The Government
Management Reform Act (GMRA) of 1994 requires the annual preparation
and audit of agency-wide and Government-wide financial statements.
Under GMRA, the Office of Management and Budget (OMB) may also
require individual components of agencies to prepare component-level
financial statements. These components are selected primarily
based upon size and influence on the Government-wide financial
statements. OMB currently requires about 20 component entities
to be audited on an annual basis. (See OMB Bulletin 01-02, "Audit
Requirements for Federal Financial Statements," Appendix B; a
copy is attached.) Most other Federal agency components are audited
only as part of the agency-wide and Government-wide financial
statements.
The President's
Management Agenda and Performance Plan are intended to improve
financial management by developing performance criteria to gauge
progress in the pursuit of the objectives and linking performance
with results. Given that resources are limited, we want to be
sure to encourage the dedication of the proper level of resources
to achieve the intended outcome. Based on the Federal Government's
experience in carrying out component-level audits, we believe
that, if a component has a demonstrated track record of solid
performance and responsible financial management, it is not necessary
to require an audit for that component each and every year. On
a trial basis, we will revise OMB Bulletin 01-02 to remove the
requirement for a separate component audit for a period of one
year. Of course, the component would be required to be audited,
as are most other components in the Federal Government, as part
of the agency-wide and Government-wide financial statements. This
action would allow the agencies to redirect resources to address
other critical management areas.
OMB will
consider removing the component-level requirement for a one-year
period if the agency head submits a request, based upon a sound
business plan, that assures responsible financial management and
does not jeopardize the completion of audit work necessary to
support the audit of the agency-wide financial statement. Such
a plan, developed in consultation with the agency's Inspector
General, must include the following conditions:
- The component
has received a clean, unqualified audit opinion on its financial
statements for three consecutive years.
- The last
two agency-wide financial statement audits have been submitted
timely.
- The component
is not on the General Accounting Office's (GAO) "High Risk"
list for financial management-related matters.
- The agency
request must briefly describe a plan and remediation dates for
each unresolved component-level material weakness identified
in prior year audits.
The authority to request the removal of the component from OMB's
required audit list rests with the agency head and cannot be delegated.
To receive consideration for removal from the FY 2001 component
audit requirement, requests should be received by OMB before July
31, 2001. If OMB approves the request, the agency component will
be removed for one year, i.e., FY 2001.
During the
coming year, OMB will conduct a further review of Bulletin 01-02
to determine whether more long-term removals from the component
list would be appropriate, and under what circumstances, in order
to assure accountability and performance as well as the efficient
use of the agencies' scarce management resources.
Questions
about this memorandum may be directed to Joseph L. Kull, Deputy
Controller, at 202-395-3993. Requests for removal from the component-level
audit requirement should be sent to the Office of Management and
Budget, Office of Federal Financial Management, Room 6025, 725
17th Street, NW, Washington, DC 20503. A copy of each request
also should be sent to the respective Resource Management Office
at OMB.
Attachment
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