Building on the CFO Act audits, FFMIA requires, beginning with the fiscal year ended September 30, 1997, that each of the 24 CFO agencies’ financial statement auditors report on whether the agency’s financial management systems substantially comply with federal financial management systems requirements, applicable accounting standards, and the SGL. The U.S. Standard General Ledger

In 1984, OMB tasked an interagency group to develop a standard general ledger chart of accounts for governmentwide use. We have been discussing with OMB some refinements to this bulletin, with particular focus on four areas: (1) clarifying, based on information provided in OMB’s implementation guidance, that the auditor should perform tests of the reporting entity’s compliance with the requirements of FFMIA, (2) including in the reporting entity’s management representation letter a representation about whether the reporting entity’s financial management systems are in substantial compliance with FFMIA requirements, (3) clarifying that the auditor’s report on the reporting entity’s compliance with applicable laws and regulations state that the auditor performed sufficient compliance tests of FFMIA requirements to report whether the entity’s financial management systems comply substantially with FFMIA requirements, and (4) separately stating in the auditor’s report whether such tests disclosed any instances in which the reporting entity’s financial management systems did not comply substantially with FFMIA requirements. Challenges in Implementing the Act

Agencies face significant challenges in achieving substantial compliance with the act’s requirements in the near future. Status of Federal Accounting Standards

Using a due process and consensus building approach, FASAB has successfully provided the federal government with an initial set of accounting standards. To date, FASAB has recommended, and OMB and GAO have issued, two statements of accounting concepts and eight statements of accounting standards with various effective dates ranging from fiscal year 1994 through fiscal year 1998. These concepts and standards, which are listed in table 3, underpin OMB’s guidance to agencies on the form and content of their financial statements. Further, we reviewed fiscal year 1996 audit results for the 24 CFO agencies and applicable federal accounting standards.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO provided information on: (1) the requirements of the Federal Financial Management Improvement Act (FFMIA) of 1996; (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.

What GAO Found

GAO noted that: (1) it is too early to tell the extent to which the 24 agencies named in the Chief Financial Officers (CFO) Act will be in compliance with FFMIA requirements for fiscal year 1997 because auditor reports discussing the results of the fiscal year 1997 financial statement audits will generally not be available until March 1, 1998, which is the statutory reporting deadline; (2) the Office of Management and Budget (OMB) and the CFO agencies have initiated efforts to implement the act's requirements and improve financial management systems; (3) although auditors performing financial audits under the CFO Act are not required to report on FFMIA compliance until March 1, 1998, prior audit results and agency self-reporting all point to significant challenges that agencies must meet in fully implementing systems requirements, accounting standards, and the U.S. Government Standard General Ledger; (4) regarding the adequacy of accounting standards, the Federal Accounting Standards Advisory Board (FASAB) has successfully developed a good initial set of accounting standards; (5) to date, FASAB has recommended, and OMB and GAO have issued, two statements of accounting concepts and eight statements of accounting standards tailored to the federal government's unique characteristics and special needs; and (6) OMB has integrated these concepts and standards into its guidance to agencies on the form and content of their financial statements.