Federal Financial Management Report (2009) 2 
Federal Financial Management Report (2009) i 

Table of Contents 

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

FRAMEWORK FOR IMPROVING FINANCIAL PERFORMANCE ........................................................................3

THE FRAMEWORK’S COLUMNS: REFORM ACTIVITIES....................................................................................7

Eliminating Improper Payments............................................................................................................... 7

Right-sizing the Government’s Real Property ........................................................................................ 8

Improving Intragovernmental Reporting................................................................................................. 9

Financial Systems Modernization.......................................................................................................... 10

Strengthening Internal Controls............................................................................................................. 11

Improving Grants Reporting and Transparency................................................................................... 12

Improving Fiscal Sustainability Reporting............................................................................................ 13

THE FRAMEWORK’S FOUNDATION: CORE ACTIVITIES .................................................................................14

I. Improving Financial Reporting............................................................................................................ 14

II. Strengthening Internal Controls......................................................................................................... 17

III. Improving Financial Systems............................................................................................................ 19

IV. Improving Asset Management .......................................................................................................... 21

V. Improving Grants Management ......................................................................................................... 23

VI. Improving Audit Requirements......................................................................................................... 25

CONCLUSION .................................................................................................................................................................26

APPENDICES...................................................................................................................................................................27

APPENDIX A: SUMMARY OF FY 2008 AUDITED FINANCIAL STATEMENT RESULTS BY AGENCY AND SELECTED 

COMPONENTS..................................................................................................................................................................28

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

ACT TABLES....................................................................................................................................................................30

APPENDIX C: GOVERNMENT CORPORATIONS REQUIRED TO SUBMIT AUDITED FINANCIAL STATEMENTS TO OMB.......37

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

STATEMENTS TO OMB ....................................................................................................................................................38

APPENDIX E: COMPLIANCE WITH THE FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996.....................42

APPENDIX F: DEBT COLLECTION DEFICIENCIES AND CORRECTIVE ACTIONS..................................................................43

APPENDIX G: ABOUT THE OFFICE OF FEDERAL FINANCIAL MANAGEMENT ...................................................................44
Federal Financial Management Report (2009) 1

Executive Summary 

The Office of Federal Financial Management within the Office of Management and Budget 

developed the “Framework for Improving Financial Performance” to provide direction and 

clarity on the executive branch’s financial management improvement goals. As required in the 

Chief Financial Officers Act (31 U.S.C. 3512), the 2009 Federal Financial Management Report 

serves as the annual, financial management 5-year plan and status report for the executive branch 

of the Federal government. This report underscores the activities that lead to improved Federal 

financial management, and it highlights the most recent fiscal year's financial reporting results. 

The Framework, as depicted in the diagram below, intends to provide the public with a simple 

presentation of: 

• Priority objectives (or “pinnacle”) of the Federal government’s financial management 

improvement efforts, which historically have included improving government-wide and 

agency financial statement audit results and other financial health metrics such as 

reducing improper payments and “right-sizing” the Government’s real property holdings.

• Reform Activities that are meant to “support” or “strengthen” the ongoing, governmentwide financial management improvement activities. In FY 2008, the reform initiatives 

focused on improved reporting and transparency in areas such as improper payments, real 

property, grant payments, and long-term fiscal sustainability. As outlined in greater 

detail in this report, critical successes were achieved in meeting these objectives and 

position the Federal government for further advances in FY 2009 and beyond. 

• Core Activities that include the day-to-day financial management activities that help 

ensure a strong foundation is in place for achieving success across the Federal 

government.
Federal Financial Management Report (2009) 2

In Fiscal Year 2008, the following results were achieved for the Government-wide Financial 

Management Improvement Goals: 

o Clean Audit Opinions. Twenty of twenty-four CFO Act agencies1

, representing 

more than 75% of all Federal outlays, achieved a clean audit opinion. This 

represents the highest number of clean audit opinions achieved in the past 6 years. 

Auditor-Identified Material Weaknesses. The total number of auditor-identified 

material weaknesses declined from 39 to 32 for FY 2008. This is the fifth 

consecutive year that material weaknesses have declined, with nearly a 50% 

decrease in weaknesses since FY 2001. Appendix B of this report offers a more 

detailed breakdown and description of those material weaknesses. 

o Timely Reporting. For the fourth consecutive year, all CFO Act agencies met the 

government-wide performance target of issuing their audited financial statements 

within 45 days of the close of the fiscal year. This government-wide performance 

target will remain the same for future years. 

o Improper Payments. The improper payment rate for the programs that originally 

reported in FY 2004 decreased from 3.1% to 3.0% in FY 2008. The largest 

portion of this reduction is attributable to the Old Age, Survivors & Disability 

Insurance program, which reduced errors by $541 million since last reporting in 

FY 2007. 

o Excess Real Property. The Federal government disposed of more than $1 billion 

in excess real property in FY 2008 and has disposed of over $8 billion in real 

property since FY 2004.2 

These positive trends demonstrate that financial management improvement efforts are having 

their intended result. However, the metrics by which we measure the success of Federal 

financial management demonstrate that enormous challenges remain. The Departments of 

Defense and Homeland Security, two of the largest and most critical agencies in government, do 

not have clean opinions on their financial statements. Auditors continue to identify more than 

30 material weaknesses in financial reporting across the Government. Billions of dollars in 

improper payments and excess real property remain on the Federal books and compromise our 

ability to serve the taxpayer most effectively. The FY 2008 results and those achieved over the 

past five years serve as an important building block toward addressing the longer-term 

challenges in Federal financial management.

 

1

 The CFO Act lists the 24 largest, independent executive agencies required to establish Chief Financial Officers 

(31. U.S.C. 91). See the “Improving Financial Reporting” core activity on page 14 for further statutory details. 

2

 The source for real property disposal valuation is the Federal Real Property Profile (FRPP) – the consolidated 

inventory of Federal real estate maintained by the General Services Administration. The FRPP calculates total 

disposals by using the market price for those properties disposed through sale and the replacement value for those 

properties disposed through demolition or other conveyance. The replacement value represents the cost necessary to 

replace a facility and is often a higher than market value. 
Federal Financial Management Report (2009) 3

Framework for Improving Financial Performance 

Introduction

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

Budget (OMB) is responsible for the Federal government’s financial management policy and is 

led by the OMB Deputy Director for Management and the OMB Controller. The OFFM mission 

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

government. To accomplish this mission, OFFM strives to: 

(1) Provide effective leadership on government-wide financial management 

improvement initiatives that result in successful outcomes for the financial 

management-related initiatives of the executive branch. 

(2) Issue government-wide financial management policies and requirements that are 

user-friendly, transparent, consistently complied with by Federal agencies, and that 

facilitate improved financial management without undue burden on agency and 

taxpayer resources. 

OFFM works closely with the Chief Financial Officers Council (CFOC), the Inspector General 

community, and the Government Accountability Office (GAO) to build consensus on financial 

management priorities, identify cross-cutting challenges and solutions, and to ensure that OMB 

policies are having the desired effect. To set forth the roadmap and provide clarity on how its 

objectives will be met, OFFM developed the “Framework for Improving Financial 

Performance.” 

About the Framework

The Framework is intended to provide the public 

with a simple presentation of: (1) the ultimate 

objective (or “pinnacle”) of the Government’s 

financial management improvement efforts; (2) the 

projects currently underway in the Federal financial 

community; and (3) the day-to-day financial 

management activities, or “core” activities that help 

ensure a strong foundation is in place for achieving 

success across all Federal agencies. 

Government-wide Financial Management Improvement Goals3

Federal agencies in the executive branch are focused on achieving the financial management 

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

 

3

 Appendices A through H provide supplementary information for a complete representation of the 5-Year Financial 

Management Plan and financial reporting status for FY 2008. 
Federal Financial Management Report (2009) 4

taxpayer funds are being properly accounted for and wisely spent. Each reform activity, or 

“column,” of the “Framework for Improving Financial Performance” represents a key financial 

management-related initiative that has a defined goal and is monitored for improved results. As 

noted throughout this report, Federal agencies are making significant progress towards achieving 

each goal. 

Eliminating Improper Payments - Agencies have improved the accuracy of Federal payments by 

(1) strengthening controls over the payment process, (2) ensuring that dollars are properly 

accounted for, and (3) sending the proper recipient the correct amount. Since FY 2004, the 

Federal government has established an impressive track record of making its improper payment 

measurements transparent to the public and then taking quick and effective action to eliminate 

those improper payments. More than 70 programs that were designated as high-risk for 

improper payments in FY 2004 have since been measured. In FY 2008, almost 100% of 

programs that were previously designated as high-risk were measured. Further, agencies have 

reduced the improper payment error rate in the programs originally measured and reported from 

4.4% in FY 2004 to 3.0% in FY 2008. The goal of reducing the improper payment rate by a 

tenth of a percent annually was successfully reached in FY 2008. The goal for FY 2009 is an 

overall error rate of 2.9% or lower. 

Right-sizing the Government’s Real Property - Agencies have established a comprehensive 

inventory of the entire Government’s real property assets that indicates excess and surplus 

property. The agencies are taking aggressive action to eliminate those properties from the 

Federal books. Since FY 2004, the Government has identified and disposed of approximately $8 

billion in unneeded real property. The goal for FY 2008, to dispose of an additional $1 billion in 

excess real property, was achieved. Looking forward, the goal is to maintain an annual real 

property disposal rate of $1 billion of excess real property with a cumulative disposal goal of $12 

billion by 2012. 

Improving Financial Reporting - Agencies have improved the quality of their financial reporting. 

Twenty of twenty-four major agencies received clean audit opinions, and the agencies reduced 

the number of material weaknesses reported. The FY 2008 goal was for 21 agencies to receive 

clean audit opinions and to reduce material weaknesses to 37. Federal agencies had mixed 

results, falling short on the clean opinion goal by one agency, but exceeding the material 

weakness reduction goal by 5. Over the next five years, the goal is to achieve and maintain 22 

clean opinions (with the Departments of Defense and Homeland Security achieving clean 

opinions beyond the 5-year window) and to continue to reduce material weaknesses by 10% 

annually. 
Federal Financial Management Report (2009) 5

The following chart illustrates the key FY 2008 results: 

Reform Activities

The Federal financial community has undertaken a series of improvement efforts intended to 

strengthen key areas of financial management. The Reform Activities include the following 

seven initiatives: 

1. Eliminating Improper Payments 

2. Right-sizing the Government’s Real Property 

3. Improving Intragovernmental Reporting 

4. Financial Systems Modernization 

5. Strengthening Internal Controls 

6. Improving Grants Reporting and Transparency 

7. Improving Fiscal Sustainability Reporting 

This report highlights the strategic goal, current focus, and status update for each of the seven 

initiatives. 

Core Activities

The Core Activities represent the foundation that holds the Framework in place. In short, the 

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

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

Core Activities include: 

1. Improving Financial Reporting 

2. Strengthening Internal Controls 

3. Improving Financial Systems 

4. Improving Asset Management 

5. Improving Grants Management 

6. Improving Audit Requirements 
Federal Financial Management Report (2009) 6

Some of these core activities (e.g., Strengthening Internal Controls) contain critical components 

that are also represented in the reform activities portion of the Framework. These overlaps are 

attributed to both OFFM and the Federal financial community determining that certain core 

activities require continued enhancement to reform the activities. In this way, the reform 

activities serve to both support the executive branch’s success and solidify the foundation of 

Federal financial activities. This report includes a detailed discussion of each core activity. 

OFFM publishes this detailed report in its efforts to provide effective leadership on governmentwide financial management improvement initiatives, as well as to issue policies and 

requirements that are user-friendly, transparent, and consistently complied with by Federal 

agencies. 
Federal Financial Management Report (2009) 7

The Framework’s Columns: Reform Activities 

The Framework’s Reform Activities are meant to “support” or “strengthen” ongoing financial 

management improvement. OFFM and the greater Federal financial management community 

seek to enhance government-wide financial management for the next five years and beyond. 

Eliminating Improper Payments 

Improper payments occur when Federal funds go to the 

wrong recipient, the recipient receives the incorrect amount 

of funds, the documentation is not available to support a 

payment, or the recipient uses the funds in an inappropriate 

manner. The Improper Payments Information Act of 2002 

(IPIA) (Sec. 1, Pub. L. 107-300, 116 Stat. 2350) created a 

permanent framework for assessing every Federal program 

and dollar for risk of improper payments, annually 

measuring the accuracy of payments, and initiating program 

improvements to ensure that payment errors and 

improprieties are reduced and ultimately eliminated. This reform activity supports the 

Government’s efforts to be a good steward of taxpayer resources by identifying and eliminating 

improper payments. 

STRATEGIC GOAL(S): 

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

CURRENT FOCUS: 

 Measure improper payments in programs that are at significant risk of improper 

payments on an annual basis. 

 Identify the causes of improper payments and develop specific corrective action 

plans to address these causes. 

 Prepare rigorous return-on-investment analyses for program integrity activities and 

ensure that these activities achieve an adequate return-on-investment. 

 Work with the Congress to enact legislative reforms to eliminate errors. 

 Expand reporting and risk assessment of contract improper payments. 

 Participate in a Federal-State partnership project to enhance program integrity 

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

STATUS UPDATE: 

 Implemented action plans to ensure 100% error measurement reporting for all 

previously identified high-risk programs. 

 Completed root cause analysis for all reporting programs. 

 Reported $71.7 billion in total improper payments for FY 2008, a measure that 

captures the error amounts for virtually all high risk programs in government. 

 Decreased improper payment rate in the programs originally reporting in the baseline year (FY 2004) 

from 3.1% to 3.0%. The goal for FY 2009 is a 2.9% improper payment rate or lower. 
Federal Financial Management Report (2009) 8

Right-sizing the Government’s Real Property 

On February 4, 2004, the President signed Executive Order 

13327, Federal Real Property Asset Management. To meet 

the requirements of the Executive Order, agencies must 

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

inventory, performance measures) to manage their portfolio 

of real property assets at the right size, in the right 

condition, and at the right cost. This reform activity 

supports the Government’s objective to identify and dispose 

of excess Federal real estate. 

STRATEGIC GOAL(S): 

 Right-size the Federal real property inventory. 

CURRENT FOCUS: 

 Capture inventory data/performance metrics on all constructed assets. 

 Dispose of unneeded Federal real property. 

 Obtain legislative authority to reform asset management and disposition, including 

the retention of sales proceeds. 

 Enact legislation to allow Executive agencies to retain a portion of the net proceeds 

of sales which would be directed toward the agency’s repair and alterations needs. 

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

security, historic preservation, and sustainability. 

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

 Develop performance targets and evaluate opportunities to consolidate leased space 

and maximize its utilization within a Department as well as government-wide. 

STATUS UPDATE: 

 Reported to the government-wide database, inventory and performance data on 

approximately 1.1 million assets valued with operating costs exceeding $1.5 trillion. 

 Disposed of approximately $8 billion in unneeded real property assets since FY 2004. 

 The goal for FY 2009 is to dispose of an additional $1 billion in unneeded real property. 
Federal Financial Management Report (2009) 9

Improving Intragovernmental Reporting 

Each year, the Treasury Department and OMB issue the 

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

the consolidated financial statements for the Government as 

a whole. The Government Accountability Office (GAO) 

has issued a disclaimed audit opinion on the Government’s 

financial statements for twelve consecutive years. A major 

reason for the disclaimer is the Government’s inability to 

adequately account for and reconcile intragovernmental 

transactions between departments and agencies. This 

reform activity supports effective financial management 

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

timely financial information to help guide decision-making.

STRATEGIC GOAL(S): 

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

consolidated financial statements. 

CURRENT FOCUS:

 Downgrade the Intragovernmental Transactions material weakness to a significant 

deficiency, and ultimately eliminate the deficiency. 

 Facilitate more systemic quarterly reconciliations. 

 Select and implement an Intragovernmental Dispute Resolution Committee. 

 Define recommended systems changes, if needed. 

 Complete work on a standardized interagency agreement template. 

STATUS UPDATE: 

 Updated and published standard intragovernmental business rules that are effective 

for all agencies (via Treasury’s Bulletin No. 2007-03, as amended by Bulletin No. 

2009-01). 

 Drafted and vetted a Memorandum of Understanding for CFOs to affirm their 

agency’s participation in the Intragovernmental Dispute Resolution Committee 

process. 

 Distributed a draft interagency agreement template. 

 Held initial discussions with CFOs and published “Watch List,” which resulted in a $12 billion 

decrease in intragovernmental imbalances during FY 2008. 

 The goal for FY 2009 is to eliminate an additional $6 billion in imbalances reported on the Watch 

List. 
Federal Financial Management Report (2009) 10

Financial Systems Modernization 

Efforts to standardize financial systems are improving the 

cost, quality, and performance of financial management 

operations by adopting common standards and shared 

solutions as well as implementing other government-wide 

improvements to foster efficiencies by standardizing, 

consolidating and optimizing Federal financial operations. 

This reform activity supports the objectives of the Federal 

Financial Management Improvement Act (FFMIA) of 1996 

by significantly improving the quality of financial data 

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

Government operations. 

STRATEGIC GOAL(S): 

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

financial management activities. 

CURRENT FOCUS

 Finalize all business process standards, including Reimbursables and Reporting. 

 Revise certified software policy to require common government-wide accounting 

classifications and business process standards to be inherent in the core financial 

management software. 

 Issue revised financial system requirements. 

 Issue revised test scenarios. 

 Collect and report performance metrics for the cost and performance of financial 

management activities. 

STATUS UPDATE: 

 Published final business process standards for Funds Management, Payment 

Management and Receivables Management processes. 

 Currently revising OMB Circular A-127, Financial Management Systems, that 

reflects OMB’s policy of requiring Federal and commercial shared service providers to implement 

core financial systems with standard financial business processes and system configurations.
Federal Financial Management Report (2009) 11

Strengthening Internal Controls 

Effective internal control over financial reporting is essential 

for successful financial management. Reliable financial 

information is critical for key decisions being made on a daily 

basis—ranging from routine decisions such as purchasing 

office supplies to more mission-related decisions such as 

building satellites. Federal agencies must strengthen internal 

control over financial reporting in order to sustain clean audit 

opinions within financial reporting deadlines in the wake of 

increasing financial audit scrutiny. This reform activity 

supports effective financial management as evidenced by the 

achievement of clean audits and the elimination of material weaknesses (MW). 

STRATEGIC GOAL(S): 

 Improve effectiveness of internal control over financial reporting.

CURRENT FOCUS: 

 Facilitate sharing of best practices and lessons learned between agencies. 

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

 Receive updated corrective action plans from agencies that reflect lessons learned 

from FY 2008 A-123, Appendix A implementation and achieve consensus between 

management, Inspectors General, and OMB. 

 Receive updated implementation plans from two agencies that have not completed 

a full scope Appendix A assessment (testing all key processes). 

STATUS UPDATE: 

 Facilitated a forum between the financial, acquisition, program, audit, and 

information technology communities to discuss overall internal control 

frameworks and to better integrate and leverage existing internal control reviews. 

 Implemented a full scope Appendix A assessment in 22 of the 24 CFO Act 

agencies. 

 Auditor-identified material weaknesses among the 24 major agencies have 

declined for five consecutive years, with an 18% reduction achieved from FY 2007 

to FY 2008. The goal for FY 2009 and beyond is to achieve a 10% reduction in material weaknesses 

annually. 
Federal Financial Management Report (2009) 12

Improving Grants Reporting and Transparency 

Each year, the Federal government provides over $500 

billion in grants to more than 60,000 grantees—State, local 

and tribal Governments, colleges and universities and nonprofit organizations. These dollars are awarded though 

more than 1,700 grant programs managed by Federal 

agencies. Improved solutions for grants management are 

essential for the strengthening of accountability and 

increasing the cost efficiency of grant programs. This 

reform activity supports the objective to use financial 

information to manage costs and ensure Federal dollars are 

wisely and effectively spent.

STRATEGIC GOAL(S): 

 Implement government-wide solutions that increase transparency of grant activities, 

lower administrative costs, and simplify application/reporting. 

CURRENT FOCUS:

 Improve governance of government-wide grants initiatives. 

 Expand searchable public website to include subgrant awards. 

 Streamline the Federal systems that capture and maintain grant and subgrant data. 

 Continue to simplify and standardize grant-making systems and processes. 

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

discretionary grants and explore uses for mandatory grants.

 Improve the quality of Single Audits and require additional training for auditors. 

STATUS UPDATE: 

 Completed the pilot project for collecting and reporting subgrantee data to 

searchable website. 

 Developed consolidated standard grant forms for reporting financial and 

performance information. 

 Implemented electronic submission for data collection form and all single audit 

reports (average 37,000 submissions per year).

 Conducted two grant policy information webcasts collectively reaching over 3,000 stakeholders.
Federal Financial Management Report (2009) 13

Improving Fiscal Sustainability Reporting 

Federal entitlement programs such as Medicare and Social 

Security are on an unsustainable fiscal path. OMB is 

working with the Treasury Department, the GAO, and the 

Federal Accounting Standards Advisory Board (FASAB) 

to improve fiscal sustainability reporting.4

 Improved 

reporting helps Federal stakeholders assess long-term 

fiscal sustainability and alerts lawmakers and the public of 

the impending fiscal crisis that will occur if no action is 

taken. Improving fiscal sustainability reporting will result 

in timely and reliable financial information to help guide 

decision-making. 

STRATEGIC GOAL(S): 

 Report comprehensive fiscal sustainability data, including social insurance and 

other programs, that facilitate and guide reform efforts to address the long-term 

fiscal imbalance. 

 Provide comprehensive fiscal sustainability data, including social insurance 

disclosures, in the Financial Report used by lawmakers and the public to inform 

the debate on entitlement reform. 

CURRENT FOCUS: 

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

within the Government-wide Financial Report. 

 Launch pilot project to develop a prototype Statement of Fiscal Sustainability. 

STATUS UPDATE: 

 Achieved an unqualified opinion on all agency-level Statements of Social 

Insurance (SOSI) for the third straight year and achieved a clean opinion on the 

government-wide SOSI for the second straight year. 

 Released a FASAB Exposure Draft: Reporting Comprehensive Long-Term Fiscal 

Projections for the U.S. Government designed to improve sustainability reporting. 

 

4

 The FASAB has not defined fiscal sustainability reporting. However, fiscal sustainability reporting, as used here, 

is meant to align with the FASAB’s financial reporting objective of stewardship, specifically, “whether future 

budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due.” 

(Statement of Financial Accounting Concepts 1, paragraph 139) 
Federal Financial Management Report (2009) 14

The Framework’s Foundation: Core Activities 

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

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

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

and procedures.

I. Improving Financial Reporting 

During FY 2008, OFFM continued to improve Federal 

financial reporting in three key areas: (1) governmentwide financial reporting requirements (OMB Circular A136, Financial Reporting Requirements); (2) accounting 

standards; and (3) consolidated government-wide financial 

statements (in coordination with the Department of the 

Treasury). 

 

OMB Circular A-136, Financial Reporting Requirements 

In conjunction with the CFO Council, OMB updates its guidance relating to agency and 

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

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

to perform this work, with all 24 CFO Act agencies represented. Circular A-136 establishes a 

central reference point for all Federal financial reporting guidance for executive branch 

departments, agencies, and entities required under the CFO Act5

, the Government Management 

Reform Act (GMRA) of 19946

, and the Accountability of Tax Dollars Act (ATDA) of 20027, 

and the Government Corporations Control Act of 19458 to submit audited financial statements, 

interim financial statements, and Performance and Accountability Reports (PAR) or Annual 

Management Reports. This Circular is available on the OMB homepage (by clicking the 

“Circulars” link), which is located at www.whitehouse.gov/omb. 

A significant achievement in FY 2008 includes the continuation of a pilot to streamline PAR 

reporting that allows agencies to select an alternative reporting format. The results of the FY 

2007 pilot presented many best practices for providing accessible and useful performance and 

financial information to agency stakeholders. One of the more successful products of the pilot 

was a “Highlights” document that contained performance and financial information in a brief, 

user-friendly format. In FY 2008, OFFM made further improvements to the pilot by initiating a 

three-tiered drill down reporting structure, which allowed agencies to provide information that is 

easily accessible to their diverse set of readers and stakeholders. The structure includes: (1) a 2-

page Budget, Performance and Financial Snapshot that provides the reader with a quick picture 

of agency mission, organization, performance and financial results, and plans for the future; (2) a 

 

5

 Pub. L. 101 - 576, 104 Stat. 2838 

6

 Pub. L. 103 - 356, 108 Stat. 3410 

7

 Pub. L. 107 - 289, 116 Stat. 2049 

8

 31 U.S.C. 9101 et seq. 
Federal Financial Management Report (2009) 15

25-page Citizens’ Report (formerly called “Highlights”) that summarizes the agency’s mission, 

key goals, how funds are spent, performance relative to goals, and actions planned plan build on 

successes or address shortcomings; and (3) a comprehensive Agency Financial Report (AFR) 

and Annual Performance Report (APR) of complete details on relevant financial and 

performance results. 

Accounting Standards 

The Federal Accounting Standards Advisory Board (FASAB) was established as an advisory 

board under the Federal Advisory Committee Act (5 U.S.C. App) to facilitate the standard 

setting process. FASAB’s mission is to consider and recommend accounting concepts and 

standards for the Federal government. In 1999, the American Institute of Certified Public 

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

generally accepted accounting principles (GAAP) for Federal financial reporting entities (i.e., an 

accounting industry “stamp of approval”). 

The Deputy Controller represents OMB on the FASAB. Additionally, an OFFM representative 

serves on the Accounting and Auditing Policy Committee (AAPC), a permanent committee 

sponsored by the FASAB. The AAPC assists the Federal government in improving financial 

reporting through the timely identification, discussion, and recommendation of solutions to 

accounting and auditing issues within the framework of existing authoritative literature. 

During FY 2008, FASAB issued Statement of Federal Financial Accounting Concepts 5,

Definitions of Elements and Basic Recognition Criteria for Accrual-Basis Financial Statements. 

The AAPC completed the Technical Release 8, Clarification of Standards Relating to InterEntity Cost; and Technical Release 9: Implementation Guide for Statement of Federal Financial 

Accounting Standards 29: Heritage Assets and Stewardship Land. 

The Financial Report of the U.S. Government 

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

Report of the U.S. Government (Financial Report). The Financial Report contains the 

consolidated financial statements of the Government as a whole, which are subject to audit by 

the Government Accountability Office (GAO). The Financial Report also serves as an important 

example of improved transparency for reporting government-wide financial information. The 

Treasury and OMB promote the Financial Report to increase awareness of America’s fiscal 

position and condition. 

The 2008 Financial Report was published on December 15, 2008, and is located on the web at 

http://www.fms.treas.gov/fr/index.html. The Treasury issued the Financial Report as an 

important piece of the Federal effort to increase public awareness of the Government’s current 

and future spending obligations. For the past five years, OMB has required the Treasury to issue 

the Financial Report on December 15, rather than on the March 31 statutory deadline, to provide 

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

On February 14, 2008, the Treasury and OMB, in coordination with GAO, released the first-ever 

summary of the Financial Report entitled, The Government’s Financial Health: A Citizen’s 
Federal Financial Management Report (2009) 16

Guide to the 2007 Financial Report of the United States Government. The 8-page Guide is a 

user-friendly overview of the U.S. Government’s short-term and long-term financial outlook 

including the Government’s biggest fiscal challenge, the unsustainable growth in entitlement 

programs. The FY 2008 Guide was published on December 15, 2008, and is included in the 

2008 Financial Report. In addition to focusing on the growth in entitlement programs, the FY 

2008 Guide summarizes the recent events in the housing market and the Government’s efforts to 

calm the resulting effects on the financial markets and what these efforts mean to the taxpayer. 

Also, this past year, the Treasury Department and OMB successfully closed 35 of GAO’s 81 

recommendations reported in July 2007. In their June 2008 report, GAO cited 10 new findings, 

which resulted in a total of 56 open recommendations during GAO’s FY 2008 audit. Recent 

OMB and the Treasury Department actions, taken to address GAO’s new findings and 

recommendations, include updating guidance on standard processes for reconciling 

intragovernmental imbalances and continuing outreach efforts to address differences between 

what is reported in Federal agencies’ financial statements and the consolidated financial 

statements. 

During FY 2009, OMB will continue working with the Treasury Department to address all of 

GAO’s recommendations from their FY 2008 and prior reports. This includes focusing on the 

three primary material weaknesses that contribute to the disclaimer of an opinion on the 

consolidated financial statements: (1) elimination of intragovernmental imbalances, (2) 

development of effective processes for preparation of the consolidated financial statements, and 

(3) resolution of management issues at the Department of Defense. 
Federal Financial Management Report (2009) 17

II. Strengthening Internal Controls 

The OMB Circular A-123, Management’s Responsibility for 

Internal Control (Circular A-123), is the policy document 

that implements the requirements of the Federal Managers 

Financial Improvement Act (FMFIA). The FMFIA requires 

that management establish and maintain effective internal 

control to achieve the objectives of (1) effective and 

efficient operations, (2) reliable financial reporting, and (3) 

compliance with applicable laws and regulations. The 

FMFIA also requires the head of each executive agency to 

report annually to the President and the Congress on the 

effectiveness of the internal controls and any identified material weaknesses in those controls. 

Circular A-123 contains multiple appendices that address, at a more detailed level, one or more 

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

activities to support the goal of strengthening internal control across the Government. 

Circular A-123 Appendices:

Appendix A—Internal Control over Financial Reporting 

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

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

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

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

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

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

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

Questions (FAQ) document, which elaborates on concepts in the Appendix. The results of the 

FY 2008 assessment can be found in Appendix B of this report. The FAQ document can be 

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

Appendix B—Improving the Management of Government Charge Card Programs 

The Federal government has more than 3.1 million charge cards in use under the General 

Services Administration’s (GSA’s) SmartPay Program. The cards are used to purchase goods 

and services, pay for Government employee travel and travel-related expenses, and to acquire 

fuel and maintenance services for Government vehicles, aircraft and other equipment. In FY 

2008, these transactions totaled more than $30 billion, with $19.7 billion (nearly 67%) spent 

through purchase cards alone. This program continues to demonstrate the improved efficiencies 

of charge card use through an estimated $1.85 billion in annual savings as compared to paperbased purchase processes. Other benefits of the program include refunds paid to agencies that 

were in excess of $166 million in FY 2008, as well as access to reduced-price airfares under the 
Federal Financial Management Report (2009) 18

GSA City Pairs Program. FY 2008 usage of the City Pairs Program saved the Government a 

projected $4.52 billion over regularly priced airfares. 

OFFM provides oversight of Federal charge card programs through Appendix B of Circular A123. This guidance requires agencies to maintain internal controls that reduce the risk of fraud, 

waste, and error in Government charge card programs. As required by Appendix B, agencies 

submit updated copies of their Charge Card Management Plans to OMB on an annual basis, and 

submit performance information on either a quarterly or annual basis depending on the size of 

the agency. OFFM works with agencies to ensure strong internal control policies and procedures 

government-wide. OFFM also works closely with the GSA SmartPay program, which manages 

the primary contracts with the Federal government’s charge card providers, to ensure the 

program is operating effectively and efficiently. OFFM is currently working with GSA and the 

Federal charge card community to revise Appendix B. This revision incorporates 

recommendations made by the GAO in its April 2008 audit of the Federal Purchase Card 

Program as well as comments and suggestions made by Agency/Organization Program 

Coordinators. The revised Appendix B will incorporate internal controls for convenience 

checks, expand on controls related to property acquired with government charge cards, and 

implement specific guidance for ensuring that appropriate disciplinary actions (including 

dismissal) are properly considered and imposed for fraud and other egregious abuse of a Federal 

charge card. 

Appendix C—Requirements for Effective Measurement and Remediation of Improper 

Payments 

Appendix C implements the requirements of the Improper Payments Information Act (IPIA) and 

the Recovery Audit Act (31 USC 3561-3567). It consolidates previous guidance documents that 

were issued as OMB memoranda under Circular A-123. Appendix C addresses all categories of 

improper payments that include, but are not limited to: programmatic disbursements, benefit 

entitlements, loan guarantees, contracts, and other types of administrative payments. 
Federal Financial Management Report (2009) 19

III. Improving Financial Systems

In FY 2008, OMB continued its efforts to ensure that 

agencies are in substantial compliance with Federal 

Financial Management Integrity Act (FFMIA) Section 

803(a) requirements: (1) Federal financial management 

systems requirements; (2) applicable federal accounting 

standards; and (3) the United States Standard General 

Ledger at the transaction level. Agencies have made 

measurable progress in achieving substantial compliance 

with FFMIA since last year. Specifically, 15 agency 

heads reported that their agencies were in substantial 

compliance with FFMIA, one more than in FY 2007 and 

ten more than in FY 2001, when only four agency heads reported substantial compliance. 

The success in reducing the number of FFMIA noncompliance results is attributable to the 

efforts of agencies conducting management’s assessment of internal control over financial 

reporting as required by Appendix A of OMB Circular A-123, Management’s Responsibility for 

Internal Control. Many agencies have been implementing baseline assessments of all key 

processes and controls. The assessments have been successful in early detection of control 

deficiencies relating to financial management systems. As a result, agencies have been resolving 

systemic issues with greater efficiency and reducing FFMIA noncompliance. 

In addition to the A-123 Appendix A assessments, OMB has continued its initiative to 

standardize government-wide business processes to address the Federal government’s long-term 

need to improve financial management and assist agencies in substantially complying with 

FFMIA. The goal of the standardization initiative is to improve the cost, quality, and 

performance of financial management systems by leveraging shared service solutions and 

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

operations. To meet the goal, the projects were established to define and develop uniform 

business standards (e.g., common government-wide accounting code, business processes, data, 

and business rules). Over the next several years, software vendors will be required to 

incorporate these standards into their financial systems. This approach will better ensure that 

agencies begin implementing a financial system with a baseline set of FFMIA standards inherent 

in the software. 

OMB continued its effort to migrate agencies to a shared service model, which requires 

designated public and qualified commercial providers to deliver both financial management and 

financial systems services to multiple agencies. In the last few years, the Department of 

Agriculture, the Department of Labor, the Environmental Protection Agency, the Office of 

Personnel Management, and the Department of Housing and Urban Development have selected a 

commercial shared service provider. By focusing on developing financial standards and 

incorporating them into Federal software, the standardization initiative will ensure that all 

agencies using financial systems with standard configurations meet FFMIA Section 803(a) 

requirements. 
Federal Financial Management Report (2009) 20

This year, OMB began a significant re-write of Circular A-127, Financial Management Systems. 

The revised Circular will clarify the definition of FFMIA substantial compliance so that auditors 

and agency heads interpret the guidance more consistently. This effort will further improve 

management of financial systems. 
Federal Financial Management Report (2009) 21

IV. Improving Asset Management

OFFM is improving asset management throughout the 

Federal government by coordinating activities in the areas of 

real property and financial assets, including the collection of 

debts owed to the Government. 

Real Property 

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

objective the past five years. The Government owns approximately 1.1 million real property 

assets with a replacement value in excess of $1.5 trillion and holds title to approximately one in 

every four acres of land in the United States. Federal real property assets continue to be 

accounted for and effective plans continue to be made for the acquisition, management, and 

disposition of assets. 

 

The agencies have taken specific steps to improve the management of real property on a 

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

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

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

for the effective management of an agency’s real properties. The Executive Order also created 

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

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

Using the Executive Order as a framework, agencies are being held accountable for accurately 

reporting their real property inventory and performance measurement data. Agencies must 

provide evidence of the specific actions taken to ensure that mission critical assets are managed 

in the right condition and that those unneeded assets exit the Federal inventory. 

Debt Collection 

Agencies continue to improve federal debt collection with the support of centralized 

management of delinquencies in the Department of the Treasury. The Debt Collection 

Improvement Act (DCIA) of 1996 (Sec. 31001, Pub. L. 104-134, 110 Stat. 1321-358) requires 

agencies to take prompt action in recovering debts, aggressively monitor accounts, properly 

screen potential borrowers in the case of credit programs, and resolve outstanding debt through a 

variety of options. In combination with agency methods, referring debt to the Department of the 

Treasury and the Department of Justice for litigation can yield significant and measurable 

savings for the taxpayer. Between 1996 and 2008, Treasury’s Financial Management Service 

(FMS) has collected more than $37.4 billion in delinquent debt. 

OMB Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables (Circular 

A-129) requires agencies to submit an annual report to OMB with information on: (1) internal 

debt collection processes; (2) agency identified deficiencies in current policies; (3) actions taken 
Federal Financial Management Report (2009) 22

by agencies to comply with DCIA and Circular A-129; and (4) intended actions to improve debt 

collection policies and practices. For FY 2008 full reports were due by December 31, 2008. 

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

of DCIA and Circular A-129, and they continue to improve their debt collection practices. A 

number of agencies have reported that they are still working to come into compliance. See 

Appendix G: Debt Collection Deficiencies and Corrective Actions, which includes a table of 

notable deficiencies and corrective actions that were reported by agencies to OMB. 

OMB will continue to work with the agencies on reducing delinquent obligations and to develop 

more effective debt collection tools. 
Federal Financial Management Report (2009) 23

V. Improving Grants Management 

OFFM, working cooperatively with the grant-making 

agencies and the grantee community, establishes 

government-wide policy and requirements to ensure that 

grants are managed properly, Federal dollars are spent in 

accordance with applicable laws and regulations, and that 

Federal grants are free from fraud, waste, and 

mismanagement. Each year, the Federal government 

provides over $500 billion in grants to State, local and 

Tribal Governments, colleges and universities, and other 

non-profit organizations—roughly one-sixth of the Federal 

budget. 

In FY 2008, OFFM and Federal agencies, organized under the Grants Policy Committee of the 

CFO Council, continued to streamline grantee reporting in accordance with its implementation 

plan for the Federal Financial Assistance Management Improvement Act of 1999 (Pub. L. 106-

107). While the Act itself expired in 2007, OFFM and Federal agencies revisited their 

implementation strategy and further simplified Federal financial assistance applications and 

reporting requirements. To date, achievements include: 

 Establishing a single portal to find and apply for financial assistance opportunities. 

 Limiting the number of standard application forms. 

 Improving the approach to issue and locate OMB guidance, and to implement agency 

regulations that apply to grant award and administration. 

 Achieving greater consistency across the different sets of OMB cost principles. 

 Standardizing the funding opportunity announcement format that makes it easier for 

potential applicants to find the information they need to decide whether to apply and 

submit responsive applications. 

Future efforts to streamline and improve the grants management include: 

 Completing the establishment of government-wide standards for post-award reporting: 

financial, performance/progress, and property (intellectual, real, and tangible personal 

property). 

 Adopting a new approach to award content and format that has potential pay-offs for both 

recipients and agencies in applying and complying with administrative and national 

policy requirements. 

 Reducing the number of system variations and disparate business processes, including 

those related to grant payments. 

 Enhancing the quality of Single Audits under OMB Circular A-133, Audits of States, 

Local Governments, and Non-Profit Organizations. 

 Establishing training and certification standards for Federal grants managers. 

Additionally, future efforts will also include capturing subgrant award data on the searchable 

website, USASpending.gov, in accordance with the Federal Funding Accountability and 
Federal Financial Management Report (2009) 24

Transparency Act of 2006, and the implementation of Section 872 of Public Law 110-417, which 

requires that OMB and GSA establish and maintain a database of information regarding the 

integrity and performance of certain persons awarded Federal contracts and grants. The focus 

for USASpending.gov will be on improving data quality and streamlining the data submission 

process. The focus for the new performance and integrity database will be to ensure the 

information is available by October 2009. 
Federal Financial Management Report (2009) 25

VI. Improving Audit Requirements 

OMB provides audit requirements to implement the audit 

provisions of several key pieces of legislation previously 

mentioned in this report, such as the Inspector General Act 

of 1978 (5 U.S.C. App.), FMFIA, CFO Act, GMRA, and 

the FFMIA. The periodic review, improvement, and 

reissuing of audit requirements are important in ensuring 

the integrity and transparency of agencies’ financial data 

and internal controls so that taxpayer resources are 

protected from waste, fraud, and mismanagement. 

Since there were no major changes in key legislation or in the AICPA and GAO financial audit 

guidance, the Yellow Book, OMB’s Audit Bulletin was not revised this year. Instead, the 

Bulletin was amended to reflect certain audit and financial reporting changes that were relevant 

to the Federal financial management community. To this end, OMB issued “Memorandum No. 

08-24, Technical Amendments to OMB Bulletin No. 7-04, Audit Requirements for Federal 

Financial Statements,” on August 25, 2008. Among other things, the Bulletin was amended to 

reflect provisions that are no longer applicable and for changes that coincide with revisions to 

OMB Circular A-136. Examples of specific amendments include: 

 Clarification that the Agreed-Upon Procedures on Intragovernmental Material 

Differences did not apply to FY 2008 and beyond. 

 Clarification that provisions that relate to the internal control over performance measures 

no longer apply. 

 Updates to reflect the continuation of OMB’s Performance and Accountability Report 

(PAR) Pilot for FY 2008. 

 Changes to reflect the use and application, within the Bulletin, of the summary of 

“unadjusted” misstatements to the summary of “uncorrected” misstatements for 

consistency with the terminology used in revised OMB Circular A-136. 

The Technical Amendments to OMB Bulletin No. 7-04 are available on the Web at 

http://www.whitehouse.gov/omb/financial/index.html. 

For FY 2009, OMB will continue to monitor legislation, and the AICPA and GAO financial 

audit guidance, as well as any relevant changes in the Federal financial management community. 

By doing so, OFFM will determine if the Bulletin should be completely revised, amended, or 

remain “as is.” 
Federal Financial Management Report (2009) 26

Conclusion 

Over the past five years, the Federal government has made significant progress in financial 

management. Overall, Federal agencies have achieved more clean audit opinions, fewer auditoridentified material weaknesses, more timely financial reporting, and have improved transparency 

and results on excess real property and improper payments. While these results demonstrate the 

improvement in performance on key financial management metrics, significant challenges 

remain. 

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

achieve greater success in those areas. The reform activities, in particular, reflect the current 

priorities for improving financial management based on the key challenges and opportunities in 

today’s environment. OFFM will continue to monitor and assess the financial management 

environment. As it changes, reform initiatives may evolve into the day-to-day core activities and 

core activities may take on new or greater significance to become reform initiatives. Moreover, 

a regular re-evaluation of the reform priorities will be results-oriented and guided by the 

objectives of future Administrations and will focus on results. 

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

activities included in this report. Through the Framework, every CFO across the Federal 

government shares common goals for improving financial performance. In addition, a closely 

knit financial management community exists to respond to long-standing and arising financial 

challenges. Looking ahead, OMB, Federal CFOs, and the financial management community will 

strive to achieve sound financial performance, which is embodied by transparency, compliance, 

and strategic management. These principles will continue to guide the Government’s efforts 

because improved financial management is critically important to the Federal financial 

management community, as both Federal agencies and managers and as the public. 
Federal Financial Management Report (2009) 27

APPENDICES 
Federal Financial Management Report (2009) 28

Appendix A: Summary of FY 2008 Audited Financial 

Statement Results by Agency and Selected Components 

In FY 2008, agencies subject to the CFO Act were required to prepare annual financial 

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

prepare audited financial statements. 

CFO Act Agency: FY 2008 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) 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) Unqualified9

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 

Office of Personnel Management (OPM) Unqualified 

 

9

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

The Department subsequently reissued its financial statements on December 17, 2008 with an unqualified opinion. 
Federal Financial Management Report (2009) 29

CFO Act Agency: FY 2008 Audit Opinion 

Small Business Administration (SBA) Unqualified 

Social Security Administration (SSA) Unqualified 

Agency Components: FY 2008 Opinion 

Food and Nutrition Service (USDA) Unqualified 

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) Unqualified 

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 

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 
Federal Financial Management Report (2009) 30

Appendix B: Material Weaknesses Reported by Auditors and 

Federal Managers’ Financial Integrity Act Tables 

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

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

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

the 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 non-conformances with government-wide 

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

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

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

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

FMFIA, and the number of financial system non-conformances 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 (2009) 31

Fiscal Year 2008: 

Auditor-Identified Material Weaknesses 

 Beginning New Resolved Consolidated Ending 

Agriculture 2 0 0 0 2 

Commerce 0 0 0 0 0 

Defense 13 0 0 0 13 

Education 0 0 0 0 0 

Energy 0 0 0 0 0 

HHS 4 0 0 2 2 

Homeland 7 0 1 0 6 

HUD 2 0 2 0 0 

Interior 0 1 0 0 1 

Justice 0 0 0 0 0 

Labor 0 0 0 0 0 

State 2 0 2 0 0 

DOT 1 0 1 0 0 

Treasury 1 0 0 0 1 

VA 4 0 1 0 3 

AID 0 1 0 0 1 

EPA 0 0 0 0 0 

GSA 0 1 0 0 1 

NASA 2 0 0 0 2 

NSF 0 0 0 0 0 

NRC 1 0 1 0 0 

OPM 0 0 0 0 0 

SBA 0 0 0 0 0 

SSA 0 0 0 0 0 

Totals 39 3 8 2 32 
Federal Financial Management Report (2009) 32

FY 2008 Auditor-Identified Material Weaknesses by Category 

As a whole, the Government 

is improving controls over 

financial reporting and 

operations. For the fifth year 

in a row, auditor reported 

material weaknesses have 

declined, with a 50% decrease 

in weaknesses since 2001. 

A material weakness is a 

significant deficiency, or 

combination of significant 

deficiencies, in internal 

controls that increases the 

odds that a material 

misstatement of the financial 

statements will go undetected 

or not be prevented. The 

existence of material weaknesses does not necessarily mean the financial statements are 

unreliable. However, they are indicators and their existence suggests the likelihood that the 

financial statements include material misstatements has increased. 

Key Challenges 

This year great strides were made in the area of Financial Systems and Security, which was 

reduced by almost 50 percent. However, challenges still remain. Nearly 70 percent of the 

material weaknesses are attributable to three agencies and are predominately in the areas of 

Financial Management and Reporting and Financial Systems and Security. These key areas 

continue to be a challenge across all agencies and OFFM will work with the agencies to reduce 

material weaknesses. 

Financial Management and Reporting material weaknesses were found in seven agencies, 

primarily as a result of control issues over the financial reporting process. Auditors found the 

controls over the financial statement preparation needed to be improved in various areas 

including oversight, data integrity, reconciliations, updating of policies and procedures, and 

training. By improving controls over the reporting process agencies are better positioned to 

prepare reliable, useful, and timely financial information for decision making. 

Financial Systems and Security material weaknesses were found in five agencies and primarily 

were a result of control issues in Information Technology (IT) security. Auditors found the 

controls over IT security needed to be improved in areas such as updating risk assessments, 

providing IT security training, strengthening password controls, and enhancing controls over 

system software modification. By improving IT security agencies can prevent unauthorized 

access to and increase the reliability of financial information.

Property, Plant, and 

Equipment

13%

Financial Management 

and Reporting

38%

Budgetary 

Reporting

9%

Accounts Payable 

and Other Liabilities

9%

Fund Balance with 

Treasury

9%

Intragovernmental 

Reconciliation

3%

Financial Systems and 

Security

19%
Federal Financial Management Report (2009) 33

Fiscal Year 2008: 

FMFIA Section 2 – Consolidated Totals 

 Adequate and Effective 

Management Controls Number of Material Weaknesses 

 Section 2 

Operational 

Section 2 

Financial 

Reporting 

Beginning New Resolved Consolidated Reassessed Ending

Agriculture Unqualified Qualified 4 0 0 1 0 3 

Commerce Qualified Unqualified 1 0 0 0 0 1 

Defense No 

Assurance 

No 

Assurance 18 4 4 0 2 16 

Education Qualified Unqualified 2 0 1 0 0 1 

Energy Unqualified Unqualified 0 0 0 0 0 0 

HHS Qualified Qualified 2 0 0 0 0 2 

Homeland Qualified No 

Assurance 19 4 2 0 5 16 

HUD Unqualified Unqualified 0 0 0 0 0 0 

Interior Unqualified Qualified 0 1 0 0 0 1 

Justice Qualified Unqualified 2 0 0 0 0 2 

Labor Unqualified Unqualified 1 0 1 0 0 0 

State Unqualified Unqualified 2 0 2 0 0 0 

DOT Qualified Unqualified 2 1 2 0 0 1 

Treasury Qualified Qualified 6 0 2 0 0 4 

VA Qualified Qualified 1 0 0 0 1 1 

AID Unqualified Unqualified 1 0 1 0 0 0 

EPA Unqualified Unqualified 0 0 0 0 0 0 

GSA Qualified Qualified 0 1 0 0 0 1 

NASA Unqualified Qualified 3 0 1 0 0 2 

NSF Unqualified Unqualified 0 0 0 0 0 0 

NRC Unqualified Unqualified 1 0 1 0 0 0 

OPM Qualified Unqualified 0 1 0 0 0 1 

SBA Unqualified Unqualified 0 0 0 0 0 0 

SSA Unqualified Unqualified 0 0 0 0 0 0 

 TOTAL 65 13 17 1 8 52 
Federal Financial Management Report (2009) 34

Fiscal Year 2008: 

FMFIA Section 2 – Operational 

 Adequate and Effective 

Management Controls Number of Material Weaknesses 

 Unqualified Qualified No 

Assurance Beginning New Resolved Consolidated Reassessed Ending

Agriculture X 0 0 0 0 0 0 

Commerce X 1 0 0 0 0 1 

Defense X 9 1 4 0 2 4 

Education X 2 0 1 0 0 1 

Energy X 0 0 0 0 0 0 

HHS X 1 0 0 0 0 1 

Homeland X 10 4 1 0 3 10 

HUD X 0 0 0 0 0 0 

Interior X 0 0 0 0 0 0 

Justice X 2 0 0 0 0 2 

Labor X 1 0 1 0 0 0 

State X 1 0 1 0 0 0 

DOT X 1 1 1 0 0 1 

Treasury X 5 0 2 0 0 3 

VA X 0 1 0 0 0 1 

AID X 1 0 1 0 0 0 

EPA X 0 0 0 0 0 0 

GSA X 0 0 0 0 0 0 

NASA X 1 0 1 0 0 0 

NSF X 0 0 0 0 0 0 

NRC X 1 0 1 0 0 0 

OPM X 0 1 0 0 0 1 

SBA X 0 0 0 0 0 0 

SSA X 0 0 0 0 0 0 

 TOTAL 13 11 0 36 8 14 0 5 25 
Federal Financial Management Report (2009) 35

Fiscal Year 2008: 

FMFIA Section 2 – Financial Reporting 

 Adequate and Effective 

Management Controls Number of Material Weaknesses 

 Unqualified Qualified No 

Assurance Beginning New Resolved Consolidated Reassessed Ending

Agriculture X 4 0 0 1 0 3 

Commerce X 0 0 0 0 0 0 

Defense X 9 3 0 0 0 12 

Education X 0 0 0 0 0 0 

Energy X 0 0 0 0 0 0 

HHS X 1 0 0 0 0 1 

Homeland X 9 0 1 0 2 6 

HUD X 0 0 0 0 0 0 

Interior X 0 1 0 0 0 1 

Justice X 0 0 0 0 0 0 

Labor X 0 0 0 0 0 0 

State X 1 0 1 0 0 0 

DOT X 1 0 1 0 0 0 

Treasury X 1 0 0 0 0 1 

VA X 1 0 0 0 1 0 

AID X 0 0 0 0 0 0 

EPA X 0 0 0 0 0 0 

GSA X 0 1 0 0 0 1 

NASA X 2 0 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 0 0 0 0 0 

SSA X 0 0 0 0 0 0 

 TOTAL 15 7 2 29 5 3 1 3 27 
Federal Financial Management Report (2009) 36

Fiscal Year 2008: 

FMFIA Section 4 – Financial Management Systems 

 Systems Conform to 

Requirements Number of Non-conformances 

 Yes 

Yes, with 

Non -

conformances 

No Beginning New Resolved Consolidated Reassessed Ending 

Agriculture X 1 0 0 0 0 1 

Commerce X 0 0 0 0 0 0 

Defense X 1 0 0 0 0 1 

Education X 0 0 0 0 0 0 

Energy X 0 0 0 0 0 0 

HHS X 2 0 0 0 0 2 

Homeland X 3 0 0 0 0 3 

HUD X 0 0 0 0 0 0 

Interior X 0 0 0 0 0 0 

Justice X 0 0 0 0 0 0 

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 0 0 0 0 0 0 

VA X 3 0 1 0 0 2 

AID X 0 0 0 0 0 0 

EPA X 0 0 0 0 0 0 

GSA X 0 1 0 0 0 1 

NASA X 2 0 1 0 0 1 

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 0 0 0 0 0 

SSA X 0 0 0 0 0 0 

 TOTAL 17 3 4 14 1 3 0 0 12 
Federal Financial Management Report (2009) 37

Appendix C: Government Corporations Required to Submit 

Audited Financial Statements to OMB 

Government Corporation: FY 2008 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

Saint Lawrence Seaway Development Corporation Unqualified 

Tennessee Valley Authority Not Received 

1

 The entity has a calendar year-end; the financial statements were not due as of the printing of this report. 
Federal Financial Management Report (2009) 38

Appendix D: Accountability of Tax Dollars Act Agencies 

Required to Submit Audited Financial Statements to OMB 

 

Agency: FY 2008 Audit Opinion 

Advisory Council on Historic Preservation Not Received 

African Development Fund Unqualified 

American Battle Monuments Commission Not Received 

Appalachian Regional Commission Not Received 

Architectural and Transportation Barriers Compliance Board Unqualified 

Armed Forces Retirement Home Unqualified 

Barry Goldwater Scholarship and Excellence in Education Fund Unqualified 

Broadcasting Board of Governors Unqualified 

Christopher Columbus Fellowship Foundation Unqualified 

Central Intelligence Agency Disclaimer 

Chemical Safety and Hazard Investigation Board Unqualified 

Commission on Civil Rights Not Received 

Commission of Fine Arts Not Received 

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

Committee for Purchase from People Who Are Blind or 

Severely Disabled 

Not Received 

Commodities Futures Trading Commission Unqualified 

Consumer Product Safety Commission Unqualified 

Court Services and Offender Supervision Agency for DC Not Received1
Federal Financial Management Report (2009) 39

Agency: FY 2008 Audit Opinion 

Defense Nuclear Facilities Safety Board Unqualified 

Delta Regional Authority Not Received 

Denali Commission Not Received 

Election Assistance Commission Disclaimer 

Equal Employment Opportunity Commission Unqualified 

Farm Credit Administration Unqualified 

Farm Credit System Insurance Corporation Not Received1

Federal Communications Commission Unqualified 

Federal Election Commission Unqualified 

Federal Financial Institutions Examination Council Appraisal 

Subcommittee 

Not Received 

Federal Housing Finance Board Unqualified 

Federal Labor Relations Authority Not Received 

Federal Maritime Commission Unqualified 

Federal Mediation and Conciliation Service Unqualified 

Federal Mine Safety and Health Review Commission Unqualified 

Federal Retirement Thrift Investment Board Not Received1

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 Unqualified 
Federal Financial Management Report (2009) 40

Agency: FY 2008 Audit Opinion 

Inter-American Foundation Unqualified 

James Madison Memorial Fellowship Foundation Unqualified 

Japan-U.S. Friendship Commission Unqualified 

Marine Mammal Commission Not Received 

Merit Systems Protection Board Unqualified 

Morris K. Udall Scholarship and Excellence in National 

Environmental Policy Foundation 

Unqualified 

National Archives and Records Administration Unqualified 

National Capital Planning Commission Unqualified 

National Commission on Libraries and Information Science N/A2

National Council on Disability Not Received 

National Credit Union Administration Not Received1

National Endowment for the Arts Unqualified 

National Endowment for the Humanities Unqualified 

National Labor Relations Board Unqualified 

National Mediation Board Unqualified 

National Transportation Safety Board Unqualified 

Nuclear Waste Technical Review Board Unqualified 

Occupational Safety and Health Review Commission Unqualified 

Office of Government Ethics Unqualified 

Office of Navajo and Hopi Indian Relocation Commission Unqualified 

Office of Special Counsel Unqualified 
Federal Financial Management Report (2009) 41

Agency: FY 2008 Audit Opinion 

Peace Corps Unqualified 

Postal Regulatory Commission Not Received 

Presidio Trust Qualified 

Railroad Retirement Board Unqualified 

Securities and Exchange Commission Unqualified 

Selective Service System Unqualified 

Smithsonian Institution Not Received 

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

SI/National Gallery of Arts Not Received 

SI/Woodrow Wilson International Center for Scholars Unqualified 

Trade and Development Agency Unqualified 

U.S. Court of Appeals for Veterans Claims Unqualified 

U.S. Holocaust Memorial Museum Not Received 

1 The entity has a calendar year-end; the financial statements were not due as of the printing of this report. 

2 The National Commission on Libraries and Information Science 
Federal Financial Management Report (2009) 42

Appendix E: Compliance with the Federal Financial 

Management Improvement Act of 1996 

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

substantially comply with Federal financial management system requirements, applicable 

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

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

determination of compliance on an annual basis. The table below indicates the FY 2008 

compliance findings for each CFO Act agency. 

Agency Head Auditor 

Agriculture No No 

Commerce Yes Yes 

Defense No No 

Education Yes No 

Energy Yes Yes 

HHS No No 

Homeland No No 

HUD Yes No 

Interior Yes No 

Justice Yes Yes 

Labor Yes Yes 

State Yes No 

DOT Yes No 

Treasury No No 

VA No No 

AID Yes Yes 

EPA Yes Yes 

GSA No No 

NASA No No 

NSF Yes Yes 

NRC No No 

OPM Yes Yes 

SBA Yes Yes 

SSA Yes Yes 

 TOTAL 15 10 
Federal Financial Management Report (2009) 43

Appendix F: Debt Collection Deficiencies and Corrective 

Actions 

Agency Deficiency Corrective Actions to be Taken or Recently 

Completed 

Agriculture 

(USDA) 

A few small agencies within 

USDA, representing 0.01 percent 

of delinquent debt, have not been 

compliant with the requirement to 

write off delinquent debt greater 

than 2 years old if there are no 

estimated material collections. 

USDA established a departmental waiver program 

and continues to coordinate write-off plans across 

the Department identifying agency-specific action 

items. Delinquent debt greater than 2 years old 

without waivers was reduced by 69 percent from 

fiscal year 2007 to FY 2008. 

Health and 

Human 

Services 

(HHS) 

The Centers for Medicare and 

Medicaid Services have not been 

reporting all eligible 

discharged/closed-out debt to the 

Internal Revenue Service (IRS). 

HHS is currently making the systems 

changes necessary to report in accordance with IRS 

regulations. Changes to the Healthcare Integrated 

General Ledger Accounting System (HIGLAS) are 

anticipated to be completed in 2009. 

Homeland 

Security 

(DHS) 

DHS previously identified a need 

to develop comprehensive debt 

collection procedures. DHS 

components have issued policies; 

however, corrective actions 

completed to date have not been 

fully effective in ensuring that all 

eligible debts are referred to the 

appropriate program (e.g., 

Treasury Offset Program). 

DHS developed a working group tasked with 

reviewing and commenting on pre-published debt 

management policy initiatives and conducting 

periodic debt collection workshops. The working 

group arranged for training for DHS headquarters 

and relevant components. In addition, the 

Department DCIA policy is being finalized for 

issuance by March 31, 2009. 

State(DOS) Detailed procedures for recording 

the write-off of debts in the 

accounting system are not fully 

developed. 

The Department implemented their Global Financial 

Management Systems (GFMS) to replace an 

obsolete domestic financial management system. 

The write-off capability was included in GFMS. 

Further, the Accounts Receivable Division drafted 

write-off instructions that are being reviewed. These 

instructions are scheduled to be implemented in 

2009. 

Labor 

(DOL) 

Historically, the Mine Safety and 

Health Administration (MSHA) had 

not referred aged delinquent debt 

to Treasury for collection and DOL 

agencies had not complied with 

the requirement to write off 

delinquent debt greater than 2 

years old if there were no 

estimated material collections. 

DOL issued a revised policy on debt collection and 

provided training, in conjunction with Department of 

Treasury, to all DOL bureaus. In 2008 MSHA debt 

required for referral was $20.5 million and actual 

referral to Treasury was $17.4 million. DOL as a 

whole had 94 percent referred to Treasury. 

Defense 

(DOD) 

In 2006, DOD identified a 

deficiency in that the Taxpayer 

Identification Number (TIN) was 

not provided on all certified 

vouchers submitted to a 

disbursing office for payment. 

Improvements have been made to address the 

deficiencies including validating TIN; encouraging 

contractors to register with the Central Contractor 

Registration; and training accounts payable 

personnel. Additional efforts in FY 2009 will close 

the deficiency through enhanced capabilities of TIN 

related systems. 
Federal Financial Management Report (2009) 44

Appendix G: About the Office of Federal Financial 

Management 

Mission: To promote and support first class financial management 

in the Executive Branch of the Federal government. 

History: The Office of Federal Financial Management (OFFM) 

was created within the Office of Management and Budget 

(OMB) by the Chief Financial Officers (CFO) Act of 

1990. OFFM, led by the OMB Controller under the 

direction of the Deputy Director for Management, is 

responsible for the financial management policy of the 

Federal government. OFFM 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. 

Branches: Financial Standards and Grants 

Financial Analysis and Systems 

Key Policy 

Areas:

Agency and Government-wide Financial 

Reporting 

Federal Asset Management 

Financial Management Systems 

Grants Management 

Improper Payments 

Performance Measurement 

President’s Management Agenda 

Single Audit 

Travel and Purchase Cards 

On the Web: www.whitehouse.gov/omb/financial