OMB sets up audit option

Component-Level Audits

Recognizing that agencies have limited resources to devote to the administration's management reform agenda, the Office of Management and Budget may allow agency components that have a proven track record for financial management skip the mandated annual audit.

Agencies and the government as a whole are required to prepare and audit their financial statements under the Government Management Reform Act of 1994. The act also allows the Office of Management and Budget to require individual agency components to prepare statements. Currently OMB requires audits from about 20 components to be audited.

But in a memo last week, Sean O'Keefe, deputy director of OMB, indicated that if a component has a demonstrated track record of good financial management, it is not necessary to require an audit every year.

"This action would allow the agencies to redirect resources to address other critical management areas," O'Keefe wrote in a July 10 memo to agency heads.

Improving financial management is part of President Bush's plans for management and performance reform. Others include advancing e-government and increasing competitive sourcing.

For a component to be removed from the audit, the agency head, in conjunction with the agency inspector general, must submit a request "based upon a sound business plan" that does not weaken the agencywide audit. The request must meet the following conditions:

* The component received a clean, unqualified audit opinion on its financial statements for three consecutive years.

* The agency submitted its last two agencywide financial statement audits on time.

* The component is not on the General Accounting Office's "high risk" list for financial management-related problems.

* The agency request briefly describes a plan with target dates to fix every unresolved weakness found in previous audits.

To be considered for removal from the fiscal 2001 audit, requests must be received by OMB before July 31. The removal will be effective only for that year.