OMB sets up audit option

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 with a proven track record for financial management to 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 OMB to require individual agency components to prepare statements. Currently, OMB requires audits from about 20 components. But in a July 10 memo, Sean O'Keefe, deputy director of OMB, indicated that if a component has a demonstrated track record of good financial management, an annual audit is not necessary.

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

For a component to be exempt, 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 conditions that include the following:

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

OMB must receive requests before July 31 to consider components for removal from the 2001 audit.