Managing for Results: The Statutory Framework for Performance-Based
Management and Accountability (Letter Report, 01/28/98,
GAO/GGD/AIMD-98-52).
Pursuant to a congressional request, GAO provided an overview of certain
major statutes that Congress has enacted to instill a more
performance-based approach to management and accountability of the
federal government.
GAO noted that: (1) implemented together, these laws provide a powerful
framework for developing and fully integrating information about
agencies' missions and strategic priorities, the results-oriented
performance goals that flow from those priorities, performance data to
show the level of achievement of those goals, and the relationship of
information technology investments to the achievement of performance
goals--along with reliable and audited financial information about the
costs of achieving mission results; (2) this framework should promote a
more results-oriented management and decisionmaking process within both
Congress and the executive branch; (3) it can be useful to Members by
providing information that is pertinent to a broad range of
management-related decisions confronting them in their capabilities as
members of budget, authorization, oversight, and appropriations
committees; (4) however, GAO's work has shown that critical
implementation issues remain to be addressed; and (5) for example,
although the statutory framework for more performance-based government
is in place, key parts of the framework are in their first years of
implementation, and how best to integrate the implementation is a
continuing work in progress.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD/AIMD-98-52
TITLE: Managing for Results: The Statutory Framework for
Performance-Based Management and Accountability
DATE: 01/28/98
SUBJECT: Accountability
Reporting requirements
Financial statements
Internal controls
Debt collection
Information resources management
Strategic planning
Financial management systems
Federal agency accounting systems
Agency missions
IDENTIFIER: GPRA
Government Performance and Results Act
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Cover
================================================================ COVER
Report to Congressional Requesters
January 1998
MANAGING FOR RESULTS - THE
STATUTORY FRAMEWORK FOR
PERFORMANCE-BASED MANAGEMENT AND
ACCOUNTABILITY
GAO/GGD/AIMD-98-52
Managing for Results
(410228/922249)
Abbreviations
=============================================================== ABBREV
CFO - Chief Financial Officer
CIO - Chief Information Officer
CCA - Clinger-Cohen Act
DCIA - Debt Collection Improvement Act
FASAB - Federal Accounting Standards Advisory Board
FFMIA - Federal Financial Management Improvement Act
FMFIA - Federal Managers' Financial Integrity Act
GMRA - Government Management Reform Act
GPRA - Government Performance and Results Act
IG - Inspector General
IRM - Information Resources Management
IT - Information Technology
NIST - National Institute of Standards and Technology
OFPP - Office of Federal Procurement Policy
OMB - Office of Management and Budget
PRA - Paperwork Reduction Act
SGL - Standard General Ledger
Letter
=============================================================== LETTER
B-278840
January 28, 1998
The Honorable Dick Armey
Majority Leader
House of Representatives
The Honorable Fred D. Thompson
Chairman, Committee on Governmental Affairs
United States Senate
The Honorable Dan Burton
Chairman, Committee on Government Reform and Oversight
House of Representatives
In response to your request, this report provides an overview of
certain major statutes that Congress has enacted to instill a more
performance-based approach to the management and accountability of
the federal government. This statutory framework includes the
Government Performance and Results Act; financial management
statutes, such as the Chief Financial Officers Act; and information
resources management statutes, such as the Clinger-Cohen Act. The
framework also includes the Federal Managers' Financial Integrity
Act, debt collection and credit reform legislation, and the Inspector
General Act.
Our objectives were to (1) summarize the acts' purposes and
requirements; (2) provide a time line illustrating the various
reporting requirements these statutes call for in relation to the
congressional budget process; and (3) identify the status of
agencies' implementation of these statutes and compliance with their
requirements, if we had done recent work on these efforts.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Implemented together, these laws provide a powerful framework for
developing and fully integrating information about agencies' missions
and strategic priorities, the results-oriented performance goals that
flow from those priorities, performance data to show the level of
achievement of those goals, and the relationship of information
technology investments to the achievement of performance goals--along
with reliable and audited financial information about the costs of
achieving mission results. This framework should promote a more
results-oriented management and decisionmaking process within both
Congress and the executive branch. It can be useful to Members by
providing information that is pertinent to a broad range of
management-related decisions confronting them in their capacities as
members of budget, authorization, oversight, and appropriations
committees. However, our work has shown that critical implementation
issues remain to be addressed. For example, although the statutory
framework for more performance-based government is in place, key
parts of the framework are in their first years of implementation,
and how best to integrate the implementation is a continuing work in
progress.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :2
We selected the statutes summarized in this report on the basis of
your request and included some additional acts that we believe are
important elements of the statutory management framework for the
federal government. To describe the acts' purposes and requirements,
we analyzed the statutory provisions. To develop the time line, we
analyzed the dates and sources for the statutory reporting
requirements in conjunction with important dates in the congressional
budget process as contained in law. To identify the status of
agencies' implementation efforts and compliance with the acts'
requirements, we compiled the information from our prior work on the
implementation of these statutes. Because we had received agencies'
comments on our prior work regarding the implementation status, we
did not obtain additional agency comments for this report. We also
listed the name and telephone number of GAO officials to contact for
further information and listed related GAO products.
We conducted this work during December 1997 in accordance with
generally accepted government auditing standards.
THE STATUTORY FRAMEWORK FOR
PERFORMANCE-BASED MANAGEMENT
AND ACCOUNTABILITY
------------------------------------------------------------ Letter :3
A key part of this statutory framework is the Government Performance
and Results Act of 1993--commonly known as "GPRA" or "the Results
Act." Prior to enactment of the Results Act, congressional
policymaking, spending decisions, and oversight had been severely
handicapped by a lack of sufficiently precise program goals and
inadequate program performance and cost information. The Results Act
sought to remedy that situation by requiring agencies to set
multiyear strategic goals and corresponding annual goals, measure
performance toward the achievement of those goals, and report on
their progress. (For information on the Results Act's purpose,
requirements, and its implementation status, see app. I.)
The most comprehensive financial management reform legislation of the
last 40 years is the Chief Financial Officers Act of 1990 (CFO Act),
as expanded by the Government Management Reform Act of 1994 (GMRA)
and amended by the Federal Financial Management Improvement Act of
1996 (FFMIA). These statutes provide the basis for identifying and
correcting financial management weaknesses that have cost the federal
government billions of dollars and have left it vulnerable to waste,
fraud, and mismanagement. The expanded CFO Act spelled out a long
overdue and ambitious agenda to help the government remedy its lack
of timely, reliable, useful, and consistent financial information.
It requires 24 agencies to prepare audited financial statements
annually, thereby greatly improving accountability over government
operations.
FFMIA builds on the CFO Act by requiring financial statement
auditors, beginning with the fiscal year 1997 financial statements,
to report whether agencies' financial management systems comply with
federal financial management systems requirements, federal accounting
standards, and the Standard General Ledger. GMRA also requires the
Treasury Department to prepare each year, beginning with fiscal year
1997, a governmentwide, consolidated financial statement that we are
to audit. A pilot program under GMRA has also begun in which 10
agencies issued accountability reports for fiscal year 1996,
consolidating their reporting under several statutes, including the
CFO, Federal Managers' Financial Integrity, Results, Prompt Payment,
and Debt Collection Acts. The accountability reports include program
and financial information, such as the audited financial statements
and performance measures reflecting performance in meeting key agency
goals, as well as the Inspectors' General semiannual reports. (See
apps. II and III.)
Information technology reform legislation, including the Paperwork
Reduction Act of 1995 (PRA) and the Clinger-Cohen Act of 1996, is
based on the best practices used by leading public and private
organizations to more effectively manage information technology.
Under the information technology reform laws, agencies are to better
link their technology plans and information technology use to their
programs' missions and goals. To do this, agencies are to, among
other things, (1) involve senior executives in information management
decisions; (2) establish senior-level Chief Information Officers who
are to, among other things, evaluate information technology programs
on the basis of applicable performance measurements; (3) impose
much-needed discipline on technology spending; (4) redesign
inefficient work processes; and (5) use performance measures to
assess technology's contribution to achieving mission results. Also,
the Computer Security Act of 1987, as amended in 1996, addresses the
importance of ensuring and improving the security and privacy of
sensitive information in federal computer systems. (See apps. IV,
V, and XI.)
Congress passed the Federal Managers' Financial Integrity Act (FMFIA)
to improve accountability by requiring agencies to evaluate their
internal accounting and administrative control systems--broadly
defined as management controls. FMFIA focuses agency improvement
efforts on management controls to help ensure that programs achieve
their intended results; resources are used consistently with the
agency's mission; programs and resources are protected from waste,
fraud, and mismanagement; laws and regulations are followed; and
reliable and timely information is obtained, maintained, reported,
and used for decisionmaking. (See app. VI.)
In the area of credit reform and debt collection, Congress revised
the budgetary and accounting requirements for federal credit programs
in the Federal Credit Reform Act of 1990 to more accurately measure
the costs of federal credit programs. In particular, the statute
changed the budgetary treatment of loans and loan guarantees so that
the government can better measure and control its subsidy costs for
loan programs and compare their costs to other programs. The Debt
Collection Improvement Act of 1996 provides significant opportunities
for improving agencies' ability to collect delinquent debt, including
enhanced administrative offset and wage garnishment. In an effort to
reduce future delinquencies, it requires agencies to screen potential
borrowers--except for disaster loan applicants--and requires denial
of credit to anyone who is delinquent in repaying federal debt
(except for tax debt). In addition, the Prompt Payment Act is
intended to encourage government managers to improve their
bill-paying procedures. In response to complaints that agencies were
not paying invoices in a timely manner and that this presented severe
cash flow difficulties for smaller businesses, the act provides for
the use of interest penalties against the operating budgets of
programs when managers fail to pay the bills on time. In addition to
encouraging managers to make timely payments, interest penalties also
compensate businesses when a payment is late. (See apps. VII, VIII,
and IX.)
Another component of the statutory framework was put in place in the
late 1970s with the passage of the Inspector General Act, which
creates the positions of Inspectors General as independent officers
within agencies to conduct and supervise audits and investigations;
promote economy, efficiency, and effectiveness; prevent and detect
fraud and abuse in programs and operations; and keep the agency head
and Congress fully informed about problems and deficiencies. Today,
27 federal establishments and 30 designated federal entities have
Inspectors General. (See app. X.)
TIMING OF STATUTORY REPORTING
REQUIREMENTS AND THE
CONGRESSIONAL BUDGET PROCESS
------------------------------------------------------------ Letter :4
The selected statutes contain different reporting requirements that
are due at various times during the fiscal year, as shown in figure
1. Some of the required reports provide information to Congress,
while others provide information to agency heads and/or the Office of
Management and Budget. In addition, figure 1 shows the congressional
budget process in relation to these reporting requirements.
Figure 1: Time Line for
Selected Statutory Reporting
Requirements
(See figure in printed
edition.)
(See figure in printed
edition.)
Source: GAO review of statutes.
Figure 2 shows the dates and underlying sources of these selected
statutory reporting requirements.
Figure 2: Dates and Sources
for Selected Statutory
Reporting Requirements
(See figure in printed
edition.)
(See figure in printed
edition.)
There are several important dates in the congressional budget process
as contained in law, as shown in figure 3. Given that these
statutory requirements provide information that can be used in the
budget process, it is important to view the requirements in relation
to the budget process.
Figure 3: Important Dates in
the Congressional Budget
Process (as Contained in the
Congressional Budget Act)
(See figure in printed
edition.)
THE RESULTING INFORMATION WILL
BE USEFUL, BUT IMPLEMENTATION
ISSUES REMAIN
------------------------------------------------------------ Letter :5
These statutes, if effectively implemented, will produce program
performance and financial information that has not previously been
available to decisionmakers and the public, as well as strengthened
management controls and processes to increase accountability. This
information will be a valuable resource for Congress to use in
carrying out its program authorization, oversight, and appropriations
responsibilities, as well as to ensure the public a more accountable
and responsive government. However, implementation of some of these
statutes is in the early stages, and integration of the resulting
information will be critical in effectively implementing this
framework. For example, agencies continue to work on developing
results-oriented performance goals in conjunction with the cost
accounting systems needed to provide reliable program and cost
information.
Ultimately, performance and financial information will be most useful
to congressional and executive branch decisionmakers when it is
closely linked with the federal government's budget and
appropriations processes. To be most useful in this context, the
performance information developed in response to the Results Act
needs to be consolidated with the critical financial and program cost
data in financial statements prepared and audited under the CFO Act.
---------------------------------------------------------- Letter :5.1
As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 15 days after the date of its issuance. We will then send
copies to the the Ranking Minority Member of the Senate Committee on
Governmental Affairs, the House Minority Leader, and the Ranking
Minority Member of the House Committee on Government Reform and
Oversight. We will also make copies available to others on request.
The major contributors to this report are listed in appendix XII.
Please contact L. Nye Stevens on (202) 512-8676 or Jeffrey Steinhoff
on (202) 512-9450, or call the contacts listed in the appendixes, if
you or your staff have any questions.
L. Nye Stevens, Director
Federal Management and Workforce Issues
General Government Division
Jeffrey C. Steinhoff
Director of Planning and Reporting
Accounting and Information
Management Division
GOVERNMENT PERFORMANCE AND RESULTS
ACT OF 1993, P.L. 103-62
=========================================================== Appendix I
PURPOSE
--------------------------------------------------------- Appendix I:1
The purposes of the Results Act include holding federal agencies
accountable for achieving program results and requiring federal
agencies to clarify their missions, set program goals, and measure
performance toward achieving those goals.
REQUIREMENTS
--------------------------------------------------------- Appendix I:2
Under the Government Performance and Results Act, agencies were
required to submit strategic plans no later than September 30, 1997,
to the Office of Management and Budget (OMB) and Congress; updates
are required at least every 3 years thereafter. The plan, covering
not less than 5 years, must contain (1) a comprehensive mission
statement for major functions and operations of the agency; (2)
general and outcome-related goals; (3) a description of how the
agency will achieve the goals and the operational processes and
resources required; (4) a description of how the goals relate to
annual performance plan goals; (5) an identification of key factors
external to, and beyond the control of, the agency that could
significantly affect the achievement of goals; and (6) a description
of program evaluations the agency used in establishing and revising
general goals, with a schedule for future program evaluations. In
developing strategic plans, agencies must consult with Congress and
solicit and consider the views and suggestions of those entities
potentially affected by or interested in the plan.
Annually, beginning with fiscal year 1999, agencies must submit to
OMB performance plans covering each program activity in the agency's
budget. OMB, using these plans, must prepare a federal performance
plan for inclusion in the president's annual budget submission to
Congress. The agency plan must (1) establish goals that define the
level of performance to be achieved by a program activity; (2)
express goals in an objective, quantifiable, and measurable form
unless an alternative form is approved by OMB; (3) describe the
operational processes and resources required to achieve goals; (4)
establish performance indicators to be used in measuring or assessing
the relevant outputs, service levels, and outcomes of each program
activity; (5) provide a basis for comparing actual program results
with the established goals; and (6) describe the means to be used to
verify and validate measured values.
Annually, beginning March 31, 2000, agencies must submit program
performance reports covering performance for the previous fiscal year
to the president and Congress. Reports beginning in fiscal year 2002
must include actual program performance results for the 3 preceding
fiscal years. The agencies' reports must (1) review how successfully
performance goals were achieved; (2) evaluate the performance plan
for the current year relative to the performance goals achieved
during the fiscal year(s) covered by the reports; (3) where goals are
not met, explain and describe (a) why the goals were not met, (b)
plans and schedules for achieving the goals, and (c) if the goals are
impractical or infeasible, why that is the case and what action is
recommended; (4) describe the use and assess the effectiveness in
achieving performance goals of any waiver under 31 U.S.C. section
9703; and (5) include the summary findings of program evaluations
completed during the fiscal year.
IMPLEMENTATION STATUS
--------------------------------------------------------- Appendix I:3
As of September 30, 1997, all major agencies had submitted strategic
plans. The agency strategic planning and congressional consultation
process provided an important opportunity to establish the foundation
for making the needed improvements in federal management. On the
whole, the agencies' strategic plans should prove useful to Congress
in undertaking the full range of its appropriation, budget,
authorization, and oversight responsibilities and to agencies in
setting a general direction for their efforts. These plans appear to
provide a workable foundation for the next phase of the Act's
implementation--annual performance planning and measurement.
Nonetheless, agencies' strategic planning efforts and, more
generally, the implementation of the Act, are still very much a work
in progress. The strategic plans that agencies recently provided to
Congress and OMB are only the starting points for the broad
transformation that is needed to successfully implement
performance-based management, and difficult implementation issues
remain to be addressed.
Our work suggests that as Congress and the agencies build on the
strategic planning process and other efforts undertaken thus far,
several critical issues will have to be addressed if the Act is to
succeed in improving the management of federal agencies. As we
reported in September 1997, these critical issues include the need to
(1) clearly establish a strategic direction for agencies by improving
goal-setting and performance measurement; (2) improve the management
of crosscutting programs by ensuring that those programs are
appropriately coordinated with other related efforts; and (3) ensure
that agencies have the data systems and analytic capacity in place to
better assess program results and costs, improve management and
performance, and establish accountability. The forthcoming annual
performance planning and measurement and performance-reporting phases
of the Act will provide important opportunities to address these
long-standing management issues.
Our September 1997 findings are consistent with our earlier findings,
reported in June 1997, that the Act's implementation to that point
had achieved mixed results, which would lead to highly uneven
governmentwide implementation. In June 1997, we observed several
challenges to effective implementation of the Act, including
overlapping and fragmented crosscutting program efforts, the often
limited or indirect influence that the federal government has in
determining whether a desired result is achieved, and the lack of
results-oriented performance information. We found that instilling
within agencies an organizational culture that focuses on results
remains a work in progress and that linking agencies' performance
plans directly to the budget process may present significant
difficulties. Addressing some of these challenges, we noted, will
raise significant policy issues for Congress and the administration
to consider, some of which will likely be very difficult to resolve.
GAO CONTACT
--------------------------------------------------------- Appendix I:4
For further information, please contact J. Christopher Mihm,
Associate Director, Federal Management and Workforce Issues, General
Government Division, (202) 512-8676.
RELATED GAO PRODUCTS
--------------------------------------------------------- Appendix I:5
Managing for Results: Building on Agencies' Strategic Plans to
Improve Federal Management (GAO/T-GGD/AIMD-98-29, Oct. 30, 1997).
Managing for Results: Critical Issues for Improving Federal
Agencies' Strategic Plans (GAO/GGD-97-180, Sept. 16, 1997).
Managing for Results: Using the Results Act to Address Mission
Fragmentation and Program Overlap (GAO/AIMD-97-146, Aug. 29, 1997).
Managing for Results: The Statutory Framework for Improving Federal
Management and Effectiveness (GAO/T-GGD/AIMD-97-144, June 24, 1997).
Managing for Results: Prospects for Effective Implementation of the
Government Performance and Results Act (GAO/T-GGD-97-113, June 3,
1997).
The Government Performance and Results Act: 1997 Governmentwide
Implementation Will Be Uneven (GAO/GGD-97-109, June 2, 1997).
GPRA: Managerial Accountability and Flexibility Pilot Did Not Work
As Intended (GAO/GGD-97-36, Apr. 10, 1997).
Agencies' Strategic Plans Under GPRA: Key Questions to Facilitate
Congressional Review (GAO/GGD-10.1.16, May 1997).
Executive Guide: Effectively Implementing the Government Performance
and Results Act (GAO/GGD-96-118, June 1996).
CHIEF FINANCIAL OFFICERS ACT OF
1990, P.L. 101-576, AND
GOVERNMENT MANAGEMENT REFORM ACT
OF 1994, P.L. 103-356
========================================================== Appendix II
PURPOSE
-------------------------------------------------------- Appendix II:1
The Chief Financial Officers (CFO) Act, with strong bipartisan
support, was signed into law on November 15, 1990. The legislation,
with an objective of greatly improving and strengthening financial
management and accountability in the federal government, represented
the most comprehensive financial management reform initiative in 40
years.
The Government Management Reform Act (GMRA) expanded the CFO Act by,
among other things, establishing requirements for the preparation and
audit of 24 agencywide financial statements beginning with fiscal
year 1996 and for the preparation and audit of consolidated financial
statements for the federal government beginning with fiscal year
1997.
REQUIREMENTS
-------------------------------------------------------- Appendix II:2
The CFO Act laid the legislative foundation for the federal
government to provide taxpayers, the nation's leaders, and agency
program managers with reliable financial information through audited
financial statements. The CFO Act provides a framework for improving
federal government financial systems, with a focus on program
results. It centralizes within OMB, through the Deputy Director for
Management and the Office of Federal Financial Management, the
establishment and oversight of federal financial management policies
and practices.
The CFO Act requires 24 federal agencies to have Chief Financial
Officers and Deputy Chief Financial Officers and lays out their
authorities and functions. The CFO Act set up a series of pilot
audits whereby certain agencies were required to prepare agencywide
financial statements and subject them to audit by the agencies'
Inspectors General (IG). GMRA expands the requirement for a fully
audited financial statement under the CFO Act to 24 agencies and
components of federal entities designated by OMB. (For example, OMB
has designated the military services, Health Care Financing
Administration, and the Internal Revenue Service as components of
agencies that must prepare audited financial statements.) The first
of these statements were due no later than March 1, 1997. Beginning
with fiscal year 1997, the Treasury Department is to produce a
consolidated financial statement for the federal government. GMRA
requires GAO to audit this statement annually, with the first audit
due by March 31, 1998.
The CFO Act requires OMB to prepare and submit to Congress a
governmentwide 5-year financial management plan. This plan describes
the activities OMB and agency CFOs will conduct over the next 5 years
to improve the financial management of the federal government.
Annually, by January 31, OMB is to submit to Congress (1) an updated
5-year financial management plan to cover the succeeding 5 fiscal
years and (2) a financial management status report. The financial
management status report is to provide (1) a description and analysis
of the status of financial management in the executive branch; (2) a
summary of the most recently completed financial statements,
financial statement audits, and reports; (3) a summary of reports on
internal accounting and administrative control systems submitted to
the president and Congress under the Federal Managers Financial
Integrity Act; and (4) any other information OMB considers
appropriate to fully inform Congress on the financial management of
the federal government. In turn, the CFO Act requires agencies to
prepare and annually revise their plans to implement OMB's 5-year
financial management plan. Other provisions of the CFO Act address
the need for the systematic process of reform; the development of
cost information; and the integration of program, financial, and
budget systems.
Among other provisions of GMRA is the enhancement of OMB's authority
to manage agency submissions of reports to Congress, the president,
and OMB. This has resulted in OMB's Accountability Report pilot.
This report consolidates the reporting under the CFO, Federal
Financial Managers' Financial Integrity, Government Performance and
Results, Prompt Payment, and Debt Collection Acts.
IMPLEMENTATION STATUS
-------------------------------------------------------- Appendix II:3
With successful implementation, the audited financial statements
required by the CFO Act, as expanded by GMRA, will provide
congressional and executive branch decisionmakers with reliable
financial and program cost information that they have not previously
had. The covered agencies and components are to prepare the
statements in accordance with a comprehensive set of federal
accounting standards developed by the Federal Accounting Standards
Advisory Board (FASAB), including a requirement for cost information,
which will be fully effective in fiscal year 1998.\1
For fiscal year 1996, agencywide financial statements were required
by the expanded CFO Act to be prepared by each of the 24 CFO Act
agencies and audited by the respective IGs. (An additional 19
components of those agencies were also designated for audit by OMB.)
All 24 audit reports were issued; 6 agencies received unqualified
opinions on their fiscal year 1996 agencywide financial statements.
Of the remainder, many received disclaimers of opinion.
A pilot program under GMRA has also begun in which 10 agencies issued
accountability reports for fiscal year 1996, consolidating their
reporting under several statutes, including the CFO, Federal
Managers' Financial Integrity, Government Performance and Results,
Prompt Payment, and Debt Collection Acts. The accountability reports
include program and financial information, such as the audited
financial statements and performance measures reflecting performance
in meeting key agency goals, as well as the IG's semiannual reports.
For the fiscal year 1997 requirement that we issue an opinion on the
governmentwide consolidated financial statements, plans are well
advanced. The 24 agencies are in the process of having their
financial statements subjected to audits, and Treasury is preparing
the governmentwide financial statements.
--------------------
\1 The Comptroller General, the Director of OMB, and the Secretary of
the Treasury created FASAB to recommend accounting standards for the
federal government, which the Comptroller General and the Director of
OMB then promulgate.
GAO CONTACTS
-------------------------------------------------------- Appendix II:4
For additional information on the CFO Act and GMRA, contact Jeffrey
C. Steinhoff, Director for Planning and Reporting, Accounting and
Information Management Division, (202) 512-9450; or Robert F. Dacey,
Director for Consolidated Audit and Computer Security Issues,
Accounting and Information Management Division, (202) 512-3317.
RELATED GAO PRODUCTS
-------------------------------------------------------- Appendix II:5
Financial Audit: Examination of IRS' Fiscal Year 1995 Financial
Statements (GAO/AIMD-96-101, July 11, 1996).
Budget and Financial Management: Progress and Agenda for the Future
(GAO/T-AIMD-96-80, Apr. 23, 1996).
CFO Act Financial Audits: Increased Attention Must Be Given to
Preparing Navy's Financial Reports (GAO/AIMD-96-7, Mar. 27, 1996).
Financial Audit: Federal Family Education Loan Program's Financial
Statements for Fiscal Years 1994 and 1993 (GAO/AIMD-96-22, Feb. 26,
1996).
Financial Management: Continued Momentum Essential to Achieve CFO
Act Goals (GAO/T-AIMD-96-10, Dec. 14, 1995).
Financial Management: Momentum Must Be Sustained to Achieve the
Reform Goals of the Chief Financial Officers Act (GAO/T-AIMD-95-204,
July 25, 1995).
Managing for Results: Strengthening Financial and Budgetary
Reporting (GAO/T-AIMD-95-181, July 11, 1995).
Managing for Results: Steps for Strengthening Federal Management
(GAO/T-GGD/AIMD-95-158, May 9, 1995).
Financial Management: CFO Act Is Achieving Meaningful Progress
(GAO/T-AIMD-94-149, June 21, 1994).
Improving Government: Actions Needed to Sustain and Enhance
Management Reforms (GAO/T-OCG-94-1, Jan. 27, 1994).
Financial Management: Strong Leadership Needed to Improve Army's
Financial Accountability (GAO/AIMD-94-12, Dec. 22, 1993).
The Chief Financial Officers Act: A Mandate for Federal Financial
Management Reform (GAO/AFMD-12.19.4, Sept. 1991).
Managing the Cost of Government: Building an Effective Financial
Management Structure (GAO/AFMD-85-35 and 35A, Feb. 1985).
FEDERAL FINANCIAL MANAGEMENT
IMPROVEMENT ACT OF 1996, P.L.
104-208, DIV. A, TITLE I, SEC.
101(F) [TITLE VIII], 110 STAT.
3009-389
========================================================= Appendix III
PURPOSE
------------------------------------------------------- Appendix III:1
The purpose of the Federal Financial Management Improvement Act
(FFMIA) is to ensure that agency financial management systems comply
with federal financial management system requirements, applicable
federal accounting standards, and the U.S. Government Standard
General Ledger (SGL)\1 in order to provide uniform, reliable, and
more useful financial information.
--------------------
\1 The U.S. Government Standard General Ledger provides a standard
chart of accounts and standardized transactions that agencies are to
use in all their financial systems.
REQUIREMENTS
------------------------------------------------------- Appendix III:2
Beginning with the fiscal year ended September 30, 1997, auditors for
each of the 24 major departments and agencies named in the CFO Act
must report, as part of their annual audits of the agencies'
financial statements, whether the agencies' financial management
systems comply substantially with federal financial management
systems requirements,\2 applicable federal accounting standards,\3
and SGL at the transaction level. The act also requires GAO to
report on implementation of the act by October 1, 1997, and each year
thereafter.
--------------------
\2 OMB Circular No. A-127, "Financial Management Systems," July
1993, prescribes the financial management systems policies and
standards for executive agencies to follow in developing, operating,
evaluating, and reporting on financial management systems. Circular
A-127 references the series of publications entitled Federal
Financial Management Systems Requirements, issued by the Joint
Financial Management Improvement Program, as the primary source of
governmentwide requirements for financial management systems.
\3 The Comptroller General and the Director of OMB have issued a
comprehensive set of accounting standards that will be fully
effective in fiscal year 1998.
IMPLEMENTATION STATUS
------------------------------------------------------- Appendix III:3
The first audit reports under the act, of the fiscal year 1997
financial statements, to include the auditors' findings required by
FFMIA, are due March 1, 1998. OMB and the CFO agencies have
initiated efforts to implement the act's requirements.
In our first report required by the act, Financial Management:
Implementation of the Federal Financial Management Improvement Act of
1996 (GAO/AIMD-98-1, Oct. 1, 1997), we discussed (1) the act's
requirements, (2) efforts under way to implement the act, (3)
challenges that agencies face in achieving full compliance with those
requirements, and (4) the status of federal accounting standards.
Other audit reports and agency self-reporting all point to
significant challenges that agencies must meet to fully implement
systems requirements, accounting standards, and SGL. The majority of
agencies did not receive unqualified opinions on their fiscal year
1996 financial statements. Fiscal year 1996 financial management
systems inventory data, self-reported by agencies and summarized in
the CFO Council's\4 and OMB's June 1997 Status Report on Federal
Financial Management Systems, reveal that the majority of agencies'
financial systems did not comply with federal financial management
systems requirements or SGL at the transaction level.
--------------------
\4 The CFO Council is a governmentwide body that addresses critical
crosscutting financial issues. It comprises the CFOs and Deputy CFOs
of the 24 largest federal agencies and senior officials of OMB and
the Department of the Treasury.
GAO CONTACT
------------------------------------------------------- Appendix III:4
For further information, please contact Gloria Jarmon, Director,
Health, Education, and Human Services Accounting and Financial
Management Issues, Accounting and Information Management Division,
(202) 512-4476.
RELATED GAO PRODUCTS
------------------------------------------------------- Appendix III:5
Financial Management: Implementation of the Federal Financial
Management Improvement Act of 1996 (GAO/AIMD-98-1, Oct. 1, 1997).
CLINGER-COHEN ACT OF 1996, P.L.
104-208
========================================================== Appendix IV
PURPOSE
-------------------------------------------------------- Appendix IV:1
The purpose of the Clinger-Cohen Act (CCA)\1 is to improve the
productivity, efficiency, and effectiveness of federal programs
through the improved acquisition, use, and disposal of information
technology (IT) resources. Among other provisions, the law (1)
encourages federal agencies to evaluate and adopt best management and
acquisition practices used by both private and public sector
organizations; (2) requires agencies to base decisions about IT
investments on quantitative and qualitative factors associated with
the costs, benefits, and risks of those investments and to use
performance data to demonstrate how well the IT expenditures support
improvements to agency programs, through measurements such as reduced
costs, improved employee productivity, and higher customer
satisfaction; and (3) requires executive agencies to appoint
executive-level chief information officers (CIO). CCA also
streamlines the IT acquisition process by eliminating the General
Services Administration's central acquisition authority, placing
procurement responsibility directly with federal agencies, and
encouraging the adoption of smaller, modular IT acquisition projects.
--------------------
\1 The Omnibus Consolidated Appropriations Act of 1997 (P.L.
104-208) renamed both the Federal Acquisition Reform Act of 1996
(P.L. 104-106, Div. D) and the Information Technology Management
Reform Act of 1996 (P.L. 104-106, Div. E) as the "Clinger-Cohen Act
of 1996."
REQUIREMENTS
-------------------------------------------------------- Appendix IV:2
OMB: CCA requires OMB to (1) issue directives to executive agencies
regarding capital planning and investment control, revisions to
mission-related and administrative processes, and information
security; (2) promote and improve the acquisition and use of IT
through performance-based and results-based management; (3) use the
budget process to analyze, track, and evaluate the risks and results
of major agency capital investments in IT/information systems, and
enforce accountability of agency heads; and (4) report to Congress on
the agencies' progress and accomplishments.
CIO: CCA amends the Paperwork Reduction Act (PRA) to require
executive agency heads to appoint CIOs at a senior level, responsible
for the agency's information resources management (IRM) activities
and reporting directly to the agency head.
A process to select and manage investments in information technology:
CCA requires executive agencies to design and implement a process for
maximizing the value and assessing and managing the risks of IT
acquisitions. It lists specific elements agencies must include in
that process and requires integration of the process with the
processes for making budget, financial, and program management
decisions.
Revisions to agency processes: Before making significant investments
in IT, executive agencies must analyze agency mission-related
processes and administrative processes, revising them as appropriate,
and they must benchmark their processes against comparable processes
of public or private sector organizations.
Information security: Executive agencies must ensure that
information security policies, procedures, and practices are adequate
to protect the agency's resources.
Assessment of agency IRM skills: Executive agencies must assess, as
part of the Results Act strategic planning and performance evaluation
process, (1) requirements for agency personnel regarding knowledge
and skills in IRM, and (2) the extent to which positions and
personnel at executive and management levels in the agency meet those
requirements. Agencies must develop strategies and plans for hiring,
training, and professional development to rectify any deficiencies
found.
Table IV.1
Clinger-Cohen Act Reporting Requirements
Section Who reports What is to be reported
------------- ------------- ----------------------------------------
5112(c) Director, OMB Submit to Congress (at the same time the
president submits his budget request to
Congress) a report of the net program
performance benefits achieved as a
result of major capital investments made
by executive agencies in information
systems and how the benefits relate to
the accomplishment of the goals of the
executive agencies.
5112(j) Director, OMB "Keep Congress fully informed" on
improvements in the performance of
agency programs and in accomplishing
agency missions through the use of the
best practices in IRM.
5123(2) Executive Submit annual report, to be included in
agency heads the executive agency's budget submission
to Congress, on the progress in
achieving its goals for improving the
efficiency and effectiveness of agency
operations and, as appropriate, the
delivery of services to the public
through the effective use of IT.
5125(c)(3)(D) Executive Report annually to the head of the
agency CIOs agency, as part of the strategic
planning and performance evaluation
process, on the progress made in
improving the IRM capabilities of the
agency's personnel.
5127 Executive Identify in the strategic IRM plan
agency heads required under 44U.S.C. sec.3506(b)(2)
(Paperwork Reduction Act) and reported
to OMB under Circular A-130 any major IT
acquisition program, or any phase or
increment of such a program, that has
significantly deviated from the cost,
performance, or schedule goals
established for the program.
5302 Administrator Submit to Congress detailed test plans
, of procedures to be used and list any
Office of regulations to be waived before
Federal executive agencies conduct pilot
Procurement programs to test alternative approaches
Policy (OFPP) to IT acquisition.
5303 Administrator Submit to OMB and Congress, not later
, than 180 days after completion of a
OFPP pilot program to test alternative
approaches to IT acquisition, a report
on the results, findings, and
recommendations derived from the pilot
program.
5312(e) Comptroller Monitor the conduct and review the
General results of acquisitions under
"solutions-based contracting pilot
programs" and submit to Congress
"periodic" reports containing the
Comptroller General's views on the
activities, results, and findings under
those pilot programs.
5401(c)(3) Comptroller Review pilot programs to test
General streamlined procedures for procuring IT
products and services through on-line
multiple award schedules and report to
Congress, not later than 3 years after
the date on which each pilot program was
established, (1)the extent of
competition for orders, (2) the effect
of streamlined procedures on prices
charged, (3)the effect of such
procedures on paperwork requirements for
multiple award schedule contracts and
orders, and (4) the effect of the pilot
program on small businesses and socially
and economically disadvantaged small
businesses.
5401(c)(4) Administrator Notify Congress at least 30 days before
, the date on which OFPP withdraws a
OFPP schedule or portion of a schedule from
the "on-line multiple award schedule
contracting" pilot program.
----------------------------------------------------------------------
IMPLEMENTATION STATUS
-------------------------------------------------------- Appendix IV:3
The sound application and management of IT to support strategic
program goals is an important part of any serious attempt to improve
agency mission performance, cut costs, and enhance responsiveness to
the public. Increasingly, agencies can, and should, be expected to
show how technology is contributing to reducing operating costs,
increasing productivity, improving service delivery cycle time, and
enhancing overall program delivery quality. Agency track records can
be established and form the basis for congressional decisionmaking
about appropriate levels for continued funding.
Our testimony in July 1996 noted that numerous activities were
already under way across government to implement new management
processes required by the law. In particular, a governmentwide CIO
Council was created by executive order to provide recommendations to
OMB on governmentwide IT priorities, procedures, and standards, and
OMB made revisions to two important management and budget policy
circulars critical to effective implementation of the law: Circular
A-130, "Management of Federal Information Resources," and Circular
A-11, "Preparation and Submission of Budget Estimates."
Our testimony in October 1997 raised a number of concerns about
executive agency CIOs. Of the 27 federal CIOs then appointed, only
12 had responsibilities focused solely on information management. In
the remainder of the agencies, where almost $19 billion of the nearly
$27 billion in annual planned IT obligations is spent, the CIOs had
additional responsibilities, such as financial operations, human
resources, procurement, and grants management. We reported that, in
many cases, OMB is not satisfied with the qualifications, reporting
relationship to the head of the agency, or multiple responsibilities
of many of the CIOs in place. Further, we noted that the CIO Council
was off to a good start in discussing major governmentwide IT issues,
but it still lacked a strategic plan with specific goals, objectives,
and strategies that it wanted to accomplish in the coming years.
We are currently evaluating department and agency documents
describing the capital planning and IT investment decisionmaking
processes being developed or implemented as required by CCA. We are
finding that agency implementation of these new management provisions
is uneven and largely focused on selecting new IT projects for
funding, rather than on ensuring adequate management control and
oversight of ongoing, substantial IT investment projects.
GAO CONTACTS
-------------------------------------------------------- Appendix IV:4
For additional information on CCA and related IRM statutes, contact
either Jack L. Brock, Jr., Director, Governmentwide and Defense
Information Systems, Accounting and Information Management Division,
(202) 512-6240; or Dave McClure, Senior Assistant Director,
Governmentwide and Defense Information Systems, Accounting and
Information Management Division, (202) 512-6257.
RELATED GAO PRODUCTS
-------------------------------------------------------- Appendix IV:5
Executive Guide: Information Security Management--Learning From
Leading Organizations, Exposure Draft (GAO/AIMD-98-21, Nov. 1997).
Chief Information Officers: Ensuring Strong Leadership and an
Effective Council (GAO/T-AIMD-98-22, Oct. 27, 1997).
Executive Guide: Measuring Performance and Demonstrating Results of
Information Technology Investments (GAO/AIMD-97-163, Sept. 1997).
Year 2000 Computing Crisis: An Assessment Guide (GAO/AIMD-10.1.14,
Sept. 1997).
Year 2000 Computing Crisis: Success Depends Upon Strong Management
and Structured Approach (GAO/T-AIMD-97-173, Sept. 25, 1997).
Medicare Transaction System: Success Depends on Correcting Critical
Managerial and Technical Weaknesses (GAO/AIMD-97-78, May 16, 1997).
The System Assessment Framework, Version 1.1, A Guide for Reviewing
Information Management and Technology Issues in the Federal
Government (GAO/AIMD-10.1.12, May 1, 1997).
Business Process Reengineering Assessment Guide (GAO/AIMD-10.1.15,
Apr. 1997).
High-Risk Areas: Actions Needed to Solve Pressing Management
Problems (GAO/T-AIMD/GGD-97-60, Mar. 5, 1997).
Assessing Risks and Returns: A Guide for Evaluating Federal
Agencies' IT Investment Decisionmaking (GAO/AIMD-10.1.13, Feb.
1997).
Air Traffic Control: Complete and Enforced Architecture Needed for
FAA Systems Modernization (GAO/AIMD-97-30, Feb. 3, 1997).
1997 High-Risk Series, An Overview (GAO/HR-97-1, Feb. 1997).
1997 High-Risk Series, Information Management and Technology
(GAO/HR-97-9, Feb. 1997).
Managing Technology: Best Practices Can Improve Performance and
Produce Results (GAO/T-AIMD-97-38, Jan. 31, 1997).
Information Technology Investment: Agencies Can Improve Performance,
Reduce Costs, and Minimize Risks (GAO/AIMD-96-64, Sept. 30, 1996).
Information Security: Opportunities for Improved OMB Oversight of
Agency Practices (GAO/AIMD-96-110, Sept. 24, 1996).
Information Management Reform: Effective Implementation is Essential
for Improving Federal Performance (GAO/T-AIMD-96-132, July 17, 1996).
Strategic Information Management (SIM) Self-Assessment Toolkit,
Exposure Draft, Version 1 (Accession Number 153193, Oct. 28, 1994).
Executive Guide: Improving Mission Performance Through Strategic
Information Management and Technology (GAO/AIMD-94-115, May 1994).
PAPERWORK REDUCTION ACT OF 1995,
P.L. 104-13
=========================================================== Appendix V
PURPOSE
--------------------------------------------------------- Appendix V:1
The purpose of the Paperwork Reduction Act (PRA) is to minimize the
public's paperwork burdens resulting from the collection of
information by or for the federal government, to coordinate federal
information resource management policies, to improve the
dissemination of public information, and to ensure the integrity of
the federal statistical system. PRA also requires agencies to
indicate in strategic information management plans how they are
applying information resources to improve the productivity,
efficiency, and effectiveness of government programs, including
improvements in the delivery of services to the public.
REQUIREMENTS
--------------------------------------------------------- Appendix V:2
PRA requires OMB, in consultation with agency heads, to set annual
governmentwide goals for the reduction of information collection
burdens by at least 10 percent during fiscal years 1996 and 1997 and
5 percent during each of the next 4 fiscal years. It also requires
OMB, in consultation with agency heads, to set annual agency goals
that reduce information collection burdens imposed on the public to
the maximum extent practicable. Agencies cannot conduct or sponsor a
collection of information unless the agency has taken a number of
specified actions and OMB has approved the collection. OMB may not
approve the collection of information for a period in excess of 3
years. PRA requires OMB to conduct pilot projects to test
alternative policies and procedures.
PRA requires OMB (in consultation with certain other agencies) to
develop and maintain a governmentwide strategic plan for IRM. It
requires agencies to develop and maintain a strategic IRM plan that
describes how IRM activities help accomplish agencies' missions. It
also requires OMB to keep Congress and congressional committees fully
and currently informed of the major activities under the act and to
report on such activities at least annually. That report is to
describe the extent to which agencies have reduced information
collection burdens on the public, improved the quality and utility of
statistical information, improved public access to government
information, and improved program performance and mission
accomplishment through IRM.
IMPLEMENTATION STATUS
--------------------------------------------------------- Appendix V:3
Although the January 13, 1997, OMB bulletin 97-03 stated that
"agencies have made substantial progress in reducing paperwork
burden" since the original PRA was enacted in 1980, the estimated
governmentwide burden (measured in hours spent gathering the
requested information) actually rose substantially during that
period. For example, the governmentwide burden estimate rose from
about 1.5 billion hours in 1980 to about 6.7 billion hours in 1996.
However, the near tripling of the governmentwide burden estimate
during fiscal year 1989 was caused primarily by the Internal Revenue
Service's adoption of a new methodology for computing burden, which
increased its paperwork estimate by about 3.4 billion hours.
In that bulletin, OMB set a goal of a 25-percent reduction in
paperwork burden by the end of fiscal year 1998. However, agencies'
burden hour totals indicate that this goal is unlikely to be met.
Also, OMB has not kept Congress fully and currently informed of these
developments, and did not set governmentwide or agency-specific goals
for fiscal years 1996 or 1997 until nearly the end of those
years--too late for agencies to plan and implement measures to
achieve the goals. Possible major fluctuations in the Internal
Revenue Service's burden estimate suggest that, ultimately,
governmentwide figures may not accurately reflect the paperwork
burden felt by the public.
GAO CONTACTS
--------------------------------------------------------- Appendix V:4
For further information, please contact either Curtis Copeland,
Assistant Director, Federal Management and Workforce Issues, General
Government Division, (202) 512-8101; or Jack Brock, Director,
Governmentwide and Defense Information Systems, Accounting and
Information Management Division, (202) 512-6240.
RELATED GAO PRODUCTS
--------------------------------------------------------- Appendix V:5
Paperwork Reduction: Governmentwide Goals Unlikely to Be Met
(GAO/T-GGD-97-114, June 4, 1997).
Paperwork Reduction: Burden Reduction Goal Unlikely to Be Met
(GAO/T-GGD/RCED-96-186, June 5, 1996).
Paperwork Reduction Act: Opportunity to Strengthen Government's
Management of Information and Technology (GAO/T-AIMD/GGD-94-126, May
19, 1994).
FEDERAL MANAGERS' FINANCIAL
INTEGRITY ACT OF 1982, P.L.
97-255, 31 U.S.C. SECS. 1105,
1113, AND 3512
========================================================== Appendix VI
PURPOSE
-------------------------------------------------------- Appendix VI:1
The purpose of the Federal Managers' Financial Integrity Act (FMFIA)
is to establish a framework for ongoing evaluations of agency systems
for internal accounting and administrative control.
REQUIREMENTS
-------------------------------------------------------- Appendix VI:2
FMFIA requires agencies to establish internal accounting and
administrative controls in compliance with standards established by
the Comptroller General. It also requires OMB to establish, in
consultation with the Comptroller General, guidelines that the
agencies shall follow in evaluating their systems of internal
accounting and administrative controls.\1
FMFIA requires the heads of executive agencies to prepare an annual
statement on whether their agencies' systems comply with the
Comptroller General's internal control standards. If the agency
heads identify material weaknesses in the systems, they shall include
in the statement a plan and schedule for correcting such weaknesses.
FMFIA also requires agency heads to include in the statement a
separate report on whether the agencies' accounting systems conform
to the accounting standards prescribed by the Comptroller General
under 31 U.S.C. sec. 3511. Agencies must submit the statement
annually to the president and Congress by December 31.
--------------------
\1 OMB Circular No. A-123, "Management Accountability and Control."
OMB issues annual format instructions each summer.
IMPLEMENTATION STATUS
-------------------------------------------------------- Appendix VI:3
OMB Circular A-123, in providing guidance on management's
responsibility for assessing controls and implementing FMFIA, defines
management controls as the organization, policies, and procedures
used by agencies to reasonably ensure that (1) programs achieve their
intended results; (2) resources are used consistent with agency
missions; (3) programs and resources are protected from waste, fraud,
and mismanagement; (4) laws and regulations are followed; and (5)
reliable and timely information is obtained, maintained, reported,
and used for decisionmaking. Circular A-123 requires agencies to
monitor and improve the effectiveness of management controls. In
addition, it states that agencies should avoid duplicating other
reviews that assess management controls, such as IG and GAO reports.
However, the circular makes clear that management has primary
responsibility for monitoring and assessing controls and that
management should use other sources as a supplement to--not a
replacement for--its own judgment.
Agencies have been evaluating their internal control systems and
reporting to the president and Congress annually for over 15 years.
In that time, progress has been made, but concerns over
well-documented management control weaknesses remain, as evidenced by
our High-Risk Series (listed below) and countless audit reports and
management studies.
GAO CONTACT
-------------------------------------------------------- Appendix VI:4
For further information, please contact Jeffrey C. Steinhoff,
Director of Planning and Reporting, Accounting and Information
Management Division, (202) 512-9450.
RELATED GAO PRODUCTS
-------------------------------------------------------- Appendix VI:5
Standards for Internal Control in the Federal Government, Exposure
Draft (GAO/AIMD-98-21.3.1, Dec. 1997).
Standards for Internal Control in the Federal Government, "Green
Book," (GAO, 1983).
High-Risk Series: An Overview (GAO/HR-97-1, Feb. 1997).
High-Risk Series: Quick Reference Guide (GAO/HR-97-2, Feb. 1997).
High-Risk Series: Defense Financial Management (GAO/HR-97-3, Feb.
1997).
High-Risk Series: Defense Contract Management (GAO/HR-97-4, Feb.
1997).
High-Risk Series: Defense Inventory Management (GAO/HR-97-5, Feb.
1997).
High-Risk Series: Defense Weapon Systems Acquisition (GAO/HR-97-6,
Feb. 1997).
High-Risk Series: Defense Infrastructure (GAO/HR-97-7, Feb. 1997).
High-Risk Series: IRS Management (GAO/HR-97-8, Feb. 1997).
High-Risk Series: Information Management and Technology
(GAO/HR-97-9, Feb. 1997).
High-Risk Series: Medicare (GAO/HR-97-10, Feb. 1997).
High-Risk Series: Student Financial Aid (GAO/HR-97-11, Feb. 1997).
High-Risk Series: Department of Housing and Urban Development
(GAO/HR-97-12, Feb. 1997).
High-Risk Series: Department of Energy Contract Management
(GAO/HR-97-13, Feb. 1997).
High-Risk Series: Superfund Program Management (GAO/HR-97-14, Feb.
1997).
DEBT COLLECTION ACT OF 1982, AS
AMENDED, P.L. 97-365, AND DEBT
COLLECTION IMPROVEMENT ACT OF
1996, P.L. 104-134, SEC. 31001
========================================================= Appendix VII
PURPOSE
------------------------------------------------------- Appendix VII:1
The purpose of these debt collection acts is to require the heads of
agencies to collect debts owed the government, to authorize the
compromise of some debts, to authorize the suspension of collection
actions in particular circumstances, and to authorize federal
agencies to use certain collection tools available in the private
sector.
REQUIREMENTS
------------------------------------------------------- Appendix VII:2
Administrative offset: These laws authorize governmentwide
administrative offset at Treasury. Under this authority, Treasury
matches federal payments against federal debts; the payments are
subject to offset to satisfy any nontax debt or claim owed to a
federal agency. The law requires federal agencies to transfer to
Treasury any delinquent debt that is 180 days old for the purpose of
administrative offset, and authorizes other collection procedures, as
Treasury finds necessary.
Cross-servicing: The Debt Collection Improvement Act (DCIA) requires
all agencies to transfer nontax debt 180 days delinquent to Treasury
for servicing, collection, compromise, or write-off, in addition to
administrative offset. The act also authorizes Treasury to establish
debt collection centers. Treasury may refer debts to either a debt
collection center, private collection agency, or the Department of
Justice, for collection.
Federal salary offset: To ensure that federal employees pay debts
owed to the government, the debt collection laws establish annual
matching requirements and make federal salary offset mandatory.
Taxpayer identification numbers: DCIA requires agencies to obtain
taxpayer identification numbers from all individuals and entities
doing business with the government to facilitate the collection of
debts.
Denial of credit: Under DCIA, creditor agencies may bar debtors who
are delinquent on federal nontax claims from receiving financial
assistance in the form of a federal direct loan or loan guarantee
(with certain exceptions).
Credit reporting: DCIA requires that creditor agencies report
delinquent debt to consumer reporting agencies and also allows these
agencies to report current debt as well. In addition, agencies must
require any participating lender in a guaranteed loan program to
provide information to credit reporting bureaus as well.
Collection services: The debt collection laws permit agencies to
contract with persons to locate and recover assets of the federal
government, the existence or location of which is unknown, and pay
for those services out of the proceeds that are recovered.
Wage garnishment: DCIA authorizes agencies to garnish
administratively the wages of delinquent debtors.
Debt sales: Agencies are authorized to sell nontax debt that is
delinquent for more than 90 days. DCIA provides for sales of debt
when Treasury determines the sale to be in the best interest of the
United States.
Dissemination of debtors: DCIA allows agencies to publicize the
identity of delinquent debtors.
Tax refund offset: DCIA allows Treasury to merge the tax refund
offset and administrative offset programs to allow for more efficient
operations. The act also allows Treasury and the Department of
Health and Human Services to use offset authorities to collect
past-due child support.
Electronic funds transfer payments: DCIA requires agencies to make
new federal payments to individuals by electronic funds transfer,
except for tax refunds. Agencies must convert existing payments to
electronic funds transfer after January 1, 1999.
Reporting: DCIA requires the agencies to report annually to Treasury
specified details about the debts owed to them and their efforts to
collect those debts. Treasury is required to analyze and report that
information to Congress annually. In addition, not later than April
1999, Treasury must provide a onetime report to Congress on the
collection services provided by it and other entities collecting on
behalf of federal agencies.
IMPLEMENTATION STATUS
------------------------------------------------------- Appendix VII:3
The Subcommittee on Government Management, Information, and
Technology, House Committee on Government Reform and Oversight, has
held periodic oversight hearings to monitor implementation of DCIA.
During those hearings, the Subcommittee has expressed disappointment
with the results thus far. As of the hearing held November 12, 1997,
Treasury had not issued, in final form, many of the regulations
required to implement the act. As of September 1997, Treasury
reported that of the $39.5 billion of eligible federal debt greater
than 180 days delinquent, agencies had referred to Treasury only $9.1
billion for participation in Treasury's administrative offset program
and only $407 million to a Treasury-designated debt collection center
for servicing. In addition, as of September 1997, agencies had
referred $7.9 billion of delinquent child support for offset.
Furthermore, Treasury has delayed for 1 year its decision on whether
to merge the tax refund and administrative offset programs,
previously scheduled for January 1998.
GAO CONTACT
------------------------------------------------------- Appendix VII:4
For further information, please contact Gary T. Engel, Acting
Director, Governmentwide Audits, Accounting and Information
Management Division, (202) 512-8815.
RELATED GAO PRODUCTS
------------------------------------------------------- Appendix VII:5
Debt Collection: Improved Reporting Needed on Billions of Dollars in
Delinquent Debt and Agency Collection Performance (GAO/AIMD-97-48,
June 2, 1997).
High-Risk Series: Quick Reference Guide (GAO/HR-97-2, Feb. 1997).
High-Risk Series: Student Financial Aid (GAO/HR-97-11, Feb. 1997).
High-Risk Series: Department of Housing and Urban Development
(GAO/HR-97-12, Feb. 1997).
Financial Management: Legislation to Improve Governmentwide Debt
Collection Practices (GAO/T-AIMD-95-235, Sept. 8, 1995).
National Fine Center: Progress Made but Challenges Remain for
Criminal Debt System (GAO/AIMD-95-76, May 25, 1995).
Credit Management: Deteriorating Credit Picture Emphasizes
Importance of OMB's Nine-Point Program (GAO/AFMD-90-12, Apr. 12,
1990).
Debt Collection: Billions Are Owed While Collection and Accounting
Problems Are Unresolved (GAO/AFMD-86-39, May 23, 1986).
FEDERAL CREDIT REFORM ACT OF 1990,
AS AMENDED, P.L. 101-508, 104
STAT. 1388-609 (1990), AND AS
AMENDED BY P.L. 105-33, 111 STAT.
692 (1997)
======================================================== Appendix VIII
PURPOSE
------------------------------------------------------ Appendix VIII:1
The purpose of the Federal Credit Reform Act is to accurately measure
the costs of federal credit programs by placing the cost of credit
programs on a budgetary basis equivalent to other federal spending
and to improve the allocation of resources among credit programs and
between credit and other spending programs.
REQUIREMENTS
------------------------------------------------------ Appendix VIII:2
After October 1, 1991, before an agency can make a new loan or loan
guarantee (or modify an existing loan or loan guarantee), Congress
must have appropriated budget authority to cover the cost to the
government of the loan or loan guarantee. The act requires agencies
to measure costs as the net present value of cash flows to and from
the government, including loan disbursements, repayments of
principal, and payments of interest and fees, over the term of the
loans and loan guarantees. Administrative costs are budgeted
separately on a cash basis.
IMPLEMENTATION STATUS
------------------------------------------------------ Appendix VIII:3
OMB's written guidance for implementing credit reform is found
primarily in Circulars A-11, A-34, and A-129. Accounting guidance is
found in Accounting for Direct Loans and Loan Guarantees, Statement
of Federal Financial Accounting Standards, Number 2; and the
Department of the Treasury's Financial Management Service has
developed illustrative cases showing accounting transactions. In
addition, the interagency Credit Reform Taskforce has recently
developed implementation guidance to agencies and auditors for
estimating and auditing credit subsidy estimates.
Agencies have prepared 7 budgets under credit reform requirements,
and there are 5 years of actual data available. Because of different
program requirements, resource and expertise levels, and levels of
commitment and interest, agencies have taken different approaches to
making subsidy estimates. In 1993, we reported that agencies had
serious problems meeting credit reform requirements because of
limited financial systems and staff. Four years later, most agencies
still have difficulty preparing subsidy estimates, and staff continue
to say that they lack sufficient computer support and staff
resources. Three of the five largest credit agencies received
disclaimers or qualified opinions related to their credit programs in
the audits of the fiscal year 1996 financial statements.
GAO CONTACTS
------------------------------------------------------ Appendix VIII:4
For further information on the Federal Credit Reform Act and the
budgetary treatment of credit programs, please contact Susan Irving,
Associate Director, Budget Issues, Accounting and Information
Management Division, (202) 512-9142; or Carolyn Litsinger, Senior
Evaluator, Budget Issues, Accounting and Information Management
Division, (202) 512-3358.
For further information on accounting and auditing credit programs,
please contact Linda Calbom, Director, Resources, Community, and
Economic Development Accounting and Financial Management Issues,
Accounting and Information Management Division, (202) 512-8341; or
Shirley Abel, Assistant Director, Resources, Community, and Economic
Development Accounting and Financial Management Issues, Accounting
and Information Management Division, (202) 512-9516.
RELATED GAO PRODUCTS
------------------------------------------------------ Appendix VIII:5
Credit Reform: Review of OMB's Credit Subsidy Model
(GAO/AIMD-97-145, Aug. 29, 1997).
Credit Reform: Appropriation of Negative Subsidy Receipts Raises
Questions (GAO/AIMD-94-58, Sept. 26, 1994).
Credit Reform: Case-by-Case Assessment Advisable in Evaluating
Coverage and Compliance (GAO/AIMD-94-57, July 28, 1994).
Credit Reform: Speculative Savings Used to Offset Current Spending
Increase Budget Uncertainty (GAO/AIMD-94-46, Mar. 18, 1994).
Federal Credit Programs: Agencies Had Serious Problems Meeting
Credit Reform Accounting Requirements (GAO/AFMD-93-17, Jan. 6,
1993).
PROMPT PAYMENT ACT P.L. 97-177,
96 STAT. 85 (1982), CODIFIED AT
31 U.S.C. SECS. 3901-3906
========================================================== Appendix IX
PURPOSE
-------------------------------------------------------- Appendix IX:1
The Prompt Payment Act is intended to encourage government managers
to improve their bill paying procedures. In response to complaints
that agencies were not paying invoices in a timely manner and that
this presented severe cash flow difficulties for smaller businesses,
the act provides for the use of interest penalties against the
operating budgets of programs when the managers fail to pay the bills
on time. In addition to encouraging managers to make timely
payments, interest penalties also compensate businesses when a
payment is late.
REQUIREMENTS
-------------------------------------------------------- Appendix IX:2
The act requires agencies to pay invoices by the contracted due date;
if an agency fails to pay on time, the agency must pay an interest
penalty. It requires the head of each agency to report to OMB
annually, 60 days after the end of the fiscal year, on the agency's
payment performance. The act also requires OMB to report to Congress
annually, 120 days after the end of the fiscal year, on the
government's payment performance.
IMPLEMENTATION STATUS
-------------------------------------------------------- Appendix IX:3
OMB has provided guidance to agencies in Circular No. A-125. OMB
requires, for cash management purposes, not only that agencies pay by
the contracted due dates, but also that agencies pay no more than 7
days prior to the due date. Agencies have payment processes in place
and have been providing data to OMB for governmentwide reporting.
OMB's most recent Prompt Payment Act report, Appendix II in its
Federal Financial Management Status Report and 5-Year Plan covering
fiscal year 1996, showed that 91.5 percent of the payments were on
time, 1.6 percent were paid early, and 6.9 percent were paid late.
That report indicated that the vast majority of interest penalties
had been paid to the vendors. Some agencies are also reporting on
payment timing. For example, the Social Security Administration
provided relevant payment timing statistics in its accountability
report for fiscal year 1996, which was prepared pursuant to the pilot
program established by GMRA.
GAO CONTACT
-------------------------------------------------------- Appendix IX:4
For further information contact Mel Mench, Assistant Director for
Report Review and Analysis, Accounting and Information Management
Division, (202) 512-9423.
RELATED GAO PRODUCTS
-------------------------------------------------------- Appendix IX:5
Prompt Payment Act: Agencies Have Not Yet Achieved Available
Benefits (GAO/AFMD-86-69, Aug. 28, 1986).
THE INSPECTOR GENERAL ACT, AS
AMENDED,
P.L. 95-452
=========================================================== Appendix X
PURPOSE
--------------------------------------------------------- Appendix X:1
The purpose of the Inspector General Act is to establish inspector
general offices in federal departments and agencies in order to
create independent and objective units responsible for (1) conducting
and supervising audits and investigations; (2) providing leadership
and coordination and recommending policies to promote economy,
efficiency, and effectiveness; (3) detecting and preventing fraud and
abuse in their agencies' programs and operations; and (4) providing a
means to keep the agency head and Congress fully and currently
informed about problems and deficiencies.
REQUIREMENTS
--------------------------------------------------------- Appendix X:2
Under the Inspector General Act of 1978, the president appoints
inspectors general (IGs) for certain specified federal
establishments, by and with the consent of the Senate, without regard
to political affiliation and solely on each individual's experience
in specified areas. Under the Inspector General Act Amendments of
1988, the heads of designated federal entities appoint IGs, without
the necessity of Senate confirmation. The IGs perform audits in
accordance with generally accepted government auditing standards and
report suspected violations of criminal law to the Attorney General.
Each IG must prepare semiannual reports that summarize the IG's
activities no later than April 30 and October 31 of each year. The
head of each agency transmits these reports unaltered to Congress and
subsequently makes them available to the public.
IMPLEMENTATION STATUS
--------------------------------------------------------- Appendix X:3
The IG Act identifies 26 federal establishments that are to have an
IG appointed by the president with Senate confirmation and 30
designated federal entities that are to have an IG appointed by their
agency heads. In 1988, the House Committee on Government Operations
reported that in the 10 years since the IG Act became law, IGs have
strengthened federal internal audit and investigative activities and
improved operations within the federal government by combating fraud,
waste, and abuse and promoting economy, efficiency, and
effectiveness.
However, during the 1990s, legislation such as GPRA, the CFO Act, and
GMRA, have dramatically changed the management and accountability of
the federal government and, in turn, have demanded shifts in the IGs'
focus and contributions. The Chairman of the House Government Reform
and Oversight Committee has observed that it is critical for the IGs
to keep pace with such changes and ensure that their work continues
to provide meaningful insight for evaluating and measuring the
government's effectiveness. The Chairman has asked us to review the
IGs' role and potential for increasing government accountability
through strategic planning, performance measures, quality assurance,
semiannual reports, qualifications, organizational changes, and
independence.
GAO CONTACT
--------------------------------------------------------- Appendix X:4
For further information, please contact Dave L. Clark, Director,
Audit Oversight and Liaison, Accounting and Information Management
Division, (202) 512-9489.
RELATED GAO PRODUCTS
--------------------------------------------------------- Appendix X:5
Inspectors General: Information on Resources and Planning at the
Department of Health and Human Services (GAO/AIMD-97-125R, Aug. 1,
1997).
Inspectors General: Joint Investigation of Personnel Actions
Regarding a Former Defense Employee (GAO/AIMD/OSI-97-81R, July 10,
1997).
Inspectors General: Handling of Allegations Against Senior OIG
Officials (GAO/OSI-97-1, Oct. 15, 1996).
Inspectors General: A Comparison of Certain Activities of the Postal
IG and Other IGs (GAO/AIMD-96-150, Sept. 20, 1996).
Inspector General Act: Activities of the Federal Entities
(GAO/AIMD-95-152FS, June 1, 1995).
Inspectors General: Independence of Legal Services Provided to IGs
(GAO/OGC-95-15, Mar. 1, 1995).
Inspectors General: Alleged Misconduct by NASA Inspector General
(GAO/OSI-95-9, Feb. 10, 1995).
Inspectors General: Action Needed to Strengthen OIGs at Designated
Federal Entities (GAO/AIMD-94-39, Nov. 30, 1993).
Inspectors General: Appointments and Related Issues
(GAO/AFMD-93-74FS, May 28, 1993).
COMPUTER SECURITY ACT OF 1987, AS
AMENDED, P.L. 100-235, 101 STAT.
1724 (1988), AS AMENDED BY P.L.
104-106, 110 STAT. 701 (1996)
========================================================== Appendix XI
PURPOSE
-------------------------------------------------------- Appendix XI:1
The purpose of the Computer Security Act is to improve the security
and privacy of sensitive information in federal computer systems.
REQUIREMENTS
-------------------------------------------------------- Appendix XI:2
The National Institute of Standards and Technology (NIST) must
develop standards and guidelines for computer systems, for
promulgation by the Secretary of Commerce, to control loss and
unauthorized modification or disclosure of sensitive information and
to prevent computer-related fraud and misuse.
All operators of federal computer systems, including both federal
agencies and their contractors, must establish security plans.
The Office of Personnel Management must issue regulations requiring
mandatory periodic training related to security awareness and
accepted security practices for all persons involved in management,
use, or operation of federal computer systems that contain sensitive
information.
The act establishes a Computer System Security and Privacy Advisory
Board within the Department of Commerce. The purpose of the Board is
to identify emerging managerial, technical, administrative, and
physical safeguard issues. The Board is to report its findings to
the Secretary of Commerce, the Director of OMB, the Director of the
National Security Agency, and the appropriate congressional
committees.
IMPLEMENTATION STATUS
-------------------------------------------------------- Appendix XI:3
Agencies have developed information security plans, and NIST has
continued to issue standards and other guidance. However, the most
recent reports from agency IGs and us (1996 and 1997) show that all
24 major agencies (CFO agencies) have significant information
security weaknesses. These weaknesses pose risks of fraud,
disruption, and disclosure of sensitive data associated with federal
operations.
GAO CONTACTS
-------------------------------------------------------- Appendix XI:4
For further information, please contact either Jack Brock, Director,
Governmentwide and Defense Information Systems, Accounting and
Information Management Division, (202) 512-6240; or Bob Dacey,
Director, Consolidated Audit and Computer Security, Accounting and
Information Management Division, (202) 512-3317.
RELATED GAO PRODUCTS
-------------------------------------------------------- Appendix XI:5
We have been reporting on federal information security and on
compliance with the Computer Security Act for years. The list below
includes reports issued since September 1993. There are other
reports, restricted to official use, that are not listed here.
Executive Guide, Information Security Management: Learning From
Leading Organizations, Exposure Draft (GAO/AIMD-98-21, Nov. 1997).
Social Security Administration: Internet Access to Personal Earnings
and Benefits Information (GAO/T-AIMD/HEHS-97-123, May 6, 1997).
IRS Systems Security and Funding: Employee Browsing Not Being
Addressed Effectively and Budget Requests for New Systems Development
Not Justified (GAO/T-AIMD-97-82, Apr. 15, 1997).
IRS Systems Security: Tax Processing Operations and Data Still at
Risk Due to Serious Weaknesses (GAO/T-AIMD-97-76, Apr. 10, 1997).
IRS Systems Security: Tax Processing Operations and Data Still at
Risk Due to Serious Weaknesses (GAO/AIMD-97-49, Apr. 8, 1997).
High-Risk Series: Information Management and Technology
(GAO/HR-97-9, Feb. 1997).
Information Security: Opportunities for Improved OMB Oversight of
Agency Practices (GAO/AIMD-96-110, Sept. 24, 1996).
Financial Audit: Examination of IRS' Fiscal Year 1995 Financial
Statements (GAO/AIMD-96-101, July 11, 1996).
Tax Systems Modernization: Actions Underway But IRS Has Not Yet
Corrected Management and Technical Weaknesses (GAO/AIMD-96-106, June
7, 1996).
Information Security: Computer Hacker Information Available on the
Internet (GAO/T-AIMD-96-108, June 5, 1996).
Information Security: Computer Attacks at Department of Defense Pose
Increasing Risks (GAO/AIMD-96-84, May 22, 1996).
Information Security: Computer Attacks at Department of Defense Pose
Increasing Risks (GAO/T-AIMD-96-92, May 22, 1996).
Security Weaknesses at IRS' Cyberfile Data Center (GAO/AIMD-96-85R,
May 9, 1996).
Tax Systems Modernization: Management and Technical Weaknesses Must
Be Overcome To Achieve Success (GAO/T-AIMD-96-75, Mar. 26, 1996).
Financial Management: Challenges Facing DOD in Meeting the Goals of
the Chief Financial Officers Act (GAO/T-AIMD-96-1, Nov. 14, 1995).
Financial Audit: Examination of IRS' Fiscal Year 1994 Financial
Statements (GAO/AIMD-95-141, Aug. 4, 1995).
Federal Family Education Loan Information System: Weak Computer
Controls Increase Risk of Unauthorized Access to Sensitive Data
(GAO/AIMD-95-117, June 12, 1995).
Department of Energy: Procedures Lacking to Protect Computerized
Data (GAO/AIMD-95-118, June 5, 1995).
Financial Management: Control Weaknesses Increase Risk of Improper
Navy Civilian Payroll Payments (GAO/AIMD-95-73, May 8, 1995).
Information Superhighway: An Overview of Technology Challenges
(GAO/AIMD-95-23, Jan. 23, 1995).
Information Superhighway: Issues Affecting Development
(GAO/RCED-94-285, Sept. 30, 1994).
IRS Automation: Controlling Electronic Filing Fraud and Improper
Access to Taxpayer Data (GAO/T-AIMD/GGD-94-183, July 19, 1994).
Financial Audit: Federal Family Education Loan Program's Financial
Statements for Fiscal Years 1993 and 1992 (GAO/AIMD-94-131, June 30,
1994).
Financial Audit: Examination of Customs' Fiscal Year 1993 Financial
Statements (GAO/AIMD-94-119, June 15, 1994).
Financial Audit: Examination of IRS' Fiscal Year 1993 Financial
Statements (GAO/AIMD-94-120, June 15, 1994).
HUD Information Resources: Strategic Focus and Improved Management
Controls Needed (GAO/AIMD-94-34, Apr. 14, 1994).
Financial Audit: Federal Deposit Insurance Corporation's Internal
Controls as of December 31, 1992 (GAO/AIMD-94-35, Feb. 4, 1994).
Financial Management: Strong Leadership Needed to Improve Army's
Financial Accountability (GAO/AIMD-94-12, Dec. 22, 1993).
Communications Privacy: Federal Policy and Actions (GAO/OSI-94-2,
Nov. 4, 1993).
Document Security: Justice Can Improve Its Controls Over Classified
and Sensitive Documents (GAO/GGD-93-134, Sept. 7, 1993).
IRS Information Systems: Weaknesses Increase Risk of Fraud and
Impair Reliability of Management Information (GAO/AIMD-93-34, Sept.
22, 1993).
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix XII
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
Debra R. Johnson, Evaluator-in-Charge
Susan Ragland, Assistant Director
Katherine M. Wheeler, Publishing Consultant
ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C.
Avrum I. Ashery, Publishing Advisor
Daniel R. Blair, Assistant Director
Jean L. Boltz, Assistant Director
Robert W. Gramling, Director
Peter Barry Grinnell, Accountant
Jackson W. Hufnagle, Assistant Director
Rosemary M. Jellish, Assistant Director
Casey L. Keplinger, Auditor
Bruce K. Michelson, Assistant Director
Deborah A. Taylor, Assistant Director
OFFICE OF GENERAL COUNSEL,
WASHINGTON, D.C.
Thomas H. Armstrong, Assistant General Counsel
Franklin D. Jackson, Senior Attorney
Andrea J. Levine, Senior Attorney
Neill W. Martin-Rolsky, Senior Attorney
Amy S. Shimamura, Senior Attorney
Barbara R. Timmerman, Senior Attorney
*** End of document. ***