[House Report 106-7]
[From the U.S. Government Publishing Office]
106th Congress Report
1st Session HOUSE OF REPRESENTATIVES 106-7
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PRESIDENTIAL AND EXECUTIVE OFFICE FINANCIAL ACCOUNTABILITY ACT OF 1999
_______
February 5, 1999.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Burton, from the Committee on Government Reform, submitted the
following
R E P O R T
[To accompany H.R. 437]
[Including cost estimate of the Congressional Budget Office]
The Committee on Government Reform, to whom was referred the
bill (H.R. 437) to provide for a Chief Financial Officer in the
Executive Office of the President, having considered the same,
report favorably thereon without amendment and recommend that
the bill do pass.
CONTENTS
Page
I. Background and Need for the Legislation..................... 1
II. Legislative Hearings and Committee Actions.................. 4
III. Committee Hearings and Written Testimony.................... 4
IV. Explanation of the Bill..................................... 5
V. Committee Oversight Findings................................ 6
VI. Budget Analysis and Projections............................. 6
VII. Cost Estimate of the Congressional Budget Office............ 7
VIII. Statement of Constitutional Authority....................... 8
IX. Committee Recommendation.................................... 8
X. Congressional Accountability Act; P.L. 104-1................ 8
XI. Unfunded Mandates Reform Act; P.L. 104-4, Section 423....... 8
XII. Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b). 8
XIII. Changes in Existing Law..................................... 8
I. Background and Need for Legislation
A. BACKGROUND
All Federal institutions must be accountable to the
citizens and taxpayers of this Nation for their financial
management. This is no less true of the White House than it is
of any other department or agency. The Chief Financial Officers
Act of 1990 put in place a system of financial accountability.
H.R. 437 will help improve financial management and
accountability at the White House by bringing it within the
scope of this system of accountability. Specifically, the bill
will ensure that the Executive Office of the President must
comply, unless exemptions are made, with section 902 of the
Chief Financial Officers Act of 1990 (31 U.S.C. 901).
The Executive Office of the President is a collection of
disparate agencies and offices. Executive Order 8248, of
September 8, 1939, established the divisions of the Executive
Office and defined their functions. Various agencies had been
transferred to theExecutive Office of the President by the
President's Reorganization Plans I and II of 1939 (5 U.S.C. App.),
effective July 1, 1939, under authority of the Reorganization Act of
1939 (5 U.S.C. 133-133r, 133t note).
The Presidential and Executive Office Accountability Act,
P.L. 104-331, ensures that those offices constituting the
Executive Office of the President are subject to the same laws
as Congress and the rest of the country. In that spirit, H.R.
437 applies the Chief Financial Officers Act (CFO Act) to the
Executive Office of the President. It directs the President to
appoint or designate a Chief Financial Officer (CFO) and, to
the fullest extent practicable, stipulates compliance by the
Executive Office of the President with the requirements of
section 902 of the CFO Act. The CFO Act allows departments and
agencies flexibility in setting up the Office of the Chief
Financial Officer. The Executive Office of the President would
have similar flexibility, so long as accountability is retained
and reports are produced by a CFO. The CFO should hold a
position in the organization sufficiently elevated to ensure
that the President--as the individual with ultimate
responsibility for the Executive Office of the President--is
aware of the activities, findings, and recommendations of the
CFO.
B. NEED FOR THE LEGISLATION
The bill is intended to improve financial management
practices and accountability in the Executive Office of the
President (EOP). Over the years, since the creation of the EOP
in 1939, various Presidents have used Executive orders,
reorganization plans, and sometimes legislative initiatives to
reconfigure the EOP to better suit their respective priorities.
The EOP currently includes the White House Office, the
Executive Residence of the White House, the Office of the Vice
President, the Council of Economic Advisers, the Council on
Environmental Quality, the National Security Council, the
Office of Administration, the Office of Management and Budget
(OMB), the Office of National Drug Control Policy, the Office
of Policy Development, the Office of Science and Technology
Policy, and the Office of the United States Trade
Representative. The bill provides for designation of a CFO to
oversee financial management of the entities of the EOP,
thereby bringing these entities into conformity with other
major Executive departments and agencies subject to the Chief
Financial Officers Act of 1990. In so extending coverage of an
existing law to the Executive Office of the President, H.R. 437
echoes the objectives and spirit of the Presidential and
Executive Office Accountability Act which was enacted in
1996.\1\
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\1\ 3 U.S.C. Sec. 401, et seq.
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The Chief Financial Officers Act of 1990 has been widely
viewed as the most important legislation addressing financial
management improvement in the Federal Government since the
Budget and Accounting Procedures Act of 1950.\2\ The CFO Act,
as amended, directs the major Executive Branch agencies (24 are
now covered) to undertake important financial management
reforms. For example, its provisions call for improvements in
agency accounting and financial management systems and for
production of more complete and reliable financial information,
including preparation of audited financial statements. While
implementation of the CFO Act is well underway, challenges
remain in fully achieving its purposes, as most recently
detailed in the 1998 Federal Financial Management Status Report
and Five Year Plan.\3\ Extending the coverage of the CFO Act to
the Executive Office of the President would bring greater
accountability to financial operations there, allowing its
entities to benefit from the unique functions performed by a
CFO.
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\2\ Pub. L. 81-784, 64 Stat. 832 (1950).
\3\ The CFO Act requires the Office of Management and Budget to
submit such a document to Congress each year. See: Federal Financial
Management Status Report & Five-Year Plan, June 1998. Washington, GPO,
1998. Also available electronically at http://www.whitehouse.gov/WH/
EXECUTIVE OFFICE OF THE PRESIDENT/OMB/Finance/98plan.pdt.
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Congressional hearings in the 104th and 105th Congresses
have focused on activities in the White House that evidence
undesirable practices relating to fiscal management and
financial accountability. For example, if there had been a CFO
on the scene, the unorthodox accounting practices that
prevailed in the White House Travel Office would not have been
allowed to continue. A CFO would have provided the Travel
Office managers with the guidance and expert advice they sorely
needed, but never received. The Committee believes that
establishing a CFO in the EOP will improve dramatically the
organizational structure for financial operations in its
component units, including the White House Office.
Such an officer will operate for the most part within the
framework of the Chief Financial Officers Act, to improve
coordination, enhance accountability, ensure fiscal
responsibility, and institute needed technological advances
throughout the EOP. Although financial management functions are
currently performed in the EOP primarily by the Financial
Management Division in the Office of Administration, existing
practices do not reach the level of attention and
accountability envisioned by H.R. 437. This bill contemplates a
well-crafted design and implementation of new and improved
accounting procedures and calls for increased vigilance on the
part of the CFO and staff to related fiscal matters. The
underlying objective is to provide leadership, coordination,
accountability, so as to ensure the appropriate use of
taxpayers' dollars.
The Committee notes that H.R. 437 provides the President
with discretion to implement this law in a manner that
recognizes the unique nature of the Executive Office of the
President. The Committee recommends that the Treasury, Postal
Service and General Government Appropriations Subcommittee
appropriates the funds necessary to fulfill the duties of the
CFO.
II. Legislative Hearings and Committee Actions
H.R. 437 is identical to legislation passed in the 105th
Congress, H.R. 1962.\4\ H.R. 437 was introduced on February 2,
1999, by Representative Stephen Horn (R-CA), Chairman of the
Subcommittee on Government Management, Information, and
Technology. The bill was considered by the Committee on
Government Reform on February 3, 1999 and passed unanimously by
voice vote.
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\4\ On May 1, 1997, the Government Reform and Oversight Committee's
Subcommittee on Government Management, Information and Technology held
a hearing on H.R. 1962, which was introduced on June 19, 1997, by
Representative Stephen Horn. The Subcommittee marked up the bill on
September 4, 1997. The bill was marked up by the Committee on
Government Reform and Oversight on September 30, 1997, with an
amendment in the nature of a substitute. On October 21, 1997 the
Committee on Government Reform and Oversight reported H.R. 1962 to the
House of Representatives as Report 105-331. The House of
Representatives passed the measure, as amended, by a vote of 413-3 on
October 21, 1997.
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III. Committee Hearings and Written Testimony
On May 1, 1997, the Subcommittee on Government Management,
Information and Technology held a hearing to solicit comments
from interested parties on the Presidential and Executive
Office Accountability Act proposal. Witnesses testified
concerning the intent of the bill; the bill's objectives; the
reason for various provisions, and the need for certain
changes.
The first panel featured Representative John L. Mica of
Florida, who in the 104th Congress introduced H.R. 3452, the
Presidential and Executive Office Accountability Act of 1996.
The second panel consisted of two witnesses testifying in
support of the Presidential and Executive Office Financial
Accountability Act. Edward J. Mazur was the Vice President of
Administration and Finance at Virginia State University, and
former Controller, Office of Federal Financial Management,
Office of Management and Budget. Mr. Mazur was the first
controller to be appointed after the passage of the Chief
Financial Officers Act, and oversaw its implementation in
Executive Branch agencies. The second witness was Cornelius E.
Tierney, Director, Center for Public Financial Management,
George Washington University School of Business and Public
Management. He has authored authoritative texts on Federal
Government accounting and auditing, and was formerly Chairman
and National Director of the governmental practice section of
Ernst & Young. He was instrumental in the drafting of the Chief
Financial Officers Act and in guiding its subsequent
implementation.
Subcommittee Chairman Horn opened the hearing with a
discussion of the Presidential and Executive Office
Accountability Act of 1996, which passed the House by an
overwhelming margin of 410 to 5 on September 24, 1996.
Unfortunately, time was short at that point and several
provisions of the House-passed bill, including the provision to
apply the CFO Act to the White House, were removed prior to
passage by the Senate.
IV. Explanation of the Bill
a. overview
This measure brings the agencies of the Executive Office of
the President, to the fullest extent practicable, within the
framework and under the requirements of the Chief Financial
Officers Act. H.R. 437 authorizes the President to appoint a
Chief Financial Officer in a unit or office within the
Executive Office of the President and, to the fullest extent
practicable, mandates adherence to most provisions of the CFO
Act. In recognition of the decentralized structure of the EOP
and the unique functions its agencies perform in support of the
President, H.R. 437 anticipates that some exemptions may be
necessary. In fact, the bill provides considerable discretion
for the President to exempt the new CFO from any of a number of
responsibilities otherwise stipulated by the CFO Act as
authority and functions to be performed by an agency's Chief
Financial Officer.
However, notwithstanding such possible exemptions, the bill
establishes that the CFO for the EOP shall perform, to the
extent practicable, the general functions and duties
established under the CFO Act in order to implement needed
financial management improvements. The intent of this
legislation is to foster improved systems of accounting,
financial management and internal controls throughout the
component entities of the Executive Office of the President.
This should facilitate prevention, or at least early detection,
of waste, fraud and abuse within the Executive Office of the
President, as well as in the other Executive Branch agencies
already covered by the CFO Act. Implementation of these
provisions will promote not only accountability and proper
fiscal management but also efficiency and cost reductions.
b. section-by-section analysis
Section 1. Short title
Section 1 provides that the Act shall be cited as the
``Presidential and Executive Office Financial Accountability
Act of 1999.''
Section 2. Chief Financial Officer in the Executive Office of the
President
Section 2(a) provides that section 901 of Title 31, U.S.
Code, is amended by adding at the end a new subsection 901(c)
of Title 31, U.S. Code. The new subsection 901(c) requires the
appointment or designation of a CFO in the EOP. This officer
shall be appointed or designated by the President from among
individuals meeting the standards described in section
901(a)(3) of Title 31, U.S. Code, i.e., an individual who
possesses demonstrated ability in general management of, and
knowledge of and extensive practical experience in financial
management practices in large governmental or business
entities. The position of CFO may be established in any office
of the EOP, including the Office of Administration.
Section 2(a) provides further that the CFO, to the extent
that the President determines appropriate and in the interest
of the United States, shall have the same authority and perform
the same functions as other CFOs under the CFO Act. The
President must submit to Congress notification with respect to
any provision of section 902 of Title 31, U.S. Code that the
President determines shall not apply to the CFO of the EOP.
This section provides that the President may designate an
employee of the EOP, other than the appointed or designated
CFO, as the ``head of the agency'' for purposes of carrying out
section 902 of Title 31, U.S. Code, relating to the authority,
functions and duties of the CFO.
Section 2(b) provides that not later than 90 days after the
date of enactment, the President is required to communicate in
writing with the Chairman of the House Committee on Government
Reform and the Chairman of the Senate Committee on Governmental
Affairs, a plan for the implementation of the provisions of
H.R. 437, as enacted.
Section 2(c) provides that the CFO shall be appointed or
designated under the provisions of this bill, as enacted, not
later than 180 days after the date of enactment.
Section 2(d) provides that the CFO of the EOP shall receive
basic pay at the rate payable for Level IV of the Executive
Schedule under 5 U.S.C. Sec. 5315.
Section 2(e) provides that the President may transfer such
offices, functions, powers, or duties thereof, as the President
determines are properly related to the functions of the CFO
under 31 U.S.C. 901(c). The personnel, assets, liabilities,
contracts, property, records, and unexpended balances of
appropriations, authorizations, allocations, and other funds
employed, held, used, arising from, available or to be made
available, of any office, the functions, powers, or duties of
which are transferred to the CFO of the EOP, as established
under H.R. 437, shall also be transferred thereto.
Section 2(f) provides that a separate budget request shall
apply to the CFO of the EOP. Section 1105(a) of Title 31, U.S.
Code, is amended by adding paragraph (32) and providing that a
separate statement of the amount of appropriations requested to
carry out the provisions of H.R. 437, as enacted, shall be
included in the EOP's annual budget request.
Section 2(g) provides for technical and conforming
amendments.
V. Committee Oversight Findings
Pursuant to rule XIII, clause 3(c)(1), of the Rules of the
House of Representatives, the results and findings for those
oversight activities are incorporated in the recommendations
found in the bill and in this report.
VI. Budget Analysis and Projections
Clause 3(c)(2) of rule XIII, of the Rules of the House of
Representatives, is inapplicable because the bill does not
provide new budget authority, new spending authority, new
credit authority, or an increase or decrease in revenues or tax
expenditures.
VII. Cost Estimate of the Congressional Budget Office
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 4, 1999.
Hon. Dan Burton,
Chairman, Committee on Government Reform,
U.S. House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 437, the
Presidential and Executive Office Financial Accountability Act
of 1999.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is John R.
Righter.
Sincerely,
------ ------
(For Dan L. Crippen, Director).
Enclosure.
H.R. 437--Presidential and Executive Office Financial Accountability
Act of 1999
CBO estimates that, subject to the availability of
appropriated funds, enacting H.R. 437 would increase costs of
the Executive Office of the President (EOP) by no more than
$250,000 a year. The bill would not affect direct spending or
receipts; therefore, pay-as-you-go procedures would not apply.
H.R. 437 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
H.R. 437 would require the President to appoint a chief
financial officer (CFO) for the 12 agencies and offices that
comprise the EOP. The bill would require the CFO to comply with
those provisions of the CFO Act that the President determines
to be appropriate and in the interest of the United States.
Based on information provided by the Office of Management and
Budget and the Office of Administration (OA), CBO expects that
the President would appoint as CFO someone within the OA, which
already provides centralized financial management and
accounting services to the EOP. As a result of enacting H.R.
437, the OA might require an additional employee or two to
coordinate activities within the EIP. In addition, the OA would
need to contract with a private firm to audit the consolidated
annual financial statements of the EOP. We estimate that the
annual audit would cost around $100,000.
In total, assuming no major problems exist in the financial
management and systems of the EOP, CBO estimates that enacting
H.R. 437 would increase annual costs of the OA by no more than
$250,000. In addition, it is possible that by improving
financial systems and communication within the EOP, the
legislation could lead to a reduction in losses from waste and
abuse, but CBO cannot estimate the amount of such potential
savings.
The CBO staff contact is John R. Righter. This estimate was
approved by Robert A. Sunshine, Deputy Assistant Director for
Budget Analysis.
VIII. Statement of Constitutional Authority
Pursuant to rule XIII, clause 3(d)(1), the Committee finds
that clauses 14 and 18 of Article I, Section 8 of the U.S.
Constitution authorizes Congress to create a Chief Financial
Officer in the Executive Office of the President.
IX. Committee Recommendation
On February 3, 1999, a quorum being present, the Committee
ordered the bill favorably reported to the House for
consideration by voice vote.
X. Congressional Accountability Act; Public Law 104-1
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(B)(3) of the Congressional Accountability Act (P.L. 104-1).
XI. Unfunded Mandates Reform Act; Public Law 104-4, Section 423
The Committee finds that the legislation does not impose
any Federal mandates within the meaning of section 423 of the
Unfunded Mandates Reform Act (P.L. 104-4).
XII. Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b)
The Committee finds that the legislation does not establish
or authorize establishment of an advisory committee within the
definition of 5 U.S.C. App., Section 5(b).
XIII. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
TITLE 31, UNITED STATES CODE
* * * * * * *
SUBTITLE I--GENERAL
* * * * * * *
CHAPTER 5--OFFICE OF MANAGEMENT AND BUDGET
* * * * * * *
SUBCHAPTER I--ORGANIZATION
* * * * * * *
Sec. 503. Functions of Deputy Director for Management
(a) Subject to the direction and approval of the Director,
the Deputy Director for Management shall establish
governmentwide financial management policies for executive
agencies and shall perform the following financial management
functions:
(1) * * *
* * * * * * *
(7) Develop and maintain qualification standards for
agency Chief Financial Officers and for agency Deputy
Chief Financial Officers appointed under sections 901
and 903, respectively (excluding any officer designated
or appointed under section 901(c)).
(8) Provide advice to agency heads with respect to
the selection of agency Chief Financial Officers and
Deputy Chief Financial Officers (excluding any officer
designated or appointed under section 901(c)).
* * * * * * *
Chapter 9--Agency Chief Financial Officers
* * * * * * *
Sec. 901. Establishment of agency Chief Financial Officers
(a) * * *
* * * * * * *
(c)(1) There shall be within the Executive Office of the
President a Chief Financial Officer, who shall be designated or
appointed by the President from among individuals meeting the
standards described in subsection (a)(3). The position of Chief
Financial Officer established under this paragraph may be so
established in any Office (including the Office of
Administration) of the Executive Office of the President.
(2) The Chief Financial Officer designated or appointed under
this subsection shall, to the extent that the President
determines appropriate and in the interest of the United
States, have the same authority and perform the same functions
as apply in the case of a Chief Financial Officer of an agency
described in subsection (b).
(3) The President shall submit to Congress notification with
respect to any provision of section 902 that the President
determines shall not apply to a Chief Financial Officer
designated or appointed under this subsection.
(4) The President may designate an employee of the Executive
Office of the President (other than the Chief Financial
Officer), who shall be deemed ``the head of the agency'' for
purposes of carrying out section 902, with respect to the
Executive Office of the President.
* * * * * * *
SUBTITLE II--THE BUDGET PROCESS
* * * * * * *
CHAPTER 11--THE BUDGET AND FISCAL, BUDGET, AND PROGRAM INFORMATION
Sec. 1105. Budget contents and submission to Congress
(a) On or after the first Monday in January but not later
than the first Monday in February of each year the President
shall submit a budget of the United States Government for the
following fiscal year. Each budget shall include a budget
message and summary and supporting information. The President
shall include in each budget the following:
(1) * * *
* * * * * * *
(31) a separate statement of the amount of
appropriations requested to carry out the provisions of
the Presidential and Executive Office Financial
Accountability Act of 1999.
* * * * * * *