OMB Bulletin 19-01 - The White House

THE DIRECTOR

EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF MANAGEMENT AND BUDGET WASHINGTON, D.C. 20503

October 4, 2018

0MB BULLETIN 19-01

TO THE HEADS, INSPECTORS GENERAL,AND CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS

SUBJECT: Audit Requirements for Federal Financial Statements

1. Purpose: This Bulletin, which includes an attachment and Appendices A-H, implements the audit provisions of the Chief Financial Officers Act of 1990(CFO Act) (Pub. L. No. 101-576), as amended, the Government Management Reform Act of 1994 (GMRA)(Pub. L. No. 103-356), and the Federal Financial Management Improvement Act of1996(Pub. L. No. 104-208, title VIII). The requirements of this Bulletin are set forth in the attachment.

2. Authority: The Bulletin is issued under the authority of the Budget and Accounting Act of 1921(Pub. L. No. 67-13), as amended, and the Budget and Accounting Procedures Act of 1950(Pub. L. No. 81-784), as amended.

3. Applicability: The provisions of this Bulletin apply to audits of financial statements of Executive Branch departments and agencies(Appendices A and C) and certain components thereof(Appendix B), and Government corporations(Appendix D).

4. Rescissions: The provisions of this Bulletin supersede the provisions in OMB Bulletin 17-03,Audit Requirementsfor Federal Financial Statements.

5. Effective Date: The provisions of this Bulletin are effective immediately for audits of financial statements, unless stipulated otherwise. Audit reports shall be submitted to the reporting entity head in sufficient time to enable the agency head to meet the deadline for submitting the audited financial statements.

6. Inquiries: Further information concerning this Bulletin may be obtained from the Office of Management and Budget, Office of Federal Financial Management at 202-395-3993.

7. Copies: Individual copies of this bulletin may be obtained from the 0MB website at .

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Mick Mulvaney Director

Table of Contents

SUMMARY OF KEY CHANGES......................................................................................................................^

AUDIT REQUIREMENTS FOR FEDERAL FINANCIAL STATEMENTS.....................................................................?

SECTION 1: BACKGROUND.................................................................................................................................. SECTION 2: DEFINITIONS..............................................................................................................................^ SECTION 3: FREQUENCY OF AUDIT..........................................................................................................................^ SECTION 4: RESPONSIBILITY FORAUDIT.................................................................................................................... 10 SECTION 5: COMMUNICATION...........................................................................................................................^

Misstatements in Previously Issued Financial Statements................................................................................................. 12 SECTION 6: SCOPE OF THE AUDIT................................................................................................................................. 13

Audits of Group Financial Statements......................................................................................................................^ Using a Service Orgamzation.........................................................................................................................^ SECTION 7: REPORTING..................................................................................................................................... Audit Report..........................................................................................................................................

Reporting on Restatement of Previously Issued Financial Statements............................................................................. 19 Reporting on Supplementary Information, RSI, RS SI, Other Information, and Highlights................................................ 20 Report on Internal Control Over Financial Reporting .........................................................................................................21 Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements ...........................................................21 Compliance with the Federal Financial Management Improvement Act of 1 996 (FFMIA)...............................................22

Status/Comments/Distribution........................................................................................................................^ Subsequent Discovery of Facts................................................................................................................................^

SECTION 8: WRITTEN REPRESENTATIONS FROM MANAGEMENT........................................................................23

SECTION 9: LEGAL REPRESENTATION LETTERS AND MANAGEMENT'S SCHEDULES.....................................25

SECTION 10: COMMUNICATING OTHERDEFICIENCIES...........................................................................................26

SECTION 11: AGREED-UPON PROCEDURES: RETIREMENT, HEALTH BENEFITS, AND LIFE INSURANCE WITHHOLDINGS/CONTRIBUTIONS AND SUPPLEMENTAL SEMIANNUAL HEADCOUNT REPORT

SUBMITTED TO THE OFFICE OF PERSONNEL MANAGEMENT (OPM)...................................................................26 SECTION 12: D^SPECTOR GENERAL OVERSIGHT......................................................................................................^? SECTION 13: AUDIT OF THE CLOSING PACKAGE FINANCIAL STATEMENTS.....................................................28

Audit Report...........................................................................................................................................^ Section on Internal Control Over Financial Reportmg...................................................................................................... Section on Compliance................................................................................................................................^ Comments/Distribution.......................................................................................................................... Commumcating Other Deficiencies................................................................................................................^

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Intragovemmental Balances and Transactions.................................................................................................................

SECTION 14: SIGNIFICANT DUE DATES AND CONTACT INFORMATION FOR FINANCIAL STATEMENTS

AND RELATED REPORTS.....................................................................................................................................^ TABLE OF APPENDICES.....................................................................................................................................^ APPENDIX A........................................................................................................................................... APPENDIX B.............................................................................................................................................^ APPENDIX C.............................................................................................................................................^ APPENDIX D..............................................................................................................................................^ APPENDIX E............................................................................................................................................^ APPENDIX ?............................................................................................................................................,, APPENDIX G.............................................................................................................................................^ APPENDIX H............................................................................................................................................

SUMMARY OF KEY CHANGES

Section Title

Section 2, Definitions

Section 5, Communication Section 5, Communication Section 6, Scope of the Audit

Section 7, Reporting

Section 7, Reporting

Section 8, Written Representations Section 13, Audit of the Closing Package Financial Statements Section 13, Audit of the Closing Package Financial Statements Appendix B

Appendix C

Appendix D

Appendix E

Appendix E

Appendix F

Appendix F

Paragraph Number(s) Former 2.5

5.2

5.6

Changes

Deleted definition of the Federal Information Security Management Act of 2002 because it is not cited in the Bulletin. Clarified to stress the importance of communication in the timely issuance of financial statements. Clarified requirements for restatements.

6.2

7.18 Former 7.22 and 7.23 Former 8.6 13.9andl3.11

Streamlined the text for consolidating statement audits vis-a-vis audit of the financial statements as a

whole. Clarified that contract testing includes treaties and international agreements. Deleted references to 0MB Circular A-123, Appendix A, because a separate audit report is not necessary for A-123 compliance. Deleted, as unnecessary, reference to representation pertaining to the Statement of Budgetary Resources. Updated to reflect requirements for intra-entity and intragovemmental activity.

13.32

Updated to clarify requirement regarding adjusting journal entries made for intragovemmental activity.

N/A

N/A

N/A

Representations 19 and 20

Representations

21 and 22

Representation 12 and 13 Representations 15,16,and 41

Modified to allow the Navy to have their General Funds audit satisfied with separate Marine Corps statements and non-Marme Corps Navy statements. Updated to include two entities inadvertently left off the list, the Northern Border Regional Commission and the Privacy and Civil Liberties Oversight Board. The Federal Housing Administration Fund was deleted because it does not exist. Added new representation regarding the reconciliation ofintra-entity and intragovemmental transactions and balances. Added new representations regarding disclosure entities and related parties. Added disclosure entities to representation.

Clarified reference to "actual or possible litigation, claims, and assessments" to include those resulting from "treaties and international agreements." Also added reference to "treaties and international

Appendix F Appendix F

Representation

19

Representation

41

agreements." Clarified text regarding intragovemmental activity.

Clarified text regarding treaties and other international agreements.

AUDIT REQUIREMENTS FOR FEDERAL FINANCIAL STATEMENTS

SECTION 1: BACKGROUND

1.1 The Government Management Reform Act of 1994 (GMRA) (Pub. L. No. 103-356) expanded the Chief Financial Officers Act of 1990 (CFO Act) (Pub. L. No. 101-576) by requiring, among other things, the annual preparation and audit oforganization-wide financial statements of the Executive Branch departments and certain Executive Branch independent agencies (CFO Act agencies. Appendix A). The GMRA also requires audited financial statements of components of Executive Branch departments and agencies designated by the Director of the Office of Management and Budget (0MB) (Appendix B).

1.2 The Accountability of Tax Dollars Act of 2002 (ATDA) (Pub. L. No. 107-289) expanded the CFO Act further and extends the requirements of the annual preparation and audit of organization-wide financial statements to the remainder of the Executive Branch independent agencies not already required to do so through another provision of Federal law (Appendix C).

1.3 The Government Corporation Control Act (GCCA) (Pub. L. No. 79-248, codified at 3 1 U.S.C. chapter 91) requires, among other things, the annual preparation and audit oforganizationwide financial statements of "mixed-ownership" and "wholly owned" Government corporations (Appendix D).

SECTION 2: DEFINITIONS

For the purposes of this Bulletin, the following definitions apply:

2.1 Annual Financial Statements mean the financial statements of a reporting entity as described in31U.S.C. ?3515 and 0MB Circular A-13 6, Financial Reporting Requirements, as revised (A-13 6). The "Annual Financial Statements' consist of:

Management's Discussion and Analysis (part of Required Supplementary Information) Basic Financial Statements, including:

Balance Sheet Statement of Net Cost Statement of Changes in Net Position Statement of Budgetary Resources Statement of Custodial Activity, if applicable Statement of Social Insurance, if applicable Statement of Changes in Social Insurance Amounts, if applicable Related Note Disclosures Required Supplementary Stewardship Information (RSSI), if applicable Required Supplementary Information (RS1\ if applicable Other Information, if applicable

1 U.S. generally accepted accounting principles (U.S. GAAP) for Federal entities are promulgated by the Federal Accounting Standards Advisory Board (FASAB).

2.2 Codification of Statements on Auditing Standards is a codification of Statements on Auditing Standards (SASs) issued by the American Institute of Certified Public Accountants (AICPA). The Government Accountability Office's (GAO) Government Auditing Standards (U.S. Generally Accepted Government Auditing Standards, GAGAS) incorporates by reference SASs issued by the AICPA. As a result, auditors performing audits of financial statements in accordance with GAGAS should comply with the incorporated SASs and the additional requirements of GAGAS.

2.3 Deficiency in Internal Control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis.

2.4 Federal Financial Management Improvement Act of 1996 (FFMIA) (Pub. L. No. 104208, Title VIII) Section 803 (a) requires CFO Act agencies to establish and maintain financial management systems that comply substantially with Federal financial management systems requirements, applicable Federal accounting standards, and the United States Government Standard General Ledger at the transaction level.

2.5 Federal Managers' Financial Integrity Act (FMFIA) (Pub. L. No. 97-255, codified at 31 U.S.C. ?3512(c), (d)) requires Executive Branch agencies to establish and maintain effective internal control. The heads of agencies must annually evaluate and report on the effectiveness of the internal control (Section 2) and financial management systems (Section 4) that protect the integrity of Federal programs.

2.6 U.S. Generally Accepted Accounting Principles (U.S. GAAP) for Federal Government entities are identified in Statement of Federal Financial Accounting Standards (SFFAS) 34,The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued by the Financial Accounting Standards Board. The GAAP hierarchy consists of the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of Federal reporting entities that are presented in accordance with U.S. GAAP and the framework for selecting those principles.

2.7 Government Accountability Office/Council of the Inspectors General on Integrity and Efficiency Financial Audit Manual (GAO/CIGIE FAM) provides methodology and guidance for conducting audits of Federal financial statements in accordance with relevant auditing standards and 0MB guidance. References to the FAM do not establish requirements for auditors.

2.8 Government Auditing Standards (also referred to as U.S. Generally Accepted Government Auditing Standards or GAGAS) are those auditing standards issued by the Comptroller General of the United States.

2.9 Group Financial Statements include financial information of more than one component, or combined financial statements aggregating the financial information prepared by components that are under common control. Auditors should refer to AU-C 600, Audits of Group Financial Statements (Including the Work of Component Auditors), for additional guidance/requirements when performing an audit of group financial statements.

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