 

reports to 45 days following the end of the fiscal year beginning with the FY 2004 reporting 

cycle. Last year, two years ahead of schedule, the Department of Treasury and the Social 

Security Administration met this requirement. This year, that number increased three-fold to 

eight agencies. 

The Department of Education, Environmental Protection Agency (EPA), Department of Health 

and Human Services, National Science Foundation (NSF), the Social Security Administration 

(SSA), Department of the Treasury, U.S. Agency for International Development (USAID), and 

the Department of Veterans Affairs all issued their Performance and Accountability Reports 

(PARs) by the middle of November 2003. 

USAID’s accomplishment is especially noteworthy, as this past fiscal year was the first time in 

its history that it achieved an unqualified audit opinion on its financial statements, as well as met 

the mid-November reporting date. 

In addition to the eight agencies above, ten more of the largest Federal agencies issued their 2003 

PARs by the end of the calendar year – 30 days earlier than the OMB-established deadline and 

60 days earlier than the statutory due date of February 28. 

In the FY 2003 reporting cycle, for the first time ever, agencies also began submitting quarterly 

financial statements to OMB. The Administration implemented this requirement to make 

agencies develop financial processes and procedures that will support accelerated year-end 

reporting and to facilitate more frequently available financial information. So far, all of the 

major agencies have met the interim reporting deadlines. Additionally, many of the smaller 

agencies, who are subject to the Accountability for Tax Dollars Act of 2002, met these deadlines. 

Another achievement of note in FY 2003 occurred at the Department of Homeland Security 

(DHS). Although DHS was created five months into the fiscal year and could have received a 

first-year waiver, the Department elected to forgo the waiver and prepared audited financial 

statements for the first time. While DHS as a whole received a disclaimer, it did receive a 

qualified opinion on its Balance Sheet and Custodial Activity Statement. Additionally, building 

upon its efforts this past year, DHS should be well-positioned for progress this fiscal year. 

Overall in FY 2003, Federal agencies progressed toward the demonstration of first class financial 

management. Such progress is reflected in an agency’s ability to attain green status on the 

Improved Financial Management Initiative of the PMA. Recently, such agencies as the 

Department of Education, EPA, NSF, and SSA have each attained green status, having 

demonstrated first class financial management principles and practices. 

Although the demonstration of fiscal accountability is a foundation for sound financial 

management, achieving unqualified financial statements is just the beginning. Ultimately, 

agency decision makers must have and use accurate precise and timely financial information in 

their day-to-day management. 
Reducing Material Weaknesses 

Despite improvements over the past year in agency financial reporting, much work remains to 

fully achieve the President’s goal of Improved Financial Performance, such as resolving the 

number of material weaknesses facing agencies. 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. 

On a government-wide basis, fewer material internal control weaknesses were reported by 

independent auditors this past fiscal year. Agency progress to correct these internal control 

weaknesses is monitored on a quarterly basis as part of the PMA scorecard, as agencies must not 

have any repeat material internal control weaknesses in order to achieve “green” status. 

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

financial audit process. Across the government, a total of 14 new weaknesses were reported in 

FY 2003. The majority of the weaknesses reported were related to deficiencies in specific 

accounting processes and financial statement reporting (as shown below). In addition, computer 

security and financial systems weaknesses were frequently reported. 

Some of the progress agencies made in FY 2003 include 23 auditor-reported internal control 

weaknesses being resolved. The most noteworthy improvement may be the U.S. Agency for 

International Development, where six weaknesses were resolved during the year. 

The following chart shows the distribution of the auditor material weaknesses by category: 

8 Federal Financial Management Report (2004) 

Auditor Material Weaknesses 

By Category

5 6 Financial Systems 2

Computer Security 6

Accounting Issues

Property

Financial Statement Report 12

Fund Balance w/Treasury 9

8 Other

In addition to auditor-reported material weaknesses related to financial reporting, OMB also

requires the head of each executive agency, in accordance with FMFIA, to report annually on
Federal Financial Management Report (2004) 9 

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. Thus, agency heads are 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. Specifically, 

Section 2 seeks to: assess agency internal controls necessary to ensure compliance with 

applicable laws; protect against loss from waste, fraud, and abuse; and ensure certain receivables 

and expenditures are properly recorded. Section 4 nonconformances, on the other hand, reflect 

weaknesses in Federal accounting systems. 

As shown in the following table, the overall number of FMFIA internal control weaknesses and 

systems nonconformances decreased by nearly 32 percent (excluding DOD consolidations). 

Specifically, there were fewer material weaknesses under Section 2 of FMFIA reported during 

FY 2003. Ten agency heads provided assurance that the management controls were adequate. 

Those notable agencies that resolved their material weaknesses include the Department of 

Defense (resolving 25), the Department of Justice (resolving eight), and the U.S. Department of 

Agriculture (resolving five). (Appendix B depicts the number of material weaknesses reported 

by the auditors, as well as the FMFIA material weaknesses and nonconformances by agency.) 

FMFIA Issues Identified by Agency Heads

Section 2 

(Internal Control Weaknesses) 

Section 4 

(Systems Nonconformances) 

Beginning FY 2002 231 35 

New 43 3 

Resolved 124 11 

Beginning FY 2003* 150 27

New 18 4

Resolved 48 7

Consolidated 15 2

Reassessed 16 1

Ending FY 2003 89 21

 *The “Beginning” FY 2003 column reflects the adjusted numbers reported by the agency Chief Financial Officer 

and Inspector General and may differ from the “Ending” FY 2002 column as reflected in the 2003 Report. 
10 Federal Financial Management Report (2004) 

Financial Management Improvement Initiatives 

During FY 2003, the Administration continued its efforts to improve the financial management 

of the Federal Government through several different initiatives. 

Strengthening Asset Management 

Strengthening the management of the government’s assets has been, and continues to be, an 

important objective of the Administration. According to its FY 2003 financial statements, the 

Federal Government owns approximately $650 billion in Property, Plant, and Equipment 

(PP&E), up from $325 billion in FY 2002, and $240 billion in Inventories and Related Property, 

up from $192 billion in FY 2002. The significant increase from FY 2002 to FY 2003 can mostly 

be attributed to the Department of Defense implementing a new accounting standard that now 

recognizes national defense PP&E as General PP&E in the government-wide balance sheet. 

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 justified and 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. In early February, the President signed Executive Order 13327, which 

directed all major agencies to: 

 Establish the position of a Senior Real Property Officer, who will be held 

accountable for the effective management of agency real properties; 

 Determine what it owns, what it needs, and how and what it costs to manage its real 

properties; 

 Develop and implement asset management plans; 

 Develop and monitor real property performance measures; and 

 Dispose of properties that are not needed. 

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 

senior real property officers. 

In conjunction with the executive order, a new program initiative was added to the President’s 

Management Agenda in February of 2004. This new Federal Real Property Asset Management 

initiative applies to the largest Federal landholding agencies, which will be given a “score” on 

the status and progress of their real property management improvement efforts on the quarterly 

PMA scorecard. 

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

and implement effective asset management plans. Additionally, the work of the agencies and the 
Federal Financial Management Report (2004) 11 

Federal Real Property Council should lead to the development of a comprehensive and 

descriptive database of all Federal real properties. Once complete, this database, along with 

appropriately identified performance measures, will assist agency management in making 

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

disposal. 

Eliminating Improper Payments 

As part of the PMA’s Improved Financial Performance initiative in 2001, the Administration’s 

efforts to eliminate improper payments initially focused on the Federal Government’s major 

benefit programs. The Administration first identified those programs that make payments in 

excess of $2 billion annually, and then required those agencies to assess the risk of, estimate the 

extent of, and put in place a strategy to eliminate improper payments. Based on the agencies’ 

estimates of improper payments made in these programs – making nearly $1 trillion in annual 

payments – improper payments exceed $35 billion a year. 

This fiscal year represents the first full year that OMB is implementing the Improper Payments 

Information Act (IPIA) of 2002, P.L. 107-300, which codifies and expands the President’s 

initiative to eliminate improper payments. The IPIA extends the range of programs that the 

executive branch will assess to all Federal payment streams. Thus, with the passage of the IPIA, 

more programs making hundreds of billions of dollars in payments annually can now also be 

targeted. 

In May of 2003, OMB issued guidance to agencies regarding how to go about complying with 

the requirements of the new law. As part of IPIA implementation, Federal agencies have 

established specific milestones to: 1) develop program inventories; 2) perform risk assessments 

to determine which programs are risk susceptible; 3) statistically sample those programs 

determined to be high risk; 4) create corrective action plans; and 5) establish baseline error rates 

and improvement targets for future reporting. 

In addition to the previously reviewed $1 trillion in Federal outlays, agencies have now 

identified an additional $400 billion in risk susceptible outlays to date. Therefore, programs 

totaling at least $1.4 trillion (or nearly 60%) of annual outlays will be subject to steps 3, 4, and 5 

stated above. Agencies are on track to report the results of these efforts in the FY 2004 PARs. 

While progress is being made, significant challenges do remain. Most notably, agencies are 

working to develop cost-effective approaches for tracking improper payments at each stage of 

the payment lifecycle. Agencies are committed to tracking and verifying the accuracy and 

appropriate use of payments from the point that payments are internally processed within an 

agency, through subsequent payment to any intermediary, and ultimately payment to the 

individual recipient. The more complex the program, the more challenging it becomes to 

monitor these payments, and thus, establish a national annual error rate. Nonetheless, even for 

the most complex programs, the Administration is developing solutions that will enable the 

implementation of appropriate financial management improvements, and obtain the information 

required to gauge results annually. 
12 Federal Financial Management Report (2004) 

With regard to relevant legislation, the Administration was pleased that the “HUD Programs 

Information Verification Act” (H.R. 3030) was incorporated into P.L. 108-199 passed by the 

Congress earlier this year. The Federal Government provides rental subsidies to low income 

individuals to ensure their housing needs are met. To reduce the more than $2 billion in net 

improper rental subsidy payments, the Administration proposed, and the Congress enacted, 

authority for the Department of Housing and Urban Development to access the National 

Directory of New Hires for the purpose of verifying the incomes of program beneficiaries to 

correctly determine their rental subsidies. The Administration has requested similar authority 

from Congress for other agency programs. 

Fiscal Year 2004 is also the first reporting year for mandatory agency recovery auditing. Under 

Section 831 of the Defense Authorization Act for Fiscal Year 2002, 31 USC §§3561-3567, 

agencies that enter into contracts with a total value in excess of $500 million in a fiscal year must 

carry out a cost-effective program for identifying errors made in paying contractors and for 

recovering amounts erroneously paid to the contractors. A required element of such a program is 

the use of recovery audits and recovery activities. Agencies have been directed to include this 

analysis as part of their improper payments reporting in their November 15th PAR submission. 

Strengthening Controls over Federal Credit 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 translate into $16.5 billion dollars spent through the use of purchase cards alone in 

FY 2003. 

In the approximately 18 months since OMB began requiring quarterly credit card reporting of the 

agencies, we have begun to see some positive results. For instance, travel delinquency is at a 

record low, the number of open purchase card accounts is below 1998 levels, and the number of 

travel cards in circulation has been decreased by nearly 25 percent. Additionally, the “span of 

control,” which represents the number of cardholders per approving official, has been reduced to 

a ratio of 1:3.5. This ratio represents less than the best practice of 1:5 established by the General 

Services Administration, based on a private sector benchmark. Because on-time payment 

performance has improved, the amount of rebates has correspondingly increased. 

While we continue to work to strengthen controls over Federal cards, additional improvements 

are still necessary. To illustrate, Congress recently introduced legislation to require agencies to 

perform a credit worthiness evaluation of any applicant for a Federal Government credit card, as 

well as to improve the contract arrangements between Federal agencies and government credit 

card vendors. OMB has organized an interagency working group tasked with developing general 

guidance to address these issues, as well as to provide a central repository containing a 

comprehensive list of card rules and requirements. 
Federal Financial Management Report (2004) 13 

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 such matters 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 matters. 

The CFO Council consists of the CFOs and Deputy CFOs of the 23 major Federal departments 

and agencies covered by the CFO Act of 1990 – collectively known as the “CFO Act agencies.” 

The Deputy Director for Management at OMB chairs the Council, and other members include 

the OMB Controller and the Fiscal Assistant Secretary of the Treasury. The CFOs of the 

Department of Homeland Security, 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 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 
14 Federal Financial Management Report (2004) 

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 assist the agency CFOs. Following is a description of each committee, its recent 

accomplishments, and its plans for the future. 

Best Practices 

Co-Chair: Christopher B. Burnham, Assistant Secretary and Chief Financial Officer, Department 

of State 

Co-Chair (Acting): JoAnne Boutelle, Deputy Chief Financial Officer, Department of Defense 

In fiscal year 2003, the Best Practices Committee continued its primary objective of supporting 

the CFO Council’s ability to resolve common financial management and business process 

challenges across Federal agencies through exposure to new ideas and strategies from “best 

practice” organizations and alternative perspectives of government and industry leaders. 

The ultimate goal of the committee is to find the very best of government and the private sector 

and apply it to the stewardship of the departments and funds entrusted to the government by the 

American people. The overall focus is governance issues, and particularly internal controls and 

management controls. 

The Best Practices Committee Charter, which was updated in April 2004, outlines the focus of 

the committee and the essential elements required to accomplish the President’s vision for a 

Federal Government that is: 

 

 Results-oriented; 

 Market-based; and 

 Citizen-centered. 

In FY 2003, the committee hosted guest speakers on the following topics: 

 Internal Control/Best Practices. Although the Federal Government is not currently 

required to implement the Sarbanes-Oxley Act, the committee sponsored two 

speakers from KPMG to discuss provisions of the Act and “best practices” for 

potential agency implementation in the future. Specifically, the focus was on the 

importance of certifying financial statements, internal control over financial 

reporting in periodic reports filed with the SEC (section 302), annually assessing and 

reporting on internal controls (section 404), and the requirement for auditors to 

provide an attestation report on management’s annual assessment. The challenge, 
Federal Financial Management Report (2004) 15 

according to KPMG, is to design and implement an effective, efficient and 

sustainable compliance program for Sarbanes-Oxley. 

 Performance Management Metrics/Enterprise Financial Management Systems. The 

committee sponsored a speaker from IBM to discuss its success in turning the 

corporation from dependence on multiple disparate systems to a more productive 

streamlined process, which now provides more reliable information for decision 

makers. For example, the company was able to complete many different 

consolidations: 16,000 software programs were decreased to less than 6,000; 155 

data centers were cut to 12; 21 private networks were reduced to one; 128 different 

Chief Information Officer (CIO) positions were consolidated into one; and hundreds 

of personal-computer configurations were distilled into four. IBM attributes its 

success to a strong re-organization and focus on a common worldwide planning 

system, single worldwide consolidation system, common geographic mega-centers, 

and a single worldwide financial information warehouse. 

 

Over the next 12 months and beyond, the committee will continue to focus on the five specific 

areas identified by a survey of the CFO Act agencies. These topics include: 

1. Enterprise Financial Management Systems; 

2. Performance Management Metrics; 

3. Cost Accounting/Cost Measurement; 

4. Financial Statement Reporting Improvements; and 

5. Travel Card Programs. 

In addition, the committee will arrange for guest speakers on other best practice topics as 

dictated by current issues or as requested by CFO Council members. Over the next year, the 

committee will continue to survey CFO Council members in order to stay current on best 

practice areas of primary interest for Best Practice Committee members and the CFO Council. 

Financial Management Policies and Practices 

Chair: James L. Taylor, Deputy Chief Financial Officer, Department of Commerce 

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

Practices 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 has been organized into three different subcommittees: 

 Financial Policy – to address emerging issues that will ultimately improve 

financial management in the Federal Government. 

 Accounting Standards – to ensure CFO Council participation in the standard 

setting process by providing viewpoints on proposed Federal Accounting 
16 Federal Financial Management Report (2004) 

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. 

Through the work of the full committee and three subcommittees, early efforts have included 

surveying the Federal agencies to determine the scope of internal control assurance being 

provided by management and auditors. In addition, the Committee has undertaken a project that 

will consider the costs and benefits of additional assurances on Federal department and agency 

internal controls. 

For the remainder of FY 2004, the Committee will: 

 Make recommendations related to the need for additional internal control 

assurances; 

 Actively participate, at the appropriate time, in the accounting standard-setting 

process; and 

 Provide input to OMB regarding specific financial reporting policies. 

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

 Identify and address emerging issues in financial management; 

 Actively participate in the accounting standard-setting process; and 

 Identify internal control policies. 

Financial Reporting Acceleration 

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

The mission of the Financial Reporting Acceleration Committee is to help agencies identify and 

eliminate common barriers to issuing their PARs, including the reporting of their audited 

financial statements by November 15. It is anticipated that accelerating these agency 

submissions will consequently facilitate preparing and issuing the consolidated government-wide 

financial statements by December 15. This fiscal year marks the third year of operation of this 

committee. 

The PMA lists Improved Financial Performance among its key initiatives, and the Financial 

Reporting Acceleration Committee strives to help all agencies “get to green” on the 

Administration’s scorecard. Timely financial information is essential to better program 

management and more effective stewardship of the nation’s resources. The committee is 

committed to helping agencies accelerate their annual reporting processes, but provides the 

greatest value by increasing agency awareness of common problems and their solutions, 

providing a forum for their discussion and resolution, and providing a key interface with the 

audit community on areas of mutual interest. While helping agencies accelerate their reporting 

processes remains the short-term focus, the committee realizes that the ultimate benefit will be 

facilitating the use of this information in agency management decisions. 
Federal Financial Management Report (2004) 17 

This past year, the committee focused on identifying common critical issues and sharing best 

practices. The success of eight agencies in meeting the November 15 deadline a year early 

yielded ample lessons learned for discussion. In addition to conducting surveys of agencies on 

issues ranging from third-party data to cash reconciliation, the committee convened several 

conferences and workshops to discuss recent acceleration experiences. The sessions ranged in 

scope from general, multi-faceted discussions of annual reporting (e.g., financial statements, 

performance reporting, and audit concerns) to specific, focusing on agency use of estimates in 

their acceleration efforts. The combined active participation by both the CFO and audit 

communities added significant value to these sessions. The committee also provided a forum to 

present and discuss the new closing package, a vehicle intended to facilitate preparing the 

consolidated governmentwide financial statements. 

Looking forward to the next fiscal year, the committee plans to focus on the following three 

areas: 

1. Continue to provide a forum to share best practices and identify and resolve issues 

with respect to financial acceleration. The committee feels that its greatest value to 

Federal financial management is to provide forums to efficiently share the best 

practices and lessons learned of both those agencies that successfully met the 

November 15 deadline and those whose acceleration efforts fell short. Maintaining 

successful acceleration efforts is as important as achieving initial success. As such, 

the committee will continue to add value to the acceleration effort by continuing to 

provide best practices and lessons learned forums to facilitate ongoing acceleration, 

and identify ways to help agencies improve process efficiency. Increased efficiency 

enables organizations to spend less time on preparation and more time on analysis 

and use of the information. 

2. Continue to identify and resolve agency reporting issues that involve central agency 

(e.g., OMB, Treasury) financial reporting requirements (e.g., government-wide 

financial reporting, Federal Agencies Centralized Trial Balance System II) and 

agency financial and budgetary reporting processes. Currently, agencies report 

financial data in a wide range of formats. While these varying formats all purport to 

ultimately convey the same or similar information, timing and source differences can 

often yield inconsistencies and differences that must be reconciled. Such 

inconsistencies pose a challenge for analysts and auditors, and complicate attempts 

to provide accurate financial management information from a government-wide 

perspective. Examples of government-wide reporting include the Financial Report 

of the United States Government and the President’s Budget. Of particular 

importance are agency efforts to reconcile and resolve the more than $160 billion in 

intragovernmental transaction differences. The committee will continue to help 

agencies resolve these and other issues by providing forums for interagency 

discussion, including meetings with central agency officials. 

3. Promote the use of accelerated financial information in day-to-day program and 

agency management. Accelerating agency and government-wide financial reporting 

is only part of the goal. Agencies must also leverage the availability of accelerated 
18 Federal Financial Management Report (2004) 

information to provide management with more current information to support 

decision-making; otherwise, the benefits of acceleration will be rendered superficial. 

Through the use of surveys and roundtable discussions, the Committee plans to help 

agencies to not only produce financial information more expeditiously, but to also 

find ways to make better use of that information. 

The committee’s success will be measured, on the surface, by the number of agencies that 

successfully meets the November 15th financial statement reporting deadline this fiscal year and 

beyond. However, success will also be measured, in part, by agencies’ level of issue awareness 

and resolution, and the extent to which agency and government-wide financial reporting 

processes gain in efficiency. 

Because the goal of the committee is to realize results and benefits in the short term, the 

Financial Reporting Acceleration Committee does not prepare a long-term plan. Rather, the 

ultimate measure of success will be achieved when the efforts of the committee are no longer 

needed, and each major agency is meeting the accelerated reporting deadlines. 

Financial Systems and E-Government 

Chair: Mark Carney, Deputy Chief Financial Officer, Department of Education 

The Financial Systems and E-Government Committee actively helps to improve Federal 

financial systems and reporting. The committee champions systems that produce data needed to 

efficiently and effectively manage the day-to-day operations of the Federal Government and 

provide accountability to its taxpayers. The committee also seeks to demonstrate and promote 

standardization of financial data and the elimination of redundant Federal financial systems. 

This past year, the committee participated in a number of key initiatives designed to transform 

the way the Federal Government as an enterprise deploys and uses information technology (IT). 

The committee also assists OMB in aligning the efforts of the CFO community with the broader 

government-wide technology initiatives. 

During FY 2003, the committee worked with the Joint Financial Management Improvement 

Program (JFMIP) to refine the newly-introduced Federal Framework for Financial Management, 

which takes a much broader prospective than defining core financial systems requirements. The 

committee serves as a pivotal “straw man” for integrating data and systems across the Federal 

enterprise, as well as assists in updating the mandatory and value-added system requirements for 

core systems. 

In cooperation with the Private Sector Council and JFMIP, the committee held a series of forums 

that brought together private sector systems experts and senior Federal executives. These forums 

served as a way to sound out current strategies in deploying commercial software and addressing 

interoperability challenges across a myriad of systems. 

The committee also participated in the “Line of Business Initiative” for financial management 

and back office grants management systems. The initial goal of this effort is to develop common 
Federal Financial Management Report (2004) 19 

solutions and target architectures for a line of business that considers business processes, 

technology, and data. These common solutions will be used in the development of business 

cases by OMB in the FY 2006 budget cycle. 

In the last fiscal year, the committee also promoted the alignment of twenty-four “e-government” 

initiatives with the acquisition and IT communities. Expectations and needed commitments by 

the CFO community were defined to effectively implement these initiatives. The committee 

continues to encourage crosscutting e-Government initiatives such as e-Grants, e-Payroll, eTravel, the Integrated Acquisition Environment, and the further refinement of the Federal 

Enterprise Architecture. 

In cooperation with the National Academy of Public Administration, the committee also defined 

relevant issues and strategies for better data integration. In addition, the feasibility of a 

commercial off-the-shelf solution for budget formulation across the Federal Government is 

currently being examined. 

In the coming years, the Financial Systems and E-Government Committee will continue to work 

to improve the Federal financial systems at agencies and to successfully promote the egovernment initiatives. The committee will also continue to actively engage relevant Federal 

agencies and private sector groups to achieve its goals. 

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 eliminating 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. 

With the enactment of the IPIA in early FY 2003, the Improper Payments Committee spent the 

first half of the past fiscal year helping agencies to prepare for the challenges of implementing 

this law. For example, the committee worked with OMB in drafting its implementation guidance 

that was issued in May of 2003. 

Additionally, the committee served as a venue for assisting the agencies to better understand the 

provisions of the Act, the subsequent OMB guidance, and the reporting requirements for FY 

2004. As part of this effort, the committee held regular meetings, including a government-wide 

meeting in which private sector contractors were available to explain various methods for 

identifying and recovering improper payments. 

Together, OMB and the CFO Council’s Improper Payments Committee are facilitating efforts to 

identify solutions and disseminate best practices among agencies. For example, the Departments 

of Agriculture and Housing and Urban Development are collaborating to develop a common 

approach for statistically sampling similar housing programs at the two agencies. In addition, the 
20 Federal Financial Management Report (2004) 

Department of Labor is teaming with the Social Security Administration to share information 

verifying Social Security numbers, thereby reducing improper payments due to identity errors or 

fraud. 

For the remainder of FY 2004 and beyond, the goals of the committee include the following: 

 Devising a standard format for reporting IPIA activities and data in the FY 2004 

PAR; 

 Developing a coordinated government-wide approach for performing statistical 

sampling in the area of grant recipients and sub-recipients, to minimize burden on 

both payment recipients and Federal agencies; 

 Determining how agencies can work within current resources to complete their 

samplings annually, and with the rigor required by OMB guidance; and 

 Sharing best practices and common challenges to provide agencies with proven 

ways to accomplish the required legislative milestones, as well as a forum for 

brainstorming and resolving common challenges that agencies face in 

implementing their IPIA plans. 

In the coming years, the Improper Payments Committee will continue to produce valuable 

deliverables to its members, as well as provide a constructive forum for discussing issues of 

importance to the CFO and IG communities. 

Performance Measurement 

Chair: Linda Combs, Assistant Secretary for Budget and Programs and Chief Financial Officer, 

Department of Transportation 

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. Therefore, several key 

milestones have already been achieved. Specifically, agencies have been reporting on “Phase 1” 

indicators since March of 2003, while “Phase 2” indicators are well under development. This 

fiscal year, the committee is well positioned to build on these accomplishments and work 

towards enhancing the system. 

Key deliverables for FY 2004 include: 
Federal Financial Management Report (2004) 21 

 For Phase 1: defining government-wide and agency-specific targets, conducting a 

consistency assessment of agency reporting to ensure the validity and reliability of 

data, and making data and results available to the public through a web portal; 

 For Phase 2: completing definition of metrics and targets and commencing agency 

reporting; and 

 For Phase 3: identifying candidate metrics for future consideration. 

Once the system is complete, managers and other interested parties will have a powerful tool for 

assessing Federal financial performance. For example, are the Federal Government and its 

individual agencies meeting goals to reduce unreconciled balances, increase the use of electronic 

funds transfers, reduce delinquent accounts receivables, 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. 
22 Federal Financial Management Report (2004) 

Five Year 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. Currently, OMB’s Director, 

Deputy Director for Management, and Controller – as well as the individual agency CFOs and 

the CFO Council as a whole – are all working to improve the government’s financial 

management for the benefit of the American taxpayer. 

The newly-aligned OFFM is now better positioned to assist agencies in improving their financial 

management practices. Over the next fiscal year and beyond, OFFM 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. 

Specifically, each of the three branches of OFFM will continue to oversee Federal 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 regular use of timely and accurate financial information in day-to-day 

decision making and in operational execution; 

 Reduce both auditor-reported and FFMIA 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. 

Additionally, the newly-restructured CFO Council – chaired by the OMB Deputy Director for 

Management – is also well-positioned to appropriately address the emerging issues and needs of 

the Federal financial community. Each of the six 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 specific regard to Federal 

financial management systems, we anticipate the Financial Systems and E-Government 

Committee to continue to evaluate ways in which agencies, and the government as a whole, may 

improve systems integration and increase systems sharing. 

OFFM and the CFO Council look forward to continued efforts toward improved financial 

management and accountability throughout the Federal Government. 
Federal Financial Management Report (2004) 23 

Appendix A: Summary of FY 2003 Financial Statement 

Results by Agencies and Selected Components

The 23 CFO Act agencies are required under the CFO Act to prepare annual audited financial 

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

financial statements. 

Fiscal Year 2003 Financial Statements 

Agency Type of Opinion 

CFO Act Agencies:

Department of Agriculture (USDA) Unqualified 

Department of Commerce (DOC) Unqualified 

Department of Defense (DOD) Disclaimer 

Department of Education (Education) Unqualified 

Department of Energy (DOE) Unqualified 

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 

General Services Administration (GSA) Unqualified 

National Aeronautics and Space Administration (NASA) Disclaimer 

National Science Foundation (NSF) Unqualified 

Nuclear Regulatory Commission (NRC) Unqualified 
24 Federal Financial Management Report (2004) 

Office of Personnel Management (OPM) Unqualified 

Small Business Administration (SBA) Disclaimer 

Social Security Administration (SSA) Unqualified 

Agency Components:

Food and Nutrition Service (USDA) N/A** 

Forest Service (USDA) Unqualified 

Rural Development Mission Area (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 

* The Department of Homeland Security (DHS) is not a CFO Act agency. However, DHS prepared and 

submitted audited financial statements in the first year of its existence. 

** Agency component received OMB waiver from audit for FY 2003. 
Federal Financial Management Report (2004) 25 

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. 
26 Federal Financial Management Report (2004) 

Fiscal Year 2003: 

Auditor-Reported Material Weaknesses 

 Beginning* New Resolved Consolidated Ending 

Agriculture 4 0 1 0 3 

Commerce 1 0 1 0 0 

Defense 13 0 2 0 11 

Education 1 0 1 0 0 

Energy 0 0 0 0 0 

HHS 2 0 0 0 2 

Homeland 0 7 0 0 7 

HUD 3 0 0 1 2 

Interior 6 0 2 0 4 

Justice 2 0 1 0 1 

Labor 0 0 0 0 0 

State 1 0 1 0 0 

DOT 5 2 3 0 4 

Treasury 4 0 2 0 2 

VA 2 0 0 0 2 

AID 7 2 6 0 3 

EPA 0 0 0 0 0 

GSA 0 1 0 0 1 

NASA 2 2 0 0 4 

NSF 0 0 0 0 0 

NRC 1 0 1 0 0 

OPM 0 0 0 0 0 

SBA 5 0 2 1 2 

SSA 0 0 0 0 0 

Totals 59 14 23 2 48 

* The “Beginning” column reflects the adjusted numbers reported by the agency Chief Financial Officer and 

Inspector General and may differ from the “Ending” column in FY 2002 as reflected in the 2003 Report.
Federal Financial Management Report (2004) 27 

Fiscal Year 2003: 

Section 2 Reporting in Agency FMFIA Reports 

 Adequate and Effective 

Management Controls Number of Material Weaknesses 

 Yes 

Yes, with 

Material 

Weaknesses* 

No Beginning** New Resolved Consolidated Reassessed Ending

Agriculture X 17 1 5 0 7 6 

Commerce X 1 0 0 0 0 1 

Defense X 70 10 25 15 0 40 

Education X 3 0 3 0 0 0 

Energy X 0 0 0 0 0 0 

HHS X 1 0 0 0 1 0 

Homeland X 10 2 0 0 0 12 

HUD X 1 0 0 0 0 1 

Interior X 11 0 0 0 1 10 

Justice X 10 0 8 0 0 2 

Labor X 0 0 0 0 0 0 

State X 0 0 0 0 0 0 

DOT X 4 2 2 0 1 3 

Treasury X 15 0 3 0 5 7 

VA X 1 0 0 0 0 1 

AID X 2 0 0 0 0 2 

EPA X 0 0 0 0 0 0 

GSA X 3 0 2 0 1 0 

NASA X 1 1 0 0 0 2 

NSF X 0 0 0 0 0 0 

NRC X 0 0 0 0 0 0 

OPM X 0 0 0 0 0 0 

SBA X 0 2 0 0 0 2 

SSA X 0 0 0 0 0 0 

 TOTAL 10 13 1 150 18 48 15 16 89 

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

except for the material weaknesses identified. 

** The “Beginning” column reflects the adjusted numbers reported by the agency Chief Financial Officer and 

Inspector General and may differ from the “Ending” column in FY 2002 as reflected in the 2003 Report. 
28 Federal Financial Management Report (2004) 

Fiscal Year 2003: 

Section 4 Reporting in Agency FMFIA (or Accountability) Reports 

 Systems Conform to 

Requirements Number of Nonconformances 

 Yes 

Yes, with 

Non -

conformances* 

No Beginning** New Resolved Consolidated Reassessed Ending

Agriculture X 2 0 0 0 0 2 

Commerce X 1 0 1 0 0 0 

Defense X 1 0 0 0 0 1 

Education X 1 0 1 0 0 0 

Energy X 0 0 0 0 0 0 

HHS X 1 0 0 0 0 1 

Homeland X 0 3 0 0 0 3 

HUD X 2 0 0 1 0 1 

Interior X 1 0 0 0 0 1 

Justice X 4 0 2 0 0 2 

Labor X 0 0 0 0 0 0 

State X 1 0 1 0 0 0 

DOT X 1 0 0 0 0 1 

Treasury X 5 0 1 1 1 2 

VA X 3 0 1 0 0 2 

AID X 1 0 0 0 0 1 

EPA X 0 0 0 0 0 0 

GSA X 2 1 0 0 0 3 

NASA X 0 0 0 0 0 0 

NSF X 0 0 0 0 0 0 

NRC X 0 0 0 0 0 0 

OPM X 0 0 0 0 0 0 

SBA X 1 0 0 0 0 1 

SSA X 0 0 0 0 0 0 

 TOTAL 11 9 4 27 4 7 2 1 21 

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

except for the non-conformances identified. 

** The “Beginning” column reflects the adjusted numbers reported by the agency Chief Financial Officer and 

Inspector General and may differ from the “Ending” column in FY 2002 as reflected in the 2003 Report. 
Federal Financial Management Report (2004) 29 

Appendix C: Government Corporations Required to 

Submit Audited Financial Statements to OMB 

 FY 2003 Opinion 

Community Development Financial Institutions Fund Unqualified 

Corporation for National and Community Service Unqualified 

Export-Import Bank of the United States (EX/IM) Unqualified 

Federal Crop Insurance Corporation Unqualified 

Federal Deposit Insurance Corporation Unqualified 

Federal Home Loan Banks Unqualified 

Federal Housing Administration Fund Unqualified 

Federal Prison Industries, Incorporated Unqualified 

Financing Corporation Unqualified 

Government National Mortgage Association Unqualified 

Millennium Challenge Corporation N/A* 

National Credit Union Administration Central Liquidity Facility Unqualified 

Overseas Private Investment Corporation Unqualified 

Pension Benefit Guaranty Corporation Unqualified 

Resolution Funding Corporation Unqualified 

Rural Telephone Bank Unqualified 

Saint Lawrence Seaway Development Corporation Unqualified 

Tennessee Valley Authority Unqualified 

* The first set of audited Financial Statements will not be available until March 31, 2005. 
30 Federal Financial Management Report (2004) 

Appendix D: 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 PMA’s initiative for Improving Financial Performance. Over the past fiscal year, 

several agencies have improved their financial performance scores. These agencies are on their 

way toward achieving first class financial management practices. 
Improved Financial Performance 

Explanation of Current Status Score 

 Agency: 

 Receives an unqualified audit 

opinion on its annual financial

statements; 

 Meets financial statement 

reporting deadlines;

 Reports in its audited annual 

financial statements that its 

systems are in compliance with the 

Federal Financial Management

Improvement Act;

 Produces accurate financial 

information on demand;

 Routinely assesses performance 

and financial information which its 

managers use to make day-to-day

decisions; 

 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, agency 

head provides an unqualified 

statement of assurance in its 

annual accountability report. 

 Agency: 

 Produces accurate financial 

information on demand OR

 Routinely assesses performance 

and financial information which 

its managers use to make day-today decisions;

 AND

 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 auditorreported internal control 

weaknesses; auditor expresses an 

opinion on the annual financial

statements; meets financial 

reporting deadlines; and has no

material non-compliance with

laws or regulations; and 

 Provides an unqualified 

statement of assurance in its 

annual accountability report. 

 Agency: 

 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 Act 

Violations; 

 Has repeat material auditorreported internal control 

weaknesses; 

 Gets a disclaimer of opinion 

on its annual financial 

statement; 

 Does not meet financial 

reporting deadlines;

 Is in material non-compliance 

with laws or regulations; OR

 Provides a qualified statement 

of assurance in its annual 

accountability report. 

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 (2004) 31 
32 Federal Financial Management Report (2004) 
http://www.whitehouse.gov/omb/financial