Federal Financial and Budgetary Reporting: A Primer

Updated September 20, 2022

Federal Financial and Budgetary Reporting: A Primer

Introduction

To improve the transparency and integrity of the federal

government and its activities, Congress has established in

law an evolving framework for budgetary and financial

reporting. This In Focus outlines several categories of

reporting and related statutory requirements for executive

branch entities. Financial and budgetary reporting may help

Congress, the President, and agency executives make better

informed decisions about the allocation and use of

government resources and guard against potential misuse

and misapplication of such resources. Accordingly, the

design and implementation of these laws may raise issues

for Congress.

Major Areas of Reporting

Agency Audited Financial Statements

Beginning in 1990, Congress has mandated that most

executive branch agencies prepare annual audited financial

statements and submit them to Congress and the director of

the Office of Management and Budget (OMB) (31 U.S.C.

§3515(a)). At agencies with statutorily appointed inspectors

general (IGs), these annual audits are to be directed by the

agency IG, but in practice such audits are typically

contracted by the IG to an independent public auditor. The

Chief Financial Officers (CFO) Act of 1990 established the

position of CFO at 24 large executive branch agencies—

known since 1990 as the “CFO Act agencies” (31 U.S.C.

§901(b)). Each CFO Act agency must submit an annual

report to the agency head and OMB containing the

aforementioned financial statements and audit reports (31

U.S.C. §902(a)(6)).

OMB provides guidance to executive agencies on the

preparation of financial statements in Circular A-136 (31

U.S.C. §3515(d)). These annual reports may be included in

an agency’s Performance and Accountability Report (PAR)

or an Agency Financial Report (AFR). OMB is then

required to submit a financial management status report to

Congress summarizing agency financial statements and

audit reports (31 U.S.C. §3512(a)(2)).

Government-Wide Reporting

In addition to agency-level financial reporting, the

Department of the Treasury, in coordination with OMB, is

required to submit a government-wide audited financial

report to Congress and the President (31 U.S.C. §331(e)(1),

enacted in 1994 as part of the Government Management

Reform Act). The report, known as the Financial Report of

the United States Government, compiles information

included in agency-level audited financial statements and

annual reports. The Government Accountability Office

(GAO) audits the government-wide report (31 U.S.C.

§331(e)(2)).

Current law also requires Treasury to release annually a

publication detailing government receipts and outlays (31

U.S.C. §3513(a)). Since 2001, this report has been called

the Combined Statement of Receipts, Outlays, and Balances

of the U.S. Government. The report includes details of (1)

receipts by source and (2) appropriations, outlays, and

balances by agency and account.

Financial Management Improvement

Congress also established mechanisms to identify financial

management improvements. CFOs within CFO Act

agencies must include a financial management status update

in the agency’s annual report (31 U.S.C. §902(a)(6)).

Separately, OMB must annually submit to Congress both a

report describing the status of financial management in the

executive branch and a government-wide five-year plan for

improving federal financial management (31 U.S.C.

§3512(a)). OMB previously published the financial

management status report and government-wide five-year

plan in a single document called the Federal Financial

Management Report. Since 2009, OMB has ceased

publishing a single document covering the statutory

requirements, and OMB has not identified where the

required components may be found.

Internal Controls Reporting

Congress has passed two pieces of legislation instituting

requirements for internal controls at executive agencies.

Agencies are required to establish internal accounting and

administrative controls (31 U.S.C. §3512(c)(1)), a provision

included in the Federal Managers’ Financial Integrity Act

of 1982 [FMFIA]). Additionally, agencies must identify

non-compliant accounting and administrative systems and

report a remediation plan to Congress and the President

annually (31 U.S.C. §3512(d)(2)). In practice, agencies

include this reporting with annually audited financial

statements.

Another statutory provision focuses on financial

management systems and applies only to the 24 CFO Act

agencies (31 U.S.C. §3512 note, commonly referred to as

the Federal Financial Management Improvement Act of

1996 [FFMIA]). This provision requires federal agencies to

maintain financial management systems that comply

substantially with federal system requirements, federal

accounting standards (in practice, as defined by the Federal

Accounting Standards Advisory Board (FASAB)), and the

United States Government Standard General Ledger at the

transaction level (31 U.S.C. §3512 note). CFO Act agencies

and their auditors must attest to the compliance of agency

financial systems with federal requirements and recommend

remedial actions in annual audit reports (31 U.S.C. §3512

note). Annually, OMB must summarize agency internal

controls reports and identify agencies failing to comply

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Federal Financial and Budgetary Reporting: A Primer

with federal financial management system requirements in

a status report submitted to Congress (31 U.S.C.

§3512(a)(2)). In practice, Treasury and OMB publish this

information in the Financial Report of the United States

Government.

President’s Budget Submission

The President’s annual budget submission is one of the

most comprehensive modes of reporting budgetary

information. The President is required annually to submit a

consolidated budget to Congress that must include, in part,

estimated receipts, expenditures, and proposed

appropriations for the next five fiscal years and actual

receipts, expenditures, and appropriations for the previous

fiscal year (31 U.S.C. §1105(a)). Account-level information

about actual and proposed budgets is included in the Budget

Appendix volume. The Appendix contains, for each account,

prior year obligations, current year appropriations, and

proposed appropriations, among other information.

Reporting on Federal Awards

In 2006, Congress mandated the creation of a publicly

available database of all recipients of federal grants, loans,

contracts, and other forms of assistance. The

USAspending.gov website was established pursuant to the

Federal Funding Accountability and Transparency Act

(FFATA). Current law requires that award information be

made available on a searchable website within 30 days of

the award date (31 U.S.C. §6101 note). Federal award

information is found at the Award Search portal on

USAspending.gov. Current data sources for

USAspending.gov include (1) agency financial system(s)

and award system(s), (2) the FFATA Sub-award Reporting

System, (3) the System for Award Management (SAM),

and (4) the Federal Procurement Data System Next

Generation (FPDS-NG or FPDS).

Reporting on Apportionments

Annual appropriations and other budgetary legislation

provide agencies with the authority to enter into

obligations. With certain exceptions, OMB apportions

appropriated funds to prevent agencies from exhausting

them prematurely. OMB uses apportionment “footnotes” to

provide additional information or direction to agencies. Due

to concerns that OMB may use footnotes to condition

funding availability on certain agency actions, Congress

required OMB and agencies to publicly disclose certain

information about apportionments beginning in 2022 (P.L.

117-103). Apportionment documents and associated

footnotes can be found on the OMB MAX.gov website.

Reporting on Budget Execution

Congress has passed two separate provisions that resulted in

extensive reporting on budget execution at the account

level: disclosure on USAspending.gov and periodic review

of the pace of federal spending via SF-133 reports.

In 2014, Congress mandated account-level reporting on

appropriated amounts and obligations, among other

requirements (FFATA, as amended by the Digital

Accountability and Transparency Act of 2014; 31 U.S.C.

§6101 note). This account-level view of budget execution is

made publicly available at the Spending Explorer portal on

USAspending.gov.

Separately, OMB established the SF-133 Report on Budget

Execution and Budgetary Resources to fulfill a statutory

requirement for the President to review the pace of

obligations or expenditures at least four times annually (31

U.S.C. §1512(d)). SF-133s provide quarterly snapshots of

appropriations and obligations at the account level. These

reports are posted on the OMB MAX.gov website and are

populated using data submitted by agencies to the

Treasury’s Government-wide Treasury Account Symbol

Adjusted Trial Balance System.

Improper Payment Reporting

Congress has enacted multiple provisions seeking to reduce

the incidence of improper payments. Current law requires

executive agencies to estimate the amount of improper

payments for programs identified as susceptible to

“significant” improper payments and implement a plan to

reduce and recover improper payments (31 U.S.C.

§3352(a), (c), and (d); included in the Payment Integrity

Information Act of 2019). Improper payments reporting

requirements are typically met via AFRs or PARs. In 2009,

OMB established PaymentAccuracy.gov, where agencies

with “high priority” programs must report rates and

amounts of improper payments and targets for reducing

improper payments (31 U.S.C. §3321 note).

Other Forms of Financial and Budgetary Reporting

Other modes of budgetary and financial reporting have been

enacted into law that are not discussed here. Examples

include Congressional Budget Office reports to House and

Senate Budget Committees (2 U.S.C. §602(e)) and

program-level reporting such as the annual Old-Age and

Survivors Insurance and Federal Disability Insurance

Trustees report (42 U.S.C. §401(c)).

Issues for Congress

Potential financial and budgetary reporting issues for

Congress may be grouped in two categories:

1. External stakeholder needs: Do diverse

stakeholders find currently reported financial and

budgetary information useful and at the right

levels of detail? To what extent do “clean” audit

opinions translate into meaningful information for

stakeholders and improved financial management?

What options may Congress consider for

transparency of government-, agency-, account-,

and program-level information?

2. Internal stakeholder needs: Within agencies, can

legacy financial and budgetary systems ensure

efficient, timely, and accurate reporting? Are

reporting requirements causing duplications of

effort? How might data and systems be integrated?

What are the consequences for non-compliance?

In evaluating policy options, Congress may consider tradeoffs and synergies. For example, increased transparency

might entail additional costs, and replacement of legacy

systems and manual processes might reduce long-term costs

and increase accuracy.

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Federal Financial and Budgetary Reporting: A Primer

Dominick A. Fiorentino, Analyst in Government

Organization and Management

IF11610

Disclaimer

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