I

104TH CONGRESS

2D SESSION H. R. 4319

To provide for the establishment of uniform accounting systems, accounting

standards, and accounting reporting systems in the Federal Government,

and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 28, 1996

Mr. SANFORD 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, accounting standards, and accounting 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:
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1 (1) Much effort has been devoted to strengthen2 ing Federal internal accounting controls. Although

3 progress has been made in recent years, Federal ac4 counting standards have not been uniformly imple5 mented in financial management systems for agen6 cies.

7 (2) Federal financial management continues to

8 be seriously deficient, and Federal financial manage9 ment and fiscal practices have failed to—

10 (A) identify costs fully;

11 (B) reflect the total liabilities of congres12 sional actions; and

13 (C) accurately report the financial condi14 tion of the Federal Government.

15 (3) Current Federal accounting practices do not

16 accurately report financial results of the Federal

17 Government or the full costs of programs and activi18 ties. The continued use of these practices under19 mines the ability of the Federal Government to pro20 vide credible and reliable financial data, encourages

21 already widespread Federal Government waste, and

22 will not assist in achieving a balanced budget.

23 (4) Waste and inefficiency in the Federal Gov24 ernment undermine the confidence of the people of

25 the United States in the Government and reduce the
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1 ability of the Federal Government to address vital

2 public needs adequately.

3 (5) To rebuild the accountability and credibility

4 of, and restore public confidence in, the Federal

5 Government, Federal agencies must incorporate ac6 counting standards and reporting objectives estab7 lished for the Federal Government into their finan8 cial management systems so that all the assets and

9 liabilities, revenues, expenses, and the full costs of

10 programs and activities of the Federal Government

11 can be consistently and accurately recorded, accu12 rately monitored, and uniformly reported throughout

13 the Federal Government.

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

15 Federal Accounting Standards Advisory Board (in

16 this Act referred to as the ‘‘FASAB’’) has made

17 substantial progress toward developing and rec18 ommending a comprehensive set of accounting con19 cepts and standards for the Federal Government.

20 When the accounting concepts and standards devel21 oped by FASAB are incorporated into Federal fi22 nancial management systems, agencies will be able

23 to provide cost and financial information that will

24 assist the Congress and financial managers in evalu25 ating the cost and performance of Federal programs
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1 and activities, and will provide important informa2 tion that is needed for improved decision making by

3 the Congress and financial managers.

4 (7) The development of financial management

5 systems with the capacity to support the accounting

6 standards and concepts developed by FASAB will,

7 over the long term, improve Federal financial man8 agement.

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

10 (1) provide for consistency of accounting by

11 Federal agencies from one fiscal year to the next,

12 and for uniform accounting standards throughout

13 the Federal Government;

14 (2) require Federal financial management sys15 tems to enable full disclosure of Federal financial

16 data, including the full costs of Federal programs

17 and activities, to the citizens of the United States,

18 the Congress, the President, and agency manage19 ment, so that Federal programs and activities can be

20 considered based on their full costs and merits;

21 (3) increase the accountability and credibility of

22 Federal financial management;

23 (4) improve performance, productivity, and effi24 ciency of Federal Government financial manage25 ment;
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1 (5) establish financial management systems to

2 support controlling the cost of the Federal Govern3 ment;

4 (6) build on and complement the Chief Finan5 cial Officers Act of 1990 (Public Law 101–576; 104

6 Stat. 2838), the Government Performance and Re7 sults Act of 1993 (Public Law 103–62; 107 Stat.

8 285), and the Government Management Reform Act

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

10 (7) increase the capability of Federal agencies

11 to monitor execution of the budget by more readily

12 permitting reports that match spending of resources

13 to results of activities.

14 SEC. 3. IMPLEMENTATION OF FEDERAL FINANCIAL MAN15 AGEMENT IMPROVEMENTS.

16 (a) IN GENERAL.—Each Federal agency shall imple17 ment financial management systems that comply with

18 Federal financial management systems requirements, ap19 plicable Federal accounting standards, and the United

20 States Government Standard General Ledger at the trans21 action level.

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

23 funding and provide sufficient resources to implement this

24 Act.

25 (c) AUDIT COMPLIANCE FINDING.—
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1 (1) IN GENERAL.—Each audit required by sec2 tion 3521(e) of title 31, United States Code, shall

3 report whether the financial management systems of

4 the agency which is being audited comply with sub5 section (a) of this section.

6 (2) CONTENT OF REPORTS.—If the person per7 forming an audit required by section 3521(e) of title

8 31, United States Code, reports that the agency fi9 nancial management systems do not comply with

10 subsection (a) of this section, the person performing

11 the audit shall include in the report on the audit—

12 (A) the name and position of any officer or em13 ployee responsible for the financial management sys14 tems;

15 (B) all facts pertaining to the failure to comply,

16 including—

17 (i) the nature and extent of the noncompli18 ance;

19 (ii) the primary reason or cause of the

20 noncompliance;

21 (iii) any official responsible for the non22 compliance; and

23 (iv) any relevant comments from any such

24 responsible officer or employee; and
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1 (C) a statement with respect to recommended

2 remedial actions and the timeframes to implement

3 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 subsection (a). The determination shall be

11 based on—

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

13 agency-wide audited financial statement;

14 (B) the agency comments on the report;

15 and

16 (C) any other information the Director

17 considers relevant and appropriate.

18 (2) DATE OF DETERMINATION.—The deter19 mination required by paragraph (1) shall be made

20 no later 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 subsection (a), the head of the

4 agency, in consultation with the Director, shall es5 tablish a remediation plan that shall describe the re6 sources, remedies, and intermediate target dates

7 necessary to bring the agency’s financial manage8 ment systems into such compliance.

9 (2) TIME PERIOD FOR COMPLIANCE.—A reme10 diation plan shall bring the agency’s financial man11 agement systems into compliance with subsection (a)

12 no later than 2 years after the date the Director

13 makes a determination under paragraph (1), unless

14 the agency, with the 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 after such date;

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 pe23 riod described in paragraph (2), the Director shall

24 submit a report of such failure to the Committees on

25 Governmental Affairs and Appropriations of the
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1 Senate and the Committees on Government Reform

2 and Oversight and Appropriations of the House of

3 Representatives. The report shall include—

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

5 employee responsible for the financial manage6 ment systems;

7 (B) the facts pertaining to the failure to

8 comply, including the nature and extent of the

9 noncompliance, the primary reason or cause for

10 the failure to comply, and any extenuating cir11 cumstances;

12 (C) a statement of the remedial actions

13 needed; and

14 (D) a statement of any administrative ac15 tion to be taken with respect to any responsible

16 officer or employee.

17 (f) PERSONAL RESPONSIBILITY.—Any financial offi18 cer or program manager who knowingly and willfully com19 mits, permits, or authorizes material deviation from the

20 requirements of subsection (a) may be subject to adminis21 trative disciplinary action, suspension from duty, or re22 moval from office.

23 (g) PENALTIES PROVIDED.—If an agency fails to

24 bring its financial management systems into compliance
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1 within the period described in subsection (e)(2), the agen2 cy shall be subject to the following penalties:

3 (1) The amounts otherwise appropriated to the

4 agency for fiscal year 2000 shall be reduced by 1

5 percent.

6 (2) The amounts otherwise appropriated to the

7 agency for fiscal year 2001 shall be reduced by 2

8 percent.

9 (3) The amounts otherwise appropriated to the

10 agency for fiscal year 2002 shall be reduced by 3

11 percent.

12 (4) The amounts otherwise appropriated to the

13 agency for fiscal year 2003 shall be reduced by 4

14 percent.

15 (5) The amounts otherwise appropriated to the

16 agency for fiscal year 2004 shall be reduced by 5

17 percent.

18 SEC. 4. APPLICATION TO CONGRESS AND THE JUDICIAL

19 BRANCH.

20 (a) IN GENERAL.—The Federal financial manage21 ment requirements of this Act may be adopted by—

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

23 the rulemaking power of the Senate;
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1 (2) the House of Representatives by resolution

2 as an exercise of the rulemaking power of the House

3 of Representatives; and

4 (3) the Judicial Conference of the United

5 States by regulation for the judicial branch.

6 (b) STUDY AND REPORT.—Not later than October 1,

7 1997—

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

9 of the House of Representatives shall jointly conduct

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

11 each entity in the legislative branch may comply

12 with financial management and accounting stand13 ards in a manner comparable to the requirements of

14 this Act; and

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

16 conduct a study and submit a report to the Congress

17 on how the judicial branch may achieve compliance

18 with financial management and accounting stand19 ards in a manner comparable to the requirements of

20 this Act.

21 SEC. 5. REPORTING REQUIREMENTS.

22 (a) REPORTS BY DIRECTOR.—Not later than March

23 31 of each year, the Director shall submit a report to the

24 Congress regarding the implementation of this Act. The

25 Director may include the report in the financial manage-
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1 ment status report and the 5-year financial management

2 plan submitted under section 3512(a)(1) of title 31, Unit3 ed States Code.

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

5 later than October 1, 1997, and annually thereafter, the

6 Comptroller General of the United States shall report to

7 the appropriate committees of the Congress concerning—

8 (1) compliance with the requirements of section

9 3(a), including whether the financial statements of

10 the Federal Government have been prepared in ac11 cordance with applicable accounting standards; and

12 (2) the adequacy of uniform accounting stand13 ards for the Federal Government.

14 SEC. 6. CONFORMING AMENDMENTS.

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

16 title 31, United States Code, is amended in the first sen17 tence by inserting ‘‘and the Controller of the Office of

18 Federal Financial Management’’ before the period.

19 (b) FINANCIAL MANAGEMENT STATUS REPORT.—

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

21 amended—

22 (1) in subparagraph (D), by striking ‘‘and’’

23 after the semicolon;

24 (2) by redesignating subparagraph (E) as sub25 paragraph (F); and
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1 (3) by inserting after subparagraph (D) the fol2 lowing:

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

4 management systems do not comply substan5 tially with the requirements of the Federal Fi6 nancial Management Improvement Act of 1996,

7 the period of time that such agencies have not

8 been in compliance, and a summary statement

9 of the efforts underway to remedy the non10 compliance; and’’.

11 SEC. 7. DEFINITIONS.

12 For purposes of this Act:

13 (1) AGENCY.—The term ‘‘agency’’ means the

14 departments and agencies of the United States Gov15 ernment listed in section 901(b) of title 31, United

16 States Code.

17 (2) DIRECTOR.—The term ‘‘Director’’ means

18 the Director of the Office of Management and Budg19 et.

20 (3) FEDERAL ACCOUNTING STANDARDS.—The

21 term ‘‘Federal accounting standards’’ means appli22 cable accounting principles, standards, and require23 ments consistent with section 902(a)(3)(A) of title

24 31, United States Code, and includes concept state-
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1 ments with respect to the objectives of Federal fi2 nancial reporting.

3 (4) FINANCIAL MANAGEMENT SYSTEMS.—The

4 term ‘‘financial management systems’’ includes the

5 financial systems and the financial portions of mixed

6 systems necessary to support financial management,

7 including automated and manual processes, proce8 dures, controls, data, hardware, software, and sup9 port personnel dedicated to the operation and main10 tenance of system functions.

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

12 system’’ includes an information system, comprised

13 of 1 or more applications, that is used for—

14 (A) collecting, processing, maintaining,

15 transmitting, or reporting data about financial

16 events;

17 (B) supporting financial planning or budg18 eting activities;

19 (C) accumulating and reporting costs in20 formation; or

21 (D) supporting the preparation of financial

22 statements.

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

24 means an information system that supports financial
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1 and nonfinancial functions of the Federal Govern2 ment or components thereof.

3 SEC. 8. EFFECTIVE DATE.

4 This Act shall take effect on October 1, 1997.

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