I

104TH CONGRESS

2D SESSION H. R. 4061

To provide for the establishment of uniform accounting systems, standards,

and reporting systems in the Federal Government, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 11, 1996

Mr. TALENT introduced the following bill; which was referred to the

Committee on Government Reform and Oversight

A BILL

To provide for the establishment of uniform accounting systems, standards, and reporting systems in the Federal

Government, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Federal Financial

5 Management Improvement Act of 1996’’.

6 SEC. 2. FINDINGS AND PURPOSES.

7 (a) FINDINGS.—The Congress finds the following:

8 (1) Much effort has been devoted to strengthen9 ing Federal internal accounting controls in the past.

10 Although progress has been made in recent years,
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1 Federal accounting standards have not been uni2 formly implemented in financial management sys3 tems for agencies.

4 (2) Federal financial management continues to

5 be seriously deficient, and Federal financial manage6 ment and fiscal practices have failed to—

7 (A) identify costs fully;

8 (B) reflect the total liabilities of congres9 sional actions; and

10 (C) accurately report the financial condi11 tion of the Federal Government.

12 (3) Current Federal accounting practices do not

13 accurately report financial results of the Federal

14 Government or the full costs of programs and activi15 ties. The continued use of these practices under16 mines the Government’s ability to provide credible

17 and reliable financial data and encourages already

18 widespread Government waste, and will not assist in

19 achieving a balanced budget.

20 (4) Waste and inefficiency in the Federal Gov21 ernment undermine the confidence of the American

22 people in the Government and reduce the Federal

23 Government’s ability to address vital public needs

24 adequately.
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1 (5) To rebuild the accountability and credibility

2 of the Federal Government, and restore public con3 fidence in the Federal Government, agencies must

4 incorporate accounting standards and reporting ob5 jectives established for the Federal Government into

6 their financial management systems so that all the

7 assets and liabilities, revenues, and expenditures or

8 expenses, and the full costs of programs and activi9 ties of the Federal Government can be consistently

10 and accurately recorded, monitored, and uniformly

11 reported throughout the Federal Government.

12 (6) Since its establishment in October 1990, the

13 Federal Accounting Standards Advisory Board

14 (hereinafter referred to as the ‘‘FASAB’’) has made

15 substantial progress toward developing and rec16 ommending a comprehensive set of accounting con17 cepts and standards for the Federal Government.

18 When the accounting concepts and standards devel19 oped by FASAB are incorporated into Federal fi20 nancial management systems, agencies will be able

21 to provide cost and financial information that will

22 assist the Congress and financial managers to evalu23 ate the cost and performance of Federal programs

24 and activities, and will therefore provide important

25 information that has been lacking, but is needed for
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1 improved decisionmaking by financial managers and

2 the Congress.

3 (7) The development of financial management

4 systems with the capacity to support these standards

5 and concepts will, over the long term, improve Fed6 eral financial management.

7 (b) PURPOSES.—The purposes of this Act are to—

8 (1) provide for consistency of accounting by an

9 agency from one fiscal year to the next, and uniform

10 accounting standards throughout the Federal Gov11 ernment;

12 (2) require Federal financial management sys13 tems to support full disclosure of Federal financial

14 data, including the full costs of Federal programs

15 and activities, to the citizens, the Congress, the

16 President, and agency management, so that pro17 grams and activities can be considered based on

18 their full costs and merits;

19 (3) increase the accountability and credibility of

20 Federal financial management;

21 (4) improve performance, productivity and effi22 ciency of Federal Government financial manage23 ment;

24 (5) establish financial management systems to

25 support controlling the cost of Federal Government;
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1 (6) build upon and complement the Chief Fi2 nancial Officers Act of 1990 (Public Law 101–576;

3 104 Stat. 2838), the Government Performance and

4 Results Act of 1993 (Public Law 103–62; 107 Stat.

5 285), and the Government Management Reform Act

6 of 1994 (Public Law 103–356; 108 Stat. 3410); and

7 (7) increase the capability of agencies to mon8 itor execution of the budget by more readily permit9 ting reports that compare spending of resources to

10 results of activities.

11 SEC. 3. IMPLEMENTATION OF FEDERAL FINANCIAL MAN12 AGEMENT IMPROVEMENTS.

13 (a) IN GENERAL.—Each agency shall implement and

14 maintain financial management systems that comply with

15 Federal financial management systems requirements, ap16 plicable Federal accounting standards, and the United

17 States Government Standard General Ledger at the trans18 action level.

19 (b) PRIORITY.—Each agency shall give priority in

20 funding and provide sufficient resources to implement this

21 Act.

22 (c) AUDIT COMPLIANCE FINDING.—

23 (1) IN GENERAL.—Each audit required by sec24 tion 3521(e) of title 31, United States Code, shall

25 report whether the agency financial management
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1 systems comply with the requirements of subsection

2 (a).

3 (2) CONTENT OF REPORTS.—When the person

4 performing the audit required by section 3521(e) of

5 title 31, United States Code, reports that the agency

6 financial management systems do not comply with

7 the requirements of subsection (a), the person per8 forming the audit shall include in the report on the

9 audit—

10 (A) the name and position of any officer or em11 ployee responsible for the financial management sys12 tems that have been found not to comply with the

13 requirements of subsection (a);

14 (B) all facts pertaining to the failure to comply

15 with the requirements of subsection (a), including—

16 (i) the nature and extent of the noncompli17 ance;

18 (ii) the primary reason or cause of the

19 noncompliance;

20 (iii) any official responsible for the non21 compliance; and

22 (iv) any relevant comments from any re23 sponsible officer or employee; and
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1 (C) a statement with respect to the rec2 ommended remedial actions and the timeframes to

3 implement such actions.

4 (d) COMPLIANCE DETERMINATION.—

5 (1) IN GENERAL.—No later than the date de6 scribed under paragraph (2), the Director, acting

7 through the Controller of the Office of Federal Fi8 nancial Management, shall determine whether the fi9 nancial management systems of an agency comply

10 with the requirements of subsection (a). Such deter11 mination shall be based on—

12 (A) a review of the report on the applicable

13 agency-wide audited financial statement;

14 (B) the agency comments on such report;

15 and

16 (C) any other information the Director

17 considers relevant and appropriate.

18 (2) DATE OF DETERMINATION.—The deter19 mination under paragraph (1) shall be made no later

20 than 90 days after the earlier of—

21 (A) the date of the receipt of an agency22 wide audited financial statement; or

23 (B) the last day of the fiscal year following

24 the year covered by such statement.

25 (e) COMPLIANCE IMPLEMENTATION.—
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1 (1) IN GENERAL.—If the Director determines

2 that the financial management systems of an agency

3 do not comply with the requirements of subsection

4 (a), the head of the agency, in consultation with the

5 Director, shall establish a remediation plan that

6 shall include the resources, remedies, and intermedi7 ate target dates necessary to bring the agency’s fi8 nancial management systems into compliance.

9 (2) TIME PERIOD FOR COMPLIANCE.—A reme10 diation plan shall bring the agency’s financial man11 agement systems into compliance no later than 2

12 years after the date on which the Director makes a

13 determination under paragraph (1), unless the agen14 cy, with concurrence of the Director—

15 (A) determines that the agency’s financial

16 management systems are so deficient as to pre17 clude compliance with the requirements of sub18 section (a) within 2 years;

19 (B) specifies the most feasible date for

20 bringing the agency’s financial management

21 systems into compliance with the requirements

22 of subsection (a); and

23 (C) designates an official of the agency

24 who shall be responsible for bringing the agen25 cy’s financial management systems into compli-
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1 ance with the requirements of subsection (a) by

2 the date specified under subparagraph (B).

3 (3) TRANSFER OF FUNDS FOR CERTAIN IM4 PROVEMENTS.—For an agency that has established

5 a remediation plan under paragraph (2), the head of

6 the agency, to the extent provided in an appropria7 tion and with the concurrence of the Director, may

8 transfer not to exceed 2 percent of available agency

9 appropriations to be merged with and to be available

10 for the same period of time as the appropriation or

11 fund to which transferred, for priority financial

12 management system improvements. Such authority

13 shall be used only for priority financial management

14 system improvements as identified by the head of

15 the agency, with the concurrence of the Director,

16 and in no case for an item for which Congress has

17 denied funds. The head of the agency shall notify

18 Congress 30 days before such a transfer is made

19 pursuant to such authority.

20 (4) REPORT IF NONCOMPLIANCE WITHIN TIME

21 PERIOD.—If an agency fails to bring its financial

22 management systems into compliance within the

23 time period specified under paragraph (2), the Di24 rector shall submit a report of such failure to the

25 Committees on Governmental Affairs and Appropria-
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1 tions of the Senate and the Committees on Govern2 ment Reform and Oversight and Appropriations of

3 the House of Representatives. The report shall in4 clude—

5 (A) the name and position of any officer or

6 employee responsible for the financial manage7 ment systems that have been found not to com8 ply with the requirements of subsection (a);

9 (B) the facts pertaining to the failure to

10 comply with the requirements of subsection (a),

11 including the nature and extent of the non12 compliance, the primary reason or cause for the

13 failure to comply, and any extenuating cir14 cumstances;

15 (C) a statement of the remedial actions

16 needed; and

17 (D) a statement of any administrative ac18 tion to be taken with respect to any responsible

19 officer or employee.

20 (f) PERSONAL RESPONSIBILITY.—Any financial offi21 cer or program manager who knowingly and willfully com22 mits, permits, or authorizes material deviation from the

23 requirements of subsection (a) may be subject to adminis24 trative disciplinary action, suspension from duty, or re25 moval from office.
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1 SEC. 4. APPLICATION TO CONGRESS AND THE JUDICIAL

2 BRANCH.

3 (a) IN GENERAL.—The Federal financial manage4 ment requirements of this Act may be adopted by—

5 (1) the Senate by resolution as an exercise of

6 the rulemaking power of the Senate;

7 (2) the House of Representatives by resolution

8 as an exercise of the rulemaking power of the House

9 of Representatives; or

10 (3) the Judicial Conference of the United

11 States by regulation for the judicial branch.

12 (b) STUDY AND REPORT.—No later than October 1,

13 1997—

14 (1) the Secretary of the Senate and the Clerk

15 of the House of Representatives shall jointly conduct

16 a study and submit a report to Congress on how the

17 offices and committees of the Senate and the House

18 of Representatives, and all offices and agencies of

19 the legislative branch may achieve compliance with

20 financial management and accounting standards in a

21 manner comparable to the requirements of this Act;

22 and

23 (2) the Chief Justice of the United States shall

24 conduct a study and submit a report to Congress on

25 how the judiciary may achieve compliance with fi-
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1 nancial management and accounting standards in a

2 manner comparable to the requirements of this Act.

3 SEC. 5. REPORTING REQUIREMENTS.

4 (a) REPORTS BY DIRECTOR.—No later than March

5 31 of each year, the Director shall submit a report to the

6 Congress regarding implementation of this Act. The Di7 rector may include the report in the financial management

8 status report and the 5-year financial management plan

9 submitted under section 3512(a)(1) of title 31, United

10 States Code.

11 (b) REPORTS BY THE COMPTROLLER GENERAL.—No

12 later than October 1, 1997, and October 1, of each year

13 thereafter, the Comptroller General of the United States

14 shall report to the appropriate committees of the Congress

15 concerning—

16 (1) compliance with the requirements of section

17 3(a) of this Act, including whether the financial

18 statements of the Federal Government have been

19 prepared in accordance with applicable accounting

20 standards; and

21 (2) the adequacy of uniform accounting stand22 ards for the Federal Government.

23 SEC. 6. CONFORMING AMENDMENTS.

24 (a) AUDITS BY AGENCIES.—Section 3521(f)(1) of

25 title 31, United States Code, is amended in the first sen-
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1 tence by inserting ‘‘and the Controller of the Office of

2 Federal Financial Management’’ before the period.

3 (b) FINANCIAL MANAGEMENT STATUS REPORT.—

4 Section 3512(a)(2) of title 31, United States Code, is

5 amended—

6 (1) in subparagraph (D) by striking ‘‘and’’

7 after the semicolon;

8 (2) by redesignating subparagraph (E) as sub9 paragraph (F); and

10 (3) by inserting after subparagraph (D) the fol11 lowing:

12 ‘‘(E) a listing of agencies whose financial

13 management systems do not comply substan14 tially with the requirements of the Federal Fi15 nancial Management Improvement Act of 1996,

16 the period of time that such agencies have not

17 been in compliance, and a summary statement

18 of the efforts underway to remedy the non19 compliance; and’’.

20 SEC. 7. DEFINITIONS.

21 For purposes of this Act:

22 (1) AGENCY.—The term ‘‘agency’’ means a de23 partment or agency described in section 901(b) of

24 title 31, United States Code.
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1 (2) DIRECTOR.—The term ‘‘Director’’ means

2 the Director of the Office of Management and Budg3 et.

4 (3) FEDERAL ACCOUNTING STANDARDS.—The

5 term ‘‘Federal accounting standards’’ means appli6 cable accounting principles, standards, and require7 ments consistent with section 902(a)(3)(A) of title

8 31, United States Code, and includes concept state9 ments with respect to the objectives of Federal fi10 nancial reporting.

11 (4) FINANCIAL MANAGEMENT SYSTEMS.—The

12 term ‘‘financial management systems’’ includes the

13 financial systems and the financial portions of mixed

14 systems necessary to support financial management,

15 including automated and manual processes, proce16 dures, controls, data, hardware, software, and sup17 port personnel dedicated to the operation and main18 tenance of system functions.

19 (5) FINANCIAL SYSTEM.—The term ‘‘financial

20 system’’ includes an information system, comprised

21 of one or more applications, that is used for—

22 (A) collecting, processing, maintaining,

23 transmitting, or reporting data about financial

24 events;
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1 (B) supporting financial planning or budg2 eting activities;

3 (C) accumulating and reporting costs in4 formation; or

5 (D) supporting the preparation of financial

6 statements.

7 (6) MIXED SYSTEM.—The term ‘‘mixed system’’

8 means an information system that supports both fi9 nancial and nonfinancial functions of the Federal

10 Government or components thereof.

11 SEC. 8. EFFECTIVE DATE.

12 This Act shall take effect on October 1, 1996.

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