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Clinton signs new federal agency audit bill.

President Clinton signed into law a bill that will help codify accounting standards set by the Federal Accounting Standards Advisory Board (FASAB). The Federal Financial Management Improvement Act of 1996 (S 1130) requires each federal agency to implement and maintain financial management systems that comply with uniform federal accounting standards. The FASAB is identified as the standard-setting body. The Office of Management and Budget (OMB) and the General Accounting Office (GAO) will draft specific audit procedures for the new law.

The conference report of the bill said that although there had been efforts to strengthen federal internal accounting controls in the past, federal financial management continued to be deficient. It said federal practices failed to identify costs fully, reveal the total liabilities of congressional actions and accurately report the U.S. government's financial condition. The report also said that using FASAB's accounting concepts and standards would enable agencies to report information that would help Congress evaluate federal programs and activities.

To ensure the agencies comply with FASAB standards, the 1996 act requires

* Agencies to report in the audits of their financial statements whether they have complied with the uniform accounting standards.

* Auditors to report findings of noncompliance. They also must report details on the extent and causes of the failure to comply.

* Agency heads to determine whether their agencies' financial management systems implemented and maintained uniform accounting standards. If the agency head's finding differs from that of the auditor, the director of the OMB will review the findings.

* Agency heads who determine noncompliance to establish remediation plans for implementing the accounting standards within three years.

* The agency inspectors general (IGs) to report to Congress if agencies fail to meet the remediation plan goals and targets.

* The OMB and the GAO to issue annual reports on the status of federal financial management and the implementation of FASAB's uniform accounting standards.

Jeffrey C. Steinhoff, GAO director of planning and reporting, said the audit requirements to report whether an agency was substantially complying with FASAB standards differentiated the new law from mandates in the Chief Financial Officers Act and the Government Performance and Results Act (See "The CFO Act: A Look at Federal Accountability," JofA, Mar. 96, page 55). "The law also requires, for the first time, that an agency head work with the OMB director to develop a remediation plan if that agency is not in compliance with the standards," said Steinhoff. He said the OMB and the GAO would coordinate the auditing standards for all the oversight laws for federal agencies. "We will develop audit guidance and approaches so the GAO and the IGs can implement the new law's provisions in the most effective manner," said Steinhoff.

S 1130 will be effective beginning with the fiscal year ending September 30, 1997.
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Publication:Journal of Accountancy
Date:Dec 1, 1996
Words:460
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