January 16, 1998
BULLETIN NO. 98-04
TO THE HEADS AND
INSPECTORS GENERAL OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
| SUBJECT: |
Addendum
to OMB Bulletin No. 93-06 |
1. Purpose. This
Addendum revises Office of Management and Budget (OMB) Bulletin
93-06, "Audit Requirements for Federal Financial Statements," to
amend the reporting requirements generally and to implement the
reporting requirements of the Federal Financial Management Improvement
Act (FFMIA) of 1996 (Public Law 104-208).
2. Addendum:
Paragraph 7.c.(3)
is amended by adding a subparagraph "(c)" that reads as follows:
"For compliance
with the Federal Financial Management Improvement Act (FFMIA)
of 1996, the auditor is required to perform sufficient tests to
report whether the reporting entity's financial management systems
substantially comply with the Federal financial management systems
requirements, applicable accounting standards, and the United
States Standard General Ledger at the transaction level. To meet
this requirement, the auditor's report shall state the. auditor's
reporting requirement and that the auditor performed tests of
compliance using the implementation guidance for FFMIA issued
by OMB on September 9, 1997. Further, the auditor shall report
instances where the reporting entity's systems did not substantially
comply with the Federal financial management systems requirements,
applicable accounting standards, and the United States Standard
General Ledger at the transaction level or that the tests disclosed
no instances where such systems did not substantially comply with
these systems requirements. Where tests disclosed that the reporting
entity's systems did not substantially comply with the foregoing
requirements, the auditor'.s report on compliance shall:
(i) Identify the entity
or organization responsible for the financial management systems
that were found not to comply with the requirements.
(ii) Include all facts
pertaining to the noncompliance, including:
(A) the nature
and extent of the noncompliance;
(B) the primary
reason or cause of the noncompliance; and
(C) any relevant
comments from reporting entity management or employees responsible
for the noncompliance.
(iii) Provide recommended
remedial actions and the time frames to implement such actions."
Appendix B is amended
to include FFMIA and OMB Memorandum M-97-13, "Computer Difficulties
Due to the Year 2000 -- Progress Reports," dated May 7, 1997.
Paragraph 7.c.(3)
is amended by adding a subparagraph "(d)" that reads as
"The auditor's report
on compliance shall state whether or not providing an opinion
on compliance was an objective of the audit."
Appendix C is added
to provide illustrative auditor reporting guidance. Use of this
reporting language is not required. It is provided to assist the
auditor in reporting in accordance with the 1994 revision of Government
Auditing Standards and this Addendum.
3 . Effective Date.
This Addendum is effective for audits of Federal financial statements
as of and for the year ended September 30, 1997.
4. Inquiries.
Further information regarding this Addendum may be obtained by
contacting the Office of Federal Financial Management, OMB, Washington,
DC 20503, telephone (202) 395-3993.
Franklin D. Raines
Director
Attachment
APPENDIX
C
Illustrative
Auditor Reporting on Compliance with Laws and Regulations based
on an Audit of Federal Financial Statements Performed
in Accordance with OMB Bulletin 93-06, "Audit Requirements for
Federal Financial Statements," as Amended
[Addressee]
We have audited the
financial statements of [Name of Federal Agency] as of and for
the year ended September 30, 19xx, and have issued our report
thereon dated March 1, xxxx. We conducted our audit in accordance
with: generally accepted auditing standards; the standards applicable
to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States; and, Office
of Management and Budget (OMB) Bulletin No. 93-06, "Audit Requirements
for Federal Financial Statements," as amended.
The management of
[Name of Federal Agency] is responsible for complying with laws
and regulations applicable to the agency. As part of obtaining
reasonable assurance about whether the agency's financial statements
are free of material misstatement, we performed tests of its compliance
with certain provisions of laws and regulations, noncompliance
with which could have a direct and material effect on the determination
of financial statement amounts and certain other laws and regulations
specified in OMB Bulletin 93-06, as amended, including the requirements
referred to in the Federal Financial Management Improvement Act
(FFMIA) of 1996.
The results of our
tests of compliance with the laws and regulations described in
the preceding paragraph disclosed instances of noncompliance with
the following laws and regulations that are required to be reported
under Government Auditing Standards and OMB Bulletin 93-06,
which are described below [or in an accompanying schedule].
List laws and regulations
for which noncompliance was disclosed exclusive of FFMIA1/
The results of our
tests of compliance disclosed no instances of noncompliance with
other laws and regulations discussed in the preceding paragraph.
Under FFMIA, we are
required to report whether the agency's financial management systems
substantially comply with the Federal financial management systems
requirements, applicable accounting standards, and the United
States Standard General Ledger at the transaction level. To meet
this requirement, we performed tests of compliance using the implementation
guidance for FFMIA issued by OMB on September 9, 1997.
The results of our
tests disclosed no instances where the agency's financial management
systems did not substantially comply with the three requirements
discussed in the preceding paragraph.
[If the results
of tests disclosed that the agency's systems did not substantially
comply with the foregoing requirements, the preceding sentence
should be replaced with the following:
"The results of
our tests disclosed instances, described below (or described.
in an accompanying schedule), where the agency's financial management
systems did not substantially comply with the three requirements
discussed in the preceding paragraph."
In addition, when
tests disclosed that the agency's systems did not substantially
comply with the foregoing requirements, the auditor's report
on compliance or an accompanying schedule should provide
the following information as required by FFMIA and paragraph.
7.c. (3)(c) of this Bulletin.
1. The entity
or organization responsible for the financial management systems
that were found not to comply with the requirements.
2. All facts pertaining
to the noncompliance, including: (a) the nature and extent of the noncompliance, (b) the primary reason or cause of the noncompliance,
and (c) any relevant comments from reporting entity management
or employees responsible for the noncompliance.
3. Recommended
remedial actions and the time frames to implement such actions.]
Providing an opinion
on compliance with certain provisions of laws and regulations
was not an objective of our audit and, accordingly, we do not
express such an opinion.2/ This report
is intended for the information of the management of [Name of
Federal Agency]. However, this report is a matter of public record,
and its distribution is not limited.
1/ FFMIA does not impose any compliance requirements; rather, it requires
reporting of substantial noncompliance with requirements contained
in government-wide policies, e.g., OMB Circular A- 1 27, "Financial
Management Systems;" Statements of Federal Financial Accounting
Standards; and the United States Standard General Ledger published
by the Department of the Treasury.
2/ If the objective is to express an opinion on the agency's compliance
with laws and regulations, the auditor should follow Statement
on Standards for Attestation Engagements No. 3, "Compliance Attestation,"
issued by the American Institute of Certified Public Accountants.