I
105TH CONGRESS
1ST SESSION
H. R. 435
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
JANUARY 9, 1997
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 sys-
tems, accounting standards, and accounting reporting
systems in the Federal Government, and for other pur-
poses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Federal Financial
Management Improvement Act of 1997’’.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress finds the following:
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(1) Much effort has been devoted to strengthen-
ing Federal internal accounting controls. Although
progress has been made in recent years, Federal ac-
counting standards have not been uniformly imple-
mented in financial management systems for agen-
cies.
(2) Federal financial management continues to
be seriously deficient, and Federal financial manage-
ment and fiscal practices have failed to—
(A) identify costs fully;
(B) reflect the total liabilities of congres-
sional actions; and
(C) accurately report the financial condi-
tion of the Federal Government.
(3) Current Federal accounting practices do not
accurately report financial results of the Federal
Government or the full costs of programs and activi-
ties. The continued use of these practices under-
mines the ability of the Federal Government to pro-
vide credible and reliable financial data, encourages
already widespread Federal Government waste, and
will not assist in achieving a balanced budget.
(4) Waste and inefficiency in the Federal Gov-
ernment undermine the confidence of the people of
the United States in the Government and reduce the
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ability of the Federal Government to address vital
public needs adequately.
(5) To rebuild the accountability and credibility
of, and restore public confidence in, the Federal
Government, Federal agencies must incorporate ac-
counting standards and reporting objectives estab-
lished for the Federal Government into their finan-
cial management systems so that all the assets and
liabilities, revenues, expenses, and the full costs of
programs and activities of the Federal Government
can be consistently and accurately recorded, accu-
rately monitored, and uniformly reported throughout
the Federal Government.
(6) Since its establishment in October 1990, the
Federal Accounting Standards Advisory Board (in
this Act referred to as the ‘‘FASAB’’) has made
substantial progress toward developing and rec-
ommending a comprehensive set of accounting con-
cepts and standards for the Federal Government.
When the accounting concepts and standards devel-
oped by FASAB are incorporated into Federal fi-
nancial management systems, agencies will be able
to provide cost and financial information that will
assist the Congress and financial managers in evalu-
ating the cost and performance of Federal programs
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and activities, and will provide important informa-
tion that is needed for improved decision making by
the Congress and financial managers.
(7) The development of financial management
systems with the capacity to support the accounting
standards and concepts developed by FASAB will,
over the long term, improve Federal financial man-
agement.
(b) PURPOSES.—The purposes of this Act are to—
(1) provide for consistency of accounting by
Federal agencies from one fiscal year to the next,
and for uniform accounting standards throughout
the Federal Government;
(2) require Federal financial management sys-
tems to enable full disclosure of Federal financial
data, including the full costs of Federal programs
and activities, to the citizens of the United States,
the Congress, the President, and agency manage-
ment, so that Federal programs and activities can be
considered based on their full costs and merits;
(3) increase the accountability and credibility of
Federal financial management;
(4) improve performance, productivity, and effi-
ciency of Federal Government financial manage-
ment;
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(5) establish financial management systems to
support controlling the cost of the Federal Govern-
ment;
(6) build on and complement the Chief Finan-
cial Officers Act of 1990 (Public Law 101–576; 104
Stat. 2838), the Government Performance and Re-
sults Act of 1993 (Public Law 103–62; 107 Stat.
285), and the Government Management Reform Act
of 1994 (Public Law 103–356; 108 Stat. 3410); and
(7) increase the capability of Federal agencies
to monitor execution of the budget by more readily
permitting reports that match spending of resources
to results of activities.
SEC. 3. IMPLEMENTATION OF FEDERAL FINANCIAL MAN-
AGEMENT IMPROVEMENTS.
(a) IN GENERAL.—Each Federal agency shall imple-
ment financial management systems that comply with
Federal financial management systems requirements, ap-
plicable Federal accounting standards, and the United
States Government Standard General Ledger at the trans-
action level.
(b) PRIORITY.—Each agency shall give priority in
funding and provide sufficient resources to implement this
Act.
(c) AUDIT COMPLIANCE FINDING.—
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(1) IN GENERAL.—Each audit required by sec-
tion 3521(e) of title 31, United States Code, shall
report whether the financial management systems of
the agency which is being audited comply with sub-
section (a) of this section.
(2) CONTENT OF REPORTS.—If the person per-
forming an audit required by section 3521(e) of title
31, United States Code, reports that the agency fi-
nancial management systems do not comply with
subsection (a) of this section, the person performing
the audit shall include in the report on the audit—
(A) the name and position of any officer or
employee responsible for the financial manage-
ment systems;
(B) all facts pertaining to the failure to
comply, including—
(i) the nature and extent of the non-
compliance;
(ii) the primary reason or cause of the
noncompliance;
(iii) any official responsible for the
noncompliance; and
(iv) any relevant comments from any
such responsible officer or employee; and
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(C) a statement with respect to rec-
ommended remedial actions and the timeframes
to implement such actions.
(d) COMPLIANCE DETERMINATION.—
(1) IN GENERAL.—No later than the date de-
scribed under paragraph (2), the Director, acting
through the Controller of the Office of Federal Fi-
nancial Management, shall determine whether the fi-
nancial management systems of an agency comply
with subsection (a). The determination shall be
based on—
(A) a review of the report on the applicable
agency-wide audited financial statement;
(B) the agency comments on the report;
and
(C) any other information the Director
considers relevant and appropriate.
(2) DATE
OF
DETERMINATION.—The deter-
mination required by paragraph (1) shall be made
no later than 90 days after the earlier of—
(A) the date of the receipt of an agency-
wide audited financial statement; or
(B) the last day of the fiscal year following
the year covered by such statement.
(e) COMPLIANCE IMPLEMENTATION.—
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(1) IN GENERAL.—If the Director determines
that the financial management systems of an agency
do not comply with subsection (a), the head of the
agency, in consultation with the Director, shall es-
tablish a remediation plan that shall describe the re-
sources, remedies, and intermediate target dates
necessary to bring the agency’s financial manage-
ment systems into such compliance.
(2) TIME PERIOD FOR COMPLIANCE.—A reme-
diation plan shall bring the agency’s financial man-
agement systems into compliance with subsection (a)
no later than 2 years after the date the Director
makes a determination under paragraph (1), unless
the agency, with the concurrence of the Director—
(A) determines that the agency’s financial
management systems are so deficient as to pre-
clude compliance with the requirements of sub-
section (a) within 2 years after such date;
(B) specifies the most feasible date for
bringing the agency’s financial management
systems into compliance with the requirements
of subsection (a); and
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(C) designates an official of the agency
who shall be responsible for bringing the agen-
cy’s financial management systems into compli-
ance with the requirements of subsection (a) by
the date specified under subparagraph (B).
(3) TRANSFER
OF
FUNDS
FOR
CERTAIN
IM-
PROVEMENTS.—For an agency that has established
a remediation plan under paragraph (2), the head of
the agency, to the extent provided in an appropria-
tion and with the concurrence of the Director, may
transfer not to exceed 2 percent of available agency
appropriations to be merged with and to be available
for the same period of time as the appropriation or
funds to which transferred, for priority financial
management system improvements. Such authority
shall be used only for priority financial management
system improvements as identified by the head of
the agency, with the concurrence of the Director,
and in no case for an item for which Congress has
denied funds. The head of the agency shall notify
Congress 30 days before such a transfer is made
pursuant to such authority.
(4) REPORT IF NONCOMPLIANCE WITHIN TIME
PERIOD.—If an agency fails to bring its financial
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management systems into compliance within the pe-
riod described in paragraph (2), the Director shall
submit a report of such failure to the Committees
on Governmental Affairs and Appropriations of the
Senate and the Committees on Government Reform
and Oversight and Appropriations of the House of
Representatives. The report shall include—
(A) the name and position of any officer or
employee responsible for the financial manage-
ment systems;
(B) the facts pertaining to the failure to
comply, including the nature and extent of the
noncompliance, the primary reason or cause for
the failure to comply, and any extenuating cir-
cumstances;
(C) a statement of the remedial actions
needed; and
(D) a statement of any administrative ac-
tion to be taken with respect to any responsible
officer or employee.
(f) PERSONAL RESPONSIBILITY.—Any financial offi-
cer or program manager who knowingly and willfully com-
mits, permits, or authorizes material deviation from the
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requirements of subsection (a) may be subject to adminis-
trative disciplinary action, suspension from duty, or re-
moval from office.
(g) PENALTIES PROVIDED.—If an agency fails to
bring its financial management systems into compliance
within the period described in subsection (e)(2), the agen-
cy shall be subject to the following penalties:
(1) The amounts otherwise appropriated to the
agency for fiscal year 2000 shall be reduced by 1
percent.
(2) The amounts otherwise appropriated to the
agency for fiscal year 2001 shall be reduced by 2
percent.
(3) The amounts otherwise appropriated to the
agency for fiscal year 2002 shall be reduced by 3
percent.
(4) The amounts otherwise appropriated to the
agency for fiscal year 2003 shall be reduced by 4
percent.
(5) The amounts otherwise appropriated to the
agency for fiscal year 2004 shall be reduced by 5
percent.
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SEC. 4. APPLICATION TO CONGRESS AND THE JUDICIAL
BRANCH.
(a) IN GENERAL.—The Federal financial manage-
ment requirements of this Act may be adopted by—
(1) the Senate by resolution as an exercise of
the rulemaking power of the Senate;
(2) the House of Representatives by resolution
as an exercise of the rulemaking power of the House
of Representatives; and
(3) the Judicial Conference of the United
States by regulation for the judicial branch.
(b) STUDY AND REPORT.—Not later than October 1,
1998—
(1) the Secretary of the Senate and the Clerk
of the House of Representatives shall jointly conduct
a study and submit a report to the Congress on how
each entity in the legislative branch may comply
with financial management and accounting stand-
ards in a manner comparable to the requirements of
this Act; and
(2) the Chief Justice of the United States shall
conduct a study and submit a report to the Congress
on how the judicial branch may achieve compliance
with financial management and accounting stand-
ards in a manner comparable to the requirements of
this Act.
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SEC. 5. REPORTING REQUIREMENTS.
(a) REPORTS BY DIRECTOR.—Not later than March
31 of each year, the Director shall submit a report to the
Congress regarding the implementation of this Act. The
Director may include the report in the financial manage-
ment status report and the 5-year financial management
plan submitted under section 3512(a)(1) of title 31, Unit-
ed States Code.
(b) REPORTS BY THE COMPTROLLER GENERAL.—No
later than October 1, 1998, and annually thereafter, the
Comptroller General of the United States shall report to
the appropriate committees of the Congress concerning—
(1) compliance with the requirements of section
3(a), including whether the financial statements of
the Federal Government have been prepared in ac-
cordance with applicable accounting standards; and
(2) the adequacy of uniform accounting stand-
ards for the Federal Government.
SEC. 6. CONFORMING AMENDMENTS.
(a) AUDITS BY AGENCIES.—Section 3521(f)(1) of
title 31, United States Code, is amended in the first sen-
tence by inserting ‘‘and the Controller of the Office of
Federal Financial Management’’ before the period.
(b) FINANCIAL MANAGEMENT STATUS REPORT.—
Section 3512(a)(2) of title 31, United States Code, is
amended—
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(1) in subparagraph (D), by striking ‘‘and’’
after the semicolon;
(2) by redesignating subparagraph (E) as sub-
paragraph (F); and
(3) by inserting after subparagraph (D) the fol-
lowing:
‘‘(E) a listing of agencies whose financial
management systems do not comply substan-
tially with the requirements of the Federal Fi-
nancial Management Improvement Act of 1996,
the period of time that such agencies have not
been in compliance, and a summary statement
of the efforts underway to remedy the non-
compliance; and’’.
SEC. 7. DEFINITIONS.
For purposes of this Act:
(1) AGENCY.—The term ‘‘agency’’ means the
departments and agencies of the United States Gov-
ernment listed in section 901(b) of title 31, United
States Code.
(2) DIRECTOR.—The term ‘‘Director’’ means
the Director of the Office of Management and Budg-
et.
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(3) FEDERAL ACCOUNTING STANDARDS.—The
term ‘‘Federal accounting standards’’ means appli-
cable accounting principles, standards, and require-
ments consistent with section 902(a)(3)(A) of title
31, United States Code, and includes concept state-
ments with respect to the objectives of Federal fi-
nancial reporting.
(4) FINANCIAL
MANAGEMENT
SYSTEMS.—The
term ‘‘financial management systems’’ includes the
financial systems and the financial portions of mixed
systems necessary to support financial management,
including automated and manual processes, proce-
dures, controls, data, hardware, software, and sup-
port personnel dedicated to the operation and main-
tenance of system functions.
(5) FINANCIAL SYSTEM.—The term ‘‘financial
system’’ includes an information system, comprised
of 1 or more applications, that is used for—
(A) collecting, processing, maintaining,
transmitting, or reporting data about financial
events;
(B) supporting financial planning or budg-
eting activities;
(C) accumulating and reporting costs in-
formation; or