[Congressional Record Volume 142, Number 117 (Friday, August 2, 1996)]
[Senate]
[Pages S9666-S9668]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996
Mr. STEVENS. Mr. President, I ask unanimous consent that the Senate
proceed to the consideration of calendar No. 548, S. 1130.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
A bill (S. 1130) to provide for the establishment of
uniform accounting systems, standards and reporting systems
in the Federal Government, and for other purposes.
The PRESIDING OFFICER. Is there objection to the immediate
consideration of the bill?
There being no objection, the Senate proceeded to consider the bill,
which had been reported from the Committee on Governmental Affairs,
with an amendment to strike all after the enacting clause and insert in
lieu thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Federal Financial Management
Improvement Act of 1996''.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds the following:
(1) Much effort has been devoted to strengthening Federal
internal accounting controls in the past. Although progress
has been made in recent years, Federal accounting standards
have not been uniformly implemented in financial management
systems for agencies.
(2) Federal financial management continues to be seriously
deficient, and Federal financial management and fiscal
practices have failed to--
(A) identify costs fully;
(B) reflect the total liabilities of congressional actions;
and
(C) accurately report the financial condition 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 activities. The continued use of
these practices undermines the Government's ability to
provide credible and reliable financial data and encourages
already widespread Government waste, and will not assist in
achieving a balanced budget.
(4) Waste and inefficiency in the Federal Government
undermine the confidence of the American people in the
Government and reduce the Federal Government's ability to
address vital public needs adequately.
(5) To rebuild the accountability and credibility of the
Federal Government, and restore public confidence in the
Federal Government, agencies must incorporate accounting
standards and reporting objectives established for the
Federal Government into their financial management systems so
that all the assets and liabilities, revenues, and
expenditures or expenses, and the full costs of programs and
activities of the Federal Government can be consistently and
accurately recorded, monitored, and uniformly reported
throughout the Federal Government.
(6) Since its establishment in October 1990, the Federal
Accounting Standards Advisory Board (hereinafter referred to
as the ``FASAB'') has made substantial progress toward
developing and recommending a comprehensive set of accounting
concepts and standards for the Federal Government. When the
accounting concepts and standards developed by FASAB are
incorporated into Federal financial management systems,
agencies will be able to provide cost and financial
information that will assist the Congress and financial
managers to evaluate the cost and performance of Federal
programs and activities, and will therefore provide important
information that has been lacking, but is needed for improved
decisionmaking by financial managers and the Congress.
(7) The development of financial management systems with
the capacity to support these standards and concepts will,
over the long term, improve Federal financial management.
(b) Purposes.--The purposes of this Act are to--
(1) provide for consistency of accounting by an agency from
one fiscal year to the next, and uniform accounting standards
throughout the Federal Government;
(2) require Federal financial management systems to support
full disclosure of Federal financial data, including the full
costs of Federal programs and activities, to the citizens,
the Congress, the President, and agency management, so that
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 efficiency of
Federal Government financial management;
(5) establish financial management systems to support
controlling the cost of Federal Government;
(6) build upon and complement the Chief Financial Officers
Act of 1990 (Public Law 101-576; 104 Stat. 2838), the
Government Performance and Results 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 agencies to monitor
execution of the budget by more readily permitting reports
that compare spending of resources to results of activities.
SEC. 3. IMPLEMENTATION OF FEDERAL FINANCIAL MANAGEMENT
IMPROVEMENTS.
(a) In General.--Each agency shall implement and maintain
financial management systems that comply with Federal
financial management systems requirements, applicable Federal
accounting standards, and the United States Government
Standard General Ledger at the transaction level.
(b) Priority.--Each agency shall give priority in funding
and provide sufficient resources to implement this Act.
(c) Audit Compliance Finding.--
(1) In general.--Each audit required by section 3521(e) of
title 31, United States Code, shall report whether the agency
financial management systems comply with the requirements of
subsection (a).
(2) Content of reports.--When the person performing the
audit required by section 3521(e) of title 31, United States
Code, reports that the agency financial management systems do
not comply with the requirements of subsection (a), 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 management systems that have
been found not to comply with the requirements of subsection
(a);
(B) all facts pertaining to the failure to comply with the
requirements of subsection (a), including--
(i) the nature and extent of the noncompliance;
(ii) the primary reason or cause of the noncompliance;
(iii) any official responsible for the noncompliance; and
(iv) any relevant comments from any responsible officer or
employee; and
(C) a statement with respect to the recommended remedial
actions and the timeframes to implement such actions.
(d) Compliance Determination.--
(1) In general.--No later than the date described under
paragraph (2), the Director, acting through the Controller of
the Office of Federal Financial Management, shall determine
whether the financial management systems of an agency comply
with the requirements of subsection (a). Such determination
shall be based on--
(A) a review of the report on the applicable agency-wide
audited financial statement;
(B) the agency comments on such report; and
(C) any other information the Director considers relevant
and appropriate.
(2) Date of determination.--The determination under
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.--
(1) In general.--If the Director determines that the
financial management systems of an agency do not comply with
the requirements of subsection (a), the head of the agency,
in consultation with the Director, shall establish a
remediation plan that shall include the resources, remedies,
and intermediate target dates necessary to bring the agency's
financial management systems into compliance.
(2) Time period for compliance.--A remediation plan shall
bring the agency's financial management systems into
compliance no later
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than 2 years after the date on which the Director makes a
determination under paragraph (1), unless the agency, with
concurrence of the Director--
(A) determines that the agency's financial management
systems are so deficient as to preclude compliance with the
requirements of subsection (a) within 2 years;
(B) specifies the most feasible date for bringing the
agency's financial management systems into compliance with
the requirements of subsection (a); and
(C) designates an official of the agency who shall be
responsible for bringing the agency's financial management
systems into compliance with the requirements of subsection
(a) by the date specified under subparagraph (B).
(3) Transfer of funds for certain improvements.--For an
agency that has established a remediation plan under
paragraph (2), the head of the agency, to the extent provided
in an appropriation 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 fund 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 management systems into
compliance within the time period specified under 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 management systems that have
been found not to comply with the requirements of subsection
(a);
(B) the facts pertaining to the failure to comply with the
requirements of subsection (a), including the nature and
extent of the noncompliance, the primary reason or cause for
the failure to comply, and any extenuating circumstances;
(C) a statement of the remedial actions needed; and
(D) a statement of any administrative action to be taken
with respect to any responsible officer or employee.
(f) Personal Responsibility.--Any financial officer or
program manager who knowingly and willfully commits, permits,
or authorizes material deviation from the requirements of
subsection (a) may be subject to administrative disciplinary
action, suspension from duty, or removal from office.
SEC. 4. APPLICATION TO CONGRESS AND THE JUDICIAL BRANCH.
(a) In General.--The Federal financial management
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; or
(3) the Judicial Conference of the United States by
regulation for the judicial branch.
(b) Study and Report.--No later than October 1, 1997--
(1) the Secretary of the Senate and the Clerk of the House
of Representatives shall jointly conduct a study and submit a
report to Congress on how the offices and committees of the
Senate and the House of Representatives, and all offices and
agencies of the legislative branch may achieve compliance
with financial management and accounting standards 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 Congress on how the judiciary
may achieve compliance with financial management and
accounting standards in a manner comparable to the
requirements of this Act.
SEC. 5. REPORTING REQUIREMENTS.
(a) Reports by Director.--No later than March 31 of each
year, the Director shall submit a report to the Congress
regarding implementation of this Act. The Director may
include the report in the financial management status report
and the 5-year financial management plan submitted under
section 3512(a)(1) of title 31, United States Code.
(b) Reports by the Comptroller General.--No later than
October 1, 1997, and October 1, of each year 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) of
this Act, including whether the financial statements of the
Federal Government have been prepared in accordance with
applicable accounting standards; and
(2) the adequacy of uniform accounting standards 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 sentence 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 by--
(1) in subparagraph (D) by striking ``and'' after the
semicolon;
(2) by redesignating subparagraph (E) as subparagraph (F);
and
(3) by inserting after subparagraph (D) the following:
``(E) a listing of agencies whose financial management
systems do not comply substantially with the requirements of
the Federal Financial 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 noncompliance; and''.
SEC. 7. DEFINITIONS.
For purposes of this Act:
(1) Agency.--The term ``agency'' means a department or
agency of the United States Government as defined in section
901(b) of title 31, United States Code.
(2) Director.--The term ``Director'' means the Director of
the Office of Management and Budget.
(3) Federal accounting standards.--The term ``Federal
accounting standards'' means applicable accounting
principles, standards, and requirements consistent with
section 902(a)(3)(A) of title 31, United States Code, and
includes concept statements with respect to the objectives of
Federal financial 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, procedures, controls, data, hardware, software,
and support personnel dedicated to the operation and
maintenance of system functions.
(5) Financial system.--The term ``financial system''
includes an information system, comprised of one or more
applications, that is used for--
(A) collecting, processing, maintaining, transmitting, or
reporting data about financial events;
(B) supporting financial planning or budgeting activities;
(C) accumulating and reporting costs information; or
(D) supporting the preparation of financial statements.
(6) Mixed system.--The term ``mixed system'' means an
information system that supports both financial and
nonfinancial functions of the Federal Government or
components thereof.
SEC. 8. EFFECTIVE DATE.
This Act shall take effect on October 1, 1996.
Mr. BROWN. Mr. President, several years ago, in an effort to identify
excess spending in the federal budget, I inquired as to overhead costs
in federal programs. I was advised that the federal accounting system
makes it impossible to identify overhead expenses for most federal
operations. The Federal Government, it turned out, has over two hundred
separate primary accounting systems, making it impossible to compare
something as basic as overhead costs.
Worse, many of these systems are shamefully inadequate even on their
own terms. A 1995 General Accounting Office report reveals that the
Pentagon made more than $400 billion in adjustments to correct errors
in defense reporting data for fiscal years 1991 to 1993--and the
resulting statements still were not reliable. The Pentagon paid vendors
$29 billion that could not be matched with supporting documents to
determine if these payments were proper. The Pentagon made an estimated
$3 million in fraudulent payments to a former Navy supply officer for
more than 100 false invoice claims, and approximately $8 million in
Army payroll payments were made to unauthorized persons, including six
``ghost'' soldiers and 76 deserters.
The Internal Revenue Service offers another disturbing example of
poor financial management and its consequences. The General Accounting
Office testified before the Governmental Affairs Committee on June 6,
1996 that despite years of criticism, ``fundamental, persistent
problems remain uncorrected'' at the IRS. For example, the IRS cannot
substantiate the amounts reported for specific types of taxes
collected, such as social security taxes, income taxes, and excise
taxes. The IRS cannot even verify a significant portion of its own
nonpayroll operating expenses, which total $3 billion. One can
hardly resist observing that this is the agency that demands precision
from every taxpayer in America.
The General Accounting Office also reports that the Medicare program
is undermined by flawed payment policies, weak billing controls and
inconsistent program management. Instances of fraud and abuse abound in
the $190 billion program. In a January 1996 report, GAO detailed a long
list of frauds. They include a $4.3 million overpayment to a company
providing heart monitoring services as well as 4,000 fraudulent claims
by a Medicare supplier totaling approximately $1.5 million. GAO
discovered that frauds like these are perpetrated on a vast scale; one
recently uncovered was operating across 20 states. The GAO report
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locates the root of the problem in financial management: ``[O]ur work
shows that outlandish charges or very large reimbursements routinely
escape the controls and typically go unquestioned.'' Even when
fraudulent billing is discovered, Medicare usually has paid out the
money and rarely acts effectively to recover it.
Together the Department of Defense, the IRS, and the Medicare Program
are just a small part of a government so massive and complex that it
controls and directs cash resources of almost $2 trillion per year,
issuing 900 million checks and maintaining a payroll and benefits
system for over 5 million government employees. Clearly it is
imperative that the government use a uniform and widely accepted set of
accounting standards across the hundreds of agencies and departments
that make up this government.
Today we are taking a great step toward putting Federal financial
management in order. The Federal Financial Management Improvement Act
of 1996 requires that all Federal agencies implement and maintain
uniform accounting standards. The result will be more accurate and
reliable information for program managers and leaders in Congress,
meaning better decisions will be made: tax dollars will be put to
better use, and a measure of confidence in the government will be
restored. While this is not the kind of legislation that makes
headlines, it is of great significance and I am proud that the Senate
has passed it. I am very grateful to Senator Stevens for steering the
bill through his Committee.
Mr. GLENN. Mr. President, over the last 6 years, we have enacted
several laws to improve Federal agency financial management. The Chief
Financial Officers Act of 1990 put into place the first requirements
for agencies to prepare annual audited financial statements. These
requirements were strengthened by the Government Management Reform Act
of 1994, and now all the major agencies are covered by the CFO Act
requirements.
In oversight hearings conducted by the Governmental Affairs
Committee, both when I was Chair and now as Ranking Minority Member, we
have seen how these laws are making significant improvements in agency
financial management. Unfortunately, we also have seen that many
agencies still have a ways to go to make the necessary reforms.
The legislation before us today, the ``Federal Financial Management
Improvement Act'' (S. 1130), which I co-sponsored, helps agencies go
those final miles to put into place necessary financial management
systems and provide real accountability for the expenditure of public
funds.
The legislation addresses the financial management systems that are
needed to provide financial accountability. Annual financial statements
will not do it alone, if agencies do not have the systems or personnel
in place to account for their financial operations. Accordingly, the
bill requires agencies to comply with applicable accounting standards
and systems requirements.
The legislation further requires auditors to identify agencies with
deficient financial management systems. This puts added teeth in the
CFO Act financial statement process, and will lead to practical
remediation steps, to be overseen by OMB. I am concerned, however, that
the legislation's requirements for auditors to identify officials
responsible for agency financial systems may have the untoward
consequence of intimidating our civil servants.
If this requirement is used to identify specific decisions that have
frustrated the development of needed financial management reforms, it
will be a success. It will also be a success if it creates incentives
for improved training for financial management personnel. If, however,
it is used to unfairly blame managers who are constrained by resource
or policy decisions made above them, whether in the agency or by
Congress, then we will have to revisit this requirement. At this point,
however, I believe that on balance the time has come to demand more
accountability from our agencies and agency officials for their
financial management performance.
I commend Senator Brown for introducing this bill and for working
with us in Committee to improve it. I believe the ``Federal Financial
Management Improvement Act'' is important legislation and will work to
improve agency financial management. I urge my colleagues to support
it.
Mr. STEVENS. Mr. President, I ask unanimous consent that the
committee substitute be agreed to, the bill be deemed read the third
time, passed, the motion to reconsider be laid upon the table, and any
statement relating to this bill appear at the appropriate place in the
Record.
The PRESIDING OFFICER. Without objection, it is so ordered.
The bill (S. 1130), as amended, was deemed read the third time and
passed.
____________________