The Chief Financial Officers (CFO) Act of 1990: 30th Anniversary and Potential Issues for Congress


The Chief Financial Officers (CFO) Act of
1990: 30th Anniversary and Potential Issues for

September 3, 2020
Congress has demonstrated sustained interest in federal financial management and improvement through
lawmaking and oversight. The Chief Financial Officers (CFO) Act of 1990, enacted in November 1990,
established both processes and institutions to address federal financial management. With the law’s 30th
anniversary approaching, this Insight discusses related statutory provisions, their implementation, and
potential issues for Congress.
CFO Act Overview
Precursors to Enactment
The CFO Act arrived in the wake of growing interest in federal financial management over the preceding
decades. In 1982, for example, Congress passed the Federal Managers’ Financial Integrity Act, which led
executive branch agencies to report over 2,200 material internal control weaknesses by 1988. Financial
at federal agencies in the 1980s further highlighted a perceived need for reform.
Ultimately, with the CFO Act, Congress established institutions and processes within agencies and across
the executive branch, with responsibilities for new agency officials and the Office of Management and
Budget (OMB).

Provisions and Implementation
Agency CFOs and Deputy CFOs
Statutory CFO positions were established at large executive branch agencies, known as the “CFO Act
agencies,” which now total 24 in number. Most of these CFO positions are presidentially appointed and
Senate confirmed, while some are career officials appointed by agency heads. CFOs are to report directly
to agency heads.
The act also established positions for career deputy CFOs. By law, agency CFOs have
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financial management responsibilities including monitoring budget execution, preparing financial
statements, and developing internal controls.
In practice, apart from CFOs’ responsibilities over financial management, the specifics of their portfolios
have differed widely across agencies. Congress also subsequently established statutory positions to
supervise other mission-support functions, including information technology, acquisition, personnel,
performance measurement toward goals, and evaluation. In other areas, such as enterprise risk
governance structures may vary by agency.
Audited Financial Statements
The CFO Act required executive agencies to prepare annual financial statements. Requirements began
with revolving and trust funds. In a pilot program, several agencies and bureaus were also required to
prepare statements covering all accounts. Statutory inspectors general direct these annual audits, but they
typically contract them to independent auditors.
Subsequent laws expanded the coverage of audited statements. In 1994, legislation required the CFO Act
agencies to prepare statements covering all accounts, expanding aspects of the earlier pilot program.
Subsequent legislation in 2002 expanded this requirement to smaller agencies. In FY2019, 22 of the 24
agencies received unmodified (“clean”) audit opinions, compared to six in FY1996. Internal
controls reporting, as mandated by other law, is included with financial statements in agency annual
OMB Institutions
The CFO Act created the OMB deputy director for management (DDM) position, which is responsible for
setting management policies for executive agencies, including financial management. Additionally, the act
established the Office of Federal Financial Management, headed by a controller who reports to the DDM,
to implement federal financial management policies. Finally, the law established a CFO Council—
consisting of the DDM, the controller, the Fiscal Assistant Secretary of the Treasury, and agency CFOs—
to advise agencies on financial modernization and improvement.
OMB provides instructions on compliance with the CFO Act to agencies via “circulars.” In particular,
OMB’s Circular A-136 provides guidance on the preparation of financial statements along with their form
and content.

OMB Planning and Reporting
The CFO Act requires OMB to submit annually to Congress a financial management status report and a
government-wide five-year plan for improvement.
OMB previously published the status report and plan in a single document. After the 2009 version, OMB
ceased publishing a single document, and it is not clear to CRS where interested observers can find the
required information.
Potential Issues
With the CFO Act in 1990, Congress passed the first of a succession of laws that focused on mission-
support functions in agencies and corresponding roles in OMB. Consequently, while many in Congress
have continued to focus on financial management improvement, the statutory landscape has substantially
changed. Illustrative issues for potential oversight and lawmaking (e.g., S. 3287, the introduced CFO
Vision Act) might include the following:

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Audits: While most agencies have achieved clean audits, many continue to struggle with
inefficient systems and processes. Incompatible legacy systems and reliance on manual
processes might compromise data quality.
CFO roles: In response to individual agency circumstances, agencies have assigned
some additional roles to CFOs while assigning others to separate officials. Several
stakeholders have differed on how to assign leadership for mission-support functions. For
 The CFO Council suggested in 2011 that CFOs assume responsibility for additional
mission-support functions, including performance and risk management. OMB said
consensus on such recommendations was lacking. Separately, the Partnership for
Public Service found that, when CFOs held dual roles to include performance, the
performance-related responsibilities received “short shrift.”

 More recently, the Government Accountability Office (GAO) consulted with the
financial management community and suggested that CFOs “would benefit” from
standardized, expanded responsibilities over additional mission-support areas. It may
be unclear whether agencies would benefit or if other stakeholders would view such
changes favorably in contrast with agencies’ tailored approaches.
Distinguishing mission from mission support: Since 1990, legislation has brought
additional attention to agency mission-support activities (e.g., human resources and
financial management). In 2009, however, the National Academy of Public
Administration highlighted that agency mission-support functions may lose “mission
Possible issues for management and Congress include whether these functions
focus on supporting agency missions as opposed to narrower priorities.
Government-wide financial management plan: The CFO Act requires OMB to create
an annually revised, five-year improvement plan. GAO recently suggested that Congress
consider aligning the reporting frequency with presidential administrations once every
four years. This would match the cadence of some existing reporting. Making such a
change might prompt more presidential engagement and transform the process into once-
per-term presidential agenda-setting.
In contrast, the frequency under current law may
emphasize continuity and sustained focus across administrations. GAO also suggested
incorporating financial management performance metrics into the plan to assess agency
performance. Which metrics might be used or how they would be constructed may be
among the issues for consideration.

Author Information

Dominick A. Fiorentino
Clinton T. Brass
Analyst in Government Organization and Management
Specialist in Government Organization and Management

Congressional Research Service

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