The CFO Act & Federal Reform

Throughout the 1990s, pressure was on the US government to reduce inefficiencies in federal programs. In an effort to increase public confidence, Congress enacted the Chief Financial Officers Act (CFO Act) in 1990, in order to regulate accounting, auditing and financial reporting practices of the federal government.

In addition to the CFO Act, the article also explores a number of amendments and related Acts which build upon the goals of improved efficiency, productivity and efficacy in federal agencies.

Requirements under the CFO Act

To meet the demand for improved accountability and transparency from the financial management practices of federal agencies, the CFO Act required the following:

  • Federal agencies were to put together financial statements for auditing. Audits would be carried out by the Comptroller General or Inspector General.
  • A new position – the Deputy Director for Management – was to be created in the Office of Management and Budget (OMB). The Deputy Director for Management represents the chief government official responsible for financial management. The Deputy Director oversees management of information policy, procurement policy, property management as well as productivity improvement. According to the act, the Deputy Director has the following functions:

o   Establish financial management policies and systems implemented throughout the government.

o   Monitor resources required for effective operation of agencies.

o   Review agency budget requests.

o   Review and recommend budget changes to the Director of the OMB.

o   Recommend financial management changes to agency heads.

o   Oversee financial execution of budget.

  • A new Office of Federal Financial Management to oversee financial management within federal government agencies.
  • The creation of CFO positions in twenty-three major federal agencies. These CFOs would make up the newly-established CFO Council. Each CFO’s roles and responsibilities would include the following:

o   Develop and manage accounting systems. Such systems would need to comply with current accounting standards and principles; internal control standards; and any other requirements of the OMB and/or Department of the Treasury.

o   Direct financial management personal, activities and operations within the agency.

o   Approve and manage financial management systems and projects.

o   Develop operational budgets.

o   Oversee staff recruitment, selection and training for financial management positions.

o   Implement asset management systems within the agency.

o   Monitor financial execution of budget.

  • The OMB would be required to prepare a five-year financial management plan, and submit it to Congress. The plan would be updated annually and describe the activities involved in the financial management reform.

Federal Accounting Standards Advisory Board

As a result of the CFO Act, the Federal Accounting Standards Advisory Board (FASAB) was established. The FASAB was initially sponsored by the Secretary of the Treasury, the Director of the Office of Management and Budget and the Comptroller General, whose respective agencies fund the FASAB.

The FASAB functions as a federal advisory committee, tasked with promoting federal accounting standards for public accountability and efficient functioning of public services. The FASAB contributes to assessing:

  • Accountability, efficiency and efficacy of the federal government.
  • Economic, political and social consequences of federal resource allocation and use.

According to the FASAB, the objective of accounting standards should allow federal agencies to provide comprehensible, relevant and reliable information about their operations. Standards should also contribute to the improvement of accounting systems and the development of effective internal controls.

Government Performance and Results Act of 1993

The Government Performance and Results Act of 1993 (GPRA) updated the CFO Act by initiate performance reform through program goals, performance metrics and public reporting processes. According to the GPRA, federal agencies had to develop and submit the following:

1.   Six-year strategic plan describing the mission of the agency. This was required by 1997.

2.   Annual performance plan, which outlined the following year’s goals. This was required by 1998.

3.   Annual performance report, which compares program goals with performance results. This was due by 2000.

The GPRA requirements challenged federal agencies to become results-oriented and measure their performance.

Government Management Reform Act of 1994

The Government Management Reform Act (GMRA) extended the CFO Act. The GMRA requires that every executive government agency produces auditable financial statements, similar in style to those of private sector organizations. It was designed to amend the CFO Act and improve project management practices within the agencies.

According to the GMRA, each department and agency should produce a statement that includes:

  • Overall financial position (assets and liabilities) of offices, bureaus and activities
  • Results of the department/agency’s operations

Since the enactment of the GMRA, most executive agencies have struggled to produce adequate financial statements reflecting their operations.

Federal Financial Management Improvement Act of 1996

The Federal Financial Management Improvement Act (FFMIA) was enacted to further develop the CFO Act, the GPRA and the GMRA. It was created in order to correct serious deficiencies in federal financial management and fiscal practices. The FFMIA had the following objectives:

  • Ensure consistency in accounting throughout the federal government, from one fiscal year to another.
  • Require full disclosure of federal financial data to citizens, Congress, the President and agency management.
  • Increase accountability and credibility in financial management practices of the federal government.
  • Improve performance, productivity and efficiency of financial management practices.
  • Aid in controlling federal government costs.

Information Technology Management Reform Act of 1996

Similar to the previous acts, the Information Technology Management Reform Act (ITMRA; also referred to as the Clinger-Cohen Act) furthered the goals of improving productivity, efficiency and efficacy of the federal programs. The ITMRA was created specifically to streamline the IT planning and procurement process. It gave new responsibilities to the Director of the OMB, which include:

  • Develop a process to monitor and analyze risks and results of capital investments.
  • Submit a report on program performance benefits and the relationship between the investments and agency goals.

The ITMRA created the new position of Chief Information Officer (CIO) in each agency. The CIO has the following responsibilities:

  • Monitor and evaluate performance of the agency IT program.
  • Advise the head of the agency on an annual basis regarding information resources management, as part of the strategic planning and evaluation processes.


This article explores the Acts associated with ensuring federal government accountability in the US. The article begins with the 1990 CFO Act (Chief Financial Officers Act), which requires audited financial statements from federal agencies. It then looks at the GPRA (Government Performance and Results Act of 1993), which began the process of performance reform. The GMRA (Government Management Reform Act of 1994) that followed required agencies to produce auditable financial statements, similar to those required in the private sector. The FFMIA (Federal Financial Management Improvement Act of 1996) built upon the previous acts, requiring full disclosure of federal financial data. Finally, the ITMRA (Information Technology Management Reform Act of 1996) furthered federal objectives of improved productivity and efficacy by streamlining the IT planning and procurement process.

CIPP/G Preparation

In preparation for the Certified Information Privacy Professional/US Government exam, a privacy professional should be comfortable with topics related to this post, including:

  • Federal agency responsibilities (II.A.c.)

Federal government reporting obligations (II.B.f.)


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