[Congressional Record (Bound Edition), Volume 148 (2002), Part 14]
[House]
[Pages 19276-19279]
[From the U.S. Government Publishing Office, www.gpo.gov]




               ACCOUNTABILITY OF TAX DOLLARS ACT OF 2002

  Mr. HORN. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 4685) to amend title 31, United States Code, to expand the types 
of Federal agencies that are required to prepare audited financial 
statements, as amended.
  The Clerk read as follows:

                               H.R. 4685

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Accountability of Tax 
     Dollars Act of 2002''.

[[Page 19277]]



     SEC. 2. AMENDMENTS RELATING TO AUDITING REQUIREMENT FOR 
                   FEDERAL AGENCY FINANCIAL STATEMENTS.

       (a) In General.--Section 3515 of title 31, United States 
     Code, is amended--
       (1) in subsection (a)--
       (A) by striking ``Not later'' and inserting ``(1) Except as 
     provided in subsection (e), not later'';
       (B) by striking ``each executive agency identified in 
     section 901(b) of this title'' and inserting ``each covered 
     executive agency''; and
       (C) by striking ``1997'' and inserting ``2003'';
       (2) in subsection (b) by striking ``an executive agency'' 
     and inserting ``a covered executive agency'';
       (3) in subsection (c) and (d) by striking ``executive 
     agencies'' each place it appears and inserting ``covered 
     executive agencies''; and
       (4) by adding at the end the following:
       ``(e)(1) The Director of the Office of Management and 
     Budget may exempt a covered executive agency, except an 
     agency described in section 901(b), from the requirements of 
     this section with respect to a fiscal year if--
       ``(A) the total amount of budget authority available to the 
     agency for the fiscal year does not exceed $25,000,000; and
       ``(B) the Director determines that requiring an annual 
     audited financial statement for the agency with respect to 
     the fiscal year is not warranted due to the absence of risks 
     associated with the agency's operations, the agency's 
     demonstrated performance, or other factors that the Director 
     considers relevant.
       ``(2) The Director shall annually notify the Committee on 
     Government Reform of the House of Representatives and the 
     Committee on Governmental Affairs of the Senate of each 
     agency the Director has exempted under this subsection and 
     the reasons for each exemption.
       ``(f) The term `covered executive agency'--
       ``(1) means an executive agency that is not required by 
     another provision of Federal law to prepare and submit to the 
     Congress and the Director of the Office of Management and 
     Budget an audited financial statement for each fiscal year, 
     covering all accounts and associated activities of each 
     office, bureau, and activity of the agency; and
       ``(2) does not include a corporation, agency, or 
     instrumentality subject to chapter 91 of this title.''.
       (b) Waiver Authority.--
       (1) In general.--The Director of the Office of Management 
     and Budget may waive the application of all or part of 
     section 3515(a) of title 31, United States Code, as amended 
     by this section, for financial statements required for the 
     first 2 fiscal years beginning after the date of the 
     enactment of this Act for an agency described in paragraph 
     (2) of this subsection.
       (2) Agencies described.--An agency referred to in paragraph 
     (1) is any covered executive agency (as that term is defined 
     by section 3515(f) of title 31, United States Code, as 
     amended by subsection (a) of this section) that is not an 
     executive agency identified in section 901(b) of title 31, 
     United States Code.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
California (Mr. Horn) and the gentlewoman from Illinois (Ms. 
Schakowsky) each will control 20 minutes.
  The Chair recognizes the gentleman from California (Mr. Horn).

                              {time}  1415


                             General Leave

  Mr. HORN. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
and include extraneous material on H.R. 4685.
  The SPEAKER pro tempore (Mr. Cantor). Is there objection to the 
request of the gentleman from California?
  There was no objection.
  Mr. HORN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, H.R. 4685, the Proposed Accountability of Tax Dollars 
Act of 2002, was introduced on May 8 by the distinguished gentleman 
from Pennsylvania (Mr. Toomey). This bill would expand the number of 
Federal agencies that are required to prepare audited financial 
statements each year. At present, only 24 Departments and agencies are 
covered by the Chief Financial Officers Act of 1990, as amended. They 
now must meet this requirement.
  This bill would require that most executive branch agencies produce 
annual audited financial statements. However, the Office of Management 
and Budget could exempt agencies with annual budgets of less than $25 
million a year. However, to do so it must determine that those agencies 
do not present risk factors that warrant audited financial statements. 
I expect this waiver authority to be used rarely, if ever. The bill 
would also permit the Office of Management and Budget to phase in the 
financial statement requirement over a 2-year period. This provision 
would give agencies additional time to prepare if they need it.
  The Enron debacle and similar events underscored the need for honest 
and accurate financial reporting in the private sector. I can assure 
you, Mr. Speaker, that this need is just as critical in the Federal 
Government. The Subcommittee on Government Efficiency, Financial 
Management and Intergovernmental Relations, which I chair, has held 
countless hearings on the pervasive financial management problems that 
confront most Federal agencies. Requiring annual audited financial 
statements will not solve all of those problems; however, it will bring 
more agencies closer to providing reliable financial information and 
holding them accountable to the American taxpayers:
  We should bring behavior sanctions to Federal financial officers, who 
misuse fiscal management.
  Many agencies that are not currently required to provide audited 
financial statements recognize their value. A recent survey conducted 
by the General Accounting Office found that 12 such agencies were 
voluntarily producing audited financial statements.
  During our subcommittee's May 14 hearing on H.R. 4685, witnesses from 
four or more of those agencies testified to the importance of audited 
financial statements in achieving greater accountability.
  H.R. 4685 is a bipartisan and commonsense bill. It has the strong 
support of the General Accounting Office headed by the Comptroller 
General of the United States and the Office of Management and Budget 
headed by the director that reports to the President.
  Enactment of this bill will help ensure greater accountability over 
the billions of tax dollars the Federal Government spends each year. I 
urge all of my colleagues to support this important bill.
  Mr. Speaker, I yield such time as he may consume to the distinguished 
gentleman from Pennsylvania (Mr. Toomey), who has done really an 
excellent job. He has been in and over every line and has spent quite a 
few hours and weeks on this legislation.
  Mr. TOOMEY. Mr. Speaker, I thank the chairman for yielding me time.
  Mr. Speaker, I rise today to urge my colleagues to support H.R. 4685, 
the Accountability for Tax Dollars Act.
  Mr. Speaker, I first introduced this bill actually in the 106th 
Congress as a good government measure to combat waste, fraud, and abuse 
at Federal agencies. I reintroduced this legislation in this Congress 
with bipartisan support.
  The Subcommittee on Government Efficiency, Financial Management and 
Intergovernmental Affairs of the Committee on Government Reform then 
held a hearing and a markup of the bill before reporting it out 
favorably. And I want to thank very much the subcommittee chairman, the 
gentleman from California (Mr. Horn), not only for his support for this 
legislation, without his help we would not have this bill on the floor 
today, but in addition to that help, I want to thank him for his 
career-long commitment to improving the operations of government, 
improving the management and effectiveness and efficiency, as well as 
the accountability, of government. The gentleman from California 
deserves to be recognized for that commitment.
  Mr. Speaker, I decided to introduce this legislation when I 
discovered, much to my surprise, that actually a majority of Federal 
agencies are not required by law to prepare audited financial 
statements even though, of course, we mandate that publicly traded 
private enterprises do in fact perform such audited financial 
statements. This strikes me as unacceptable for several reasons: first, 
the agencies themselves really need reliable financial statements in 
order to evaluate their own operations and operate efficiently. But, 
secondly, Congress has an important oversight responsibility over all 
of these agencies. And we cannot conduct that oversight properly if we 
do not have reliable financial information.

[[Page 19278]]

  Thirdly, taxpayers themselves ought to be able to look at financial 
information that they can rely upon so they can evaluate whether their 
Federal tax dollars are being used appropriately and efficiently.
  Finally, the government ought to be willing to impose upon itself 
those mandates that we are willing and able to impose on the private 
sector. It is a little bit ironic that Federal law requires, as I said, 
that publicly traded private companies file audited financial 
statements with whom? With the SEC. The SEC, who ironically is not 
required to prepare such audits on themselves.
  It is interesting Congress did not formally require that any agency 
prepare audits on its financial statements until fiscal year 1996. And 
even then we only required 24 of the largest agencies, those covered by 
the Chief Financial Officers Act, to perform these audits. The list of 
agencies that do not audit their financial statements includes large 
agencies charged with very significant regulatory and fiduciary 
responsibilities, including the Federal Communications Commission, the 
Securities and Exchange Commission, the Commodities and Futures Trading 
Commission, the Equal Employment Opportunity Commission, and the 
National Labor Relations Board, just to name a few.
  Well, in the process of evaluating this issue, I asked the General 
Accounting Office to survey agencies which are not required to prepare 
audited financial statements in order that we could learn a little bit 
about them, and specifically to determine what degree of effort would 
be required for agencies to implement this requirement, and also 
whether non-CFO agencies that voluntarily do audit their own financial 
statements, and there are a number of do, whether they have realized 
benefits from having done so.
  The GAO study was very interesting. It found out that, first of all, 
the surveyed agencies reported they either achieved significant 
benefits or anticipated achieving major benefits from auditing their 
financial statements. Twenty-one of the 26 largest agencies that are 
not required to audit their financial statements thought that the 
Federal agencies in fact should be required to audit these financial 
statements.
  All of the surveyed agencies that have voluntarily adopted a standard 
of auditing their statements reported significant benefits, including 
enhanced accountability, greater ability to identify inefficiencies and 
weaknesses, improved internal controls, compliance with statutory 
requirements, and better monitoring of assets and liabilities. Probably 
the most convincing result of the GAO survey was the fact that almost 
all of the agencies that do not prepare audited financial statements 
reported that the absence of a statutory requirement was the main 
reason for not doing such an audit.
  So what does H.R. 4685 actually do? Well, the Accountability of Tax 
Dollars Act of 2002 would extend the CFO act requirements currently 
imposed on the major agencies to all Federal agencies. The act then 
gives the Office of Management and Budget the authority to waive the 
audit requirements for agencies with annual budgets less than $25 
million. And I share the chairman's hope that this provision will be 
seldom, if ever, invoked.
  Now to ease the transition of this new requirement, the Office of 
Management and Budget director will be given discretion for the first 2 
years to waive the application of this provision for those agencies 
where he deems it necessary. The agencies covered by this bill have a 
combined annual budget of tens of billions of dollars, huge significant 
sums of money that simply should be accounted for more rigorously.
  In summary, Mr. Speaker, in our current climate of budget 
constraints, a Federal agency really should be able to demonstrate 
measurable outcomes and demonstrate it with audited financial 
statements. Audits make an agency's transactions public so that an 
agency can be evaluated on how well their programs perform; and how 
well they are fulfilling their mission, rewarding the successful 
agencies, and, frankly, withholding resources from those who are 
failing can only be achieved if we have complete and audited financial 
information on which we can rely to make our judgments.
  Mr. Speaker, I believe that H.R. 4685 takes us one step closer to 
achieving this goal. Both the GAO and the administration support this 
bill. It was introduced with bipartisan support. I would like to thank 
my colleague from Pennsylvania (Mr. Kanjorski) for being an original 
cosponsor of this bill. I also want to thank the GAO for their work in 
looking into this issue, and my staff for the hard work that they did 
in determining an appropriate response to this. I relied on the 
expertise of the GAO and the staff and their insights regarding the 
costs and benefits of implementing this rule.
  Once again, I want to thank the gentleman from California (Mr. Horn) 
for making it possible to have this bill on the floor today.
  Mr. Speaker, I urge my colleagues to support this important good 
government legislation.
  Ms. SCHAKOWSKY. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of H.R. 4685. It is a bill to improve 
the financial accountability of the executive branch agencies.
  The bill before us today extends the requirements for audited 
financial statements to nearly all executive branch agencies. 
Unfortunately, this bill provides no funds to pay for those audits. The 
result is that the money spent to pay for these audits would otherwise 
be used by the Inspectors General to investigate waste, fraud and 
abuse. I believe strongly that Congress should fund what it authorizes.
  Mr. Speaker, I have been pleased to work with the gentleman from 
California (Mr. Horn) on this and other financial management activities 
in the Committee on Government Reform. We share a belief that sound 
financial management gives us greater freedom to fund the many programs 
designed to help the public and that shoddy financial management 
directly impacts every taxpayer in this country and particularly harms 
the most vulnerable of our citizens.
  Bad financial management is a double crime. First, it is wrong to 
disregard the value of taxpayer funds by wasting them through 
mismanagement. Second, it denies taxpayers the services for which they 
have paid their taxes. Unfortunately, the bill we have on the floor 
today is not the bill we have passed out of our subcommittee. The bill 
we have passed included a section that required the agencies covered 
under this bill to conform to the accounting standards set out in the 
Federal Financial Management Improvement Act of 1996. The 
administration insisted that those provisions be stripped from the 
bill, or it would block the bill from coming before the House today. I 
find this turn of events disappointing.
  I am disappointed because we are passing a weaker bill than should be 
passed and because we are acquiescing to an unreasonable demand by the 
Bush administration. Our actions send a signal to the public that 
Congress is not serious enough about accounting standards. If there is 
any time in our history that we should be demanding greater 
accountability from government agencies, it is today.

                              {time}  1430

  Requiring agencies to follow the standards of the Federal Financial 
Management Improvement Act is not new. In fact, every year, as part of 
its financial review of the executive branch, the General Accounting 
Office reports to Congress on whether each agency is conforming within 
the provisions of this Act. The Act requires agencies to put in place 
policies and systems that lead to sound financial management on a day-
to-day basis. Frankly, I am puzzled that the Bush administration 
opposes this kind of sound financial management.
  This administration talks a lot about its management initiatives and 
improving accountability in the government. However, it is very careful 
to make sure that it is the Office of Management and Budget that sets 
the rules

[[Page 19279]]

by which agencies are graded. I am afraid that the administration's 
opposition to the accounting standards that were in this bill is just 
one more attempt to make sure that OMB, and not Congress, sets the 
standards by which agencies are judged. It is very easy to claim 
success when you define what success is.
  The bill before us today is not just about accounting standards. The 
title is the Accountability for Tax Dollars Act, and I would like to 
speak to that topic.
  The chart in the well shows the Federal deficit in surpluses for the 
years 1980 to 2001 and projections of the deficit through 2010. As my 
colleagues can see, after a few years of surplus at the end of the 
Clinton administration, we are back to the deficit spending of the 
Reagan and Bush, Senior, administrations.
  I believe that it is important for the American public to understand 
just who is accountable in this situation. The administration would 
like the public to believe that the recession and the attacks of last 
September are responsible for these deficits, but that is not true.
  The second chart, based on data from the Congressional Budget Office, 
shows that the single biggest cause of the deficits in this year and 
into the future is the Bush tax cut.
  When President Clinton signaled to the world that he was serious 
about balancing the budget, it had an important effect. International 
investment began to flow into the U.S. economy and was one of the 
engines of the expansion of the 1990s. These deficits will have the 
opposite effect, holding back the economy and taking a toll on 
everyone.
  We have already seen that happening. Last week, the Department of 
Commerce announced that the poverty rate was up and household income 
was down. The last time we saw poverty go up and income go down was 
during the recession in 1991.
  Mr. Speaker, I support the bill before us today. However, it is 
unfortunate that we are not also considering a bill that I introduced, 
the First Things First Act. My bill truly addresses the problem of 
accountability for tax dollars by preventing further implementation of 
the Bush tax cuts, provisions that overwhelmingly benefit the rich and 
are fueling the Bush recession.
  My bill puts further implementation of the tax cuts for the top 
bracket on hold until we can pay for the needs created by the terrorist 
attack last year, until we can ensure the solvency of Social Security 
and Medicare trust funds, until we can provide a comprehensive 
prescription drug benefit under Medicare, until we can ensure Federal 
funding for school modernization and hiring 100,000 teachers, and until 
we reduce the number of people who face homelessness and substandard 
housing.
  Mr. Speaker, I ask that my colleagues pass the bill before us today, 
and I ask my colleagues to be truly accountable to the American public 
for their tax dollars. It is our patriotic duty to ensure that every 
tax dollar is accounted for and that agencies like the Department of 
Defense, which cannot account for over $1 trillion in transactions, 
clean up their books and their acts.
  I would like to take a personal note, Mr. Speaker, to just thank the 
Chairman of the Subcommittee of Government Efficiency, Financial 
Management and Intergovernmental Relations. I want to commend him and 
thank the gentleman not only for the many courtesies that he has shown 
to me, as the ranking Democrat on that committee, and not only for the 
many, many things I learned from him on how to carry out the role of 
chairman with integrity and fairness, but I want to thank him for his 
service to the American people.
  He has been relentless in his pursuit of government efficiency and 
financial management. He has had over a dozen hearings around the 
country on our capacity to deal with some of the threats of the 
terrorist attacks, and this decent and dedicated leader of our country 
will be deeply missed as he retires. He deserves all of our thanks.
  Mr. Speaker, I yield back the balance of my time.
  Mr. HORN. Mr. Speaker, I yield myself such time as I may consume.
  I thank the fine speech of the gentlewoman from Illinois (Ms. 
Shakowsky). She has worked in our committee on good government matters; 
and, of course, she comes from Chicago, so she knows where there needs 
a little work up there, but I thank her.
  Mr. Speaker, I have no other requests for time, and I yield back the 
balance of my time.
  The SPEAKER pro tempore (Mr. Cantor). The question is on the motion 
offered by the gentleman from California (Mr. Horn) that the House 
suspend the rules and pass the bill, H.R. 4685, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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