EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF …

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

August 27, 2019

0MB BULLETIN NO. 19-03

T0 THE HEADS, INSPECTORS GENERAL, AND CHIEF FINANCIAL OFFICERS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS

SUB JECT: Audit Requirements for Federal Financial Statements

1. Purpose: This Bulletin, which includes an attachment and Appendices A-E, 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), the Government Corporation Control Act (GCCA) (Pub. L. No. 79-248), and the Federal Financial Management Improvement Act of 1996 (FFMIA) (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 0MB Bulletin 19-01, 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 . Russell T. Vought Acting Director

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Table of Contents

SUMMARY OF KEY CHANGES ..........................................................................................................................................5 AUDIT REQUIREMENTS FOR FEDERAL FINANCIAL STATEMENTS ............................ ............. ............................ 7 SECTION 1: BACKGROUND ............................................................................. .................... ........... ................................... 7 SECTION 2 : DEFINITIONS ................................... ... .................................... ................................ .........................................7 SECTION 3 : FREQUENCY OF AUDIT .......................................................................... ........ ........... ........ ........ ................. I 0 SECTION 4: RESPONSIBILITY FOR AUDIT .................................. ........... ........................... ........... ................................. 10 SECTION 5: COMM1JNICATION............................................... ................. ................... ................... ................................. l l

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

Support for the U .S. Government Consolidated Financial Statements ......................................... ................................. 16 Audits ofGroup Financia l Statem ents ....................................... .................................................................................. .. .... 17 Using a Service Organization .. .......................................................... .. ...................... ........ ................... ..... .......................... 18 SECTION 7: REPORTING ..................... .... ................................................... .............................................. ......................... 19 Audit R eport................................................................................................. ................... ....................................................20 Reporting on Restatement of Previously Issued Financial Statements .............................................................................21 Reporting on Supplementary Information, RSI, RSSI, Other Information, and Highlights ................. ...............................21 Report on Internal Control Over Financial Reporting ........................................................................ .................................22 Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements ....... ....................................................22 Compliance with the Federal Financial Management Improvement Act of 1996 (FFMIA) ...................... .. ................. ......23 Status/Comments/Distribution ................................. .................... ....................................................... ........ .........................24 Subsequent Discovery of Facts ......................................... ................. .......................... ........................................................24 SECTION 8: WRITTEN REPRESENTATIONS FROM MANAGEMENT. ........................ ........... ... .................................24 SECTION 9: LEGAL REPRESENTATION LETTERS AND MANAGEMENT SCHEDULES .......................................26 SECTION 10 : COMMUNICATING OTHERDEFICIENCJES ......... ............................................................................ ......27 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) ...................................................................27 SECTION 12 : INSPECTOR GENERAL OVERSIGHT .................................. .....................................................................28 SECTION 13: SIGNIFICANT DUE DATES AND CONTACT INFORMATION FOR FINANCIAL STATEMENTS AND RELATED REPORTS ...................... ............. .............. .. .....................................................:.................................. ......29 TABLE OF APPENDICES ................................ ............................................ .......................................................................30 APPENDIX A: CFO ACT AGENCIES .............................................................................................................................31 APPENDIX B: COMPONENT ENTITIES ......................... ..............................................................................................32 APPENDIX C: ATDA AGENCIES ........................... .................................................................... .............................. ......33

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APPENDIX D: GOVERNMENT CORPORATIONS ....................................................................................................... 40 APPENDIX E: ILLUSTRATIVE REPRESENTATIONS ................................................................................................. 41

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SUMMARY OF KEY CHANGES

Section Title Section 1, Definitions Section 2, Definitions Section 2, Definitions Section 3, Frequency of Audit

Parae;raph Number(s) 2.1 2.6

2.12 and 2.18 3.1

Section 5,

5.1

Communication

Section 6, Scope of 6.8

the Audit

Section 6, Scope of 6.12 the Audit Section 6, Scope of 6.13 the Audit Section 6, Scope of 6.14 the Audit Section 6, Scope of 6.15 Audit Section 6, Scope of 6.16 Audit

Section 7,

7.18

Reporting

Section 8, Written 8.1 Representations Section 8, Written 8.5 Representations

Section 8, Written Representations Section 9, Legal Representation Letter Section 9, Legal Representation Letter Section 9, Legal Representation

Former section 8.8 9.1 9.5 9.6

Chane;es Moved footnote 1 to body of paragraph 2.6.

Added reference to FASAB as GAAP standard setter previously included in footnote 1. Added definitions for intragovernmental and significant entities. Modified to include relevant portions of former paragraph 13.5 and clarified information pertaining to calendar year-end entities. Clarified requirements and included references to the FAM. Modified to include portion of former paragraph 13.9 and highlight intragovernmental transactions. Modified to include a portion of former paragraph 13.32. Modified to include a portion of former paragraph 13.9. Modified to include a portion of former paragraph 13.32. Added new paragraph for requirements in lieu of Closing Package audit. Added new paragraph with reference to GAO Communication Letter sent to significant entities. Deleted reference to treaties and international agreements in light of changes to paragraphs 6.12. Deleted reference to Closing Package.

Modified to include references to required representations for significant entities and calendar year entities. Deleted as unnecessary in light of Closing Package elimination. Deleted reference to Closing Package and added footnote and clarifying language regarding external counsel requests. Clarified guidance for management schedules.

Clarified to state that DOJ and GAO are recipients of legal letter update and to provide

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Letter Former Section 13, Audit of the Closing Package Financial Statements Appendix B

Entire Section NIA

Appendix D

NIA

Former Appendix F Appendix E

Entire Appendix Representation 41

Former Appendix G Farmer Appendix H

Entire Appendix Entire Appendix

requirements for significant entities. Deleted as unnecessary in light of Closing Package elimination.

Replaced "Department" ofthe Navy with "U.S." Added footnote for 01 Payment Integrity information. Added Federal Housing Administration pursuant to 31 USC 9101 subsection (3)(L); the FHA Fund, referenced in the law, does not exist. Deleted as unnecessary in light of Closing Package elimination. Deleted reference to treaties and other international agreements in light of changes to 7.18. Deleted as unnecessary in light of Closing Package elimination. Deleted as unnecessary in light of Closing Package elimination.

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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 of organization-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 31 U.S.C. chapter 91) requires, among other things, the annual preparation and audit of organizationwide 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 in 31 U.S.C. ?3515 and 0MB Circular A-136, Financial Reporting Requirements, as revised (A-136). 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 (RSI), if applicable Other Information, if applicable

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

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(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 promulgated by the Federal Accounting Standards Advisory Board (FASAB). Statement of Federal Financial Accounting Standards (SFFAS) 34, The Hierarchy ofGenerally Accepted Accounting Principles, Including the Application ofStandards Issued by the Financial Accounting Standards Board prescribes the GAAP hierarchy, which 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.

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. 1

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

1 GAO, Government Auditing Standards 201 I Revision, GAO-12-33 lG (Washington, D.C., December 2011).

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