Chief Financial Officers Act of 1990: Agencies, Audits, and Controls

The Chief Financial Officers Act of 1990 (Public Law 101-576) built a uniform financial management structure across the federal executive branch. It requires 24 major agencies to install a Chief Financial Officer, prepare audited annual financial statements, follow standardized federal accounting rules, and maintain financial systems that comply with government-wide requirements, all coordinated by the Office of Management and Budget. Before the law, federal bookkeeping varied so widely from agency to agency that neither Congress nor the public could get a reliable picture of how trillions of dollars moved through the government.

Which Agencies the Law Covers

The statute originally applied to 23 agencies. A 2004 amendment brought the Department of Homeland Security in as the 24th.¹ Together these agencies account for the bulk of federal spending. They fall into two groups based on how their CFOs are appointed.²

Seventeen departments and agencies have CFOs appointed by the President with Senate confirmation:

Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
Department of Homeland Security
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Department of Veterans Affairs
Environmental Protection Agency
National Aeronautics and Space Administration

Seven smaller agencies have CFOs selected by the agency head as career appointees in the competitive service or Senior Executive Service:

Agency for International Development
General Services Administration
National Science Foundation
Nuclear Regulatory Commission
Office of Personnel Management
Small Business Administration
Social Security Administration

The Financial Officers the Law Requires

Every covered agency must have a CFO who reports directly to the agency head on financial matters. Whether appointed by the President or the agency head, the CFO must have demonstrated ability in general management and extensive practical experience in financial management at large governmental or business entities.² The CFO oversees all financial management activities, develops and maintains the agency’s integrated accounting and financial systems, manages cash and debt collection, approves financial system upgrades, and prepares an annual financial management report for the agency head and OMB within 60 days of each audit.³

Each agency also has a Deputy CFO reporting to the CFO. The Deputy CFO slot is career-reserved in the Senior Executive Service, which keeps it filled by a career official across administrations. Candidates must have at least six years of practical financial management experience at large governmental entities, along with demonstrated skill in accounting, budget execution, and systems development.⁴

At OMB, the act created the Deputy Director for Management, a Presidential appointee confirmed by the Senate who serves as the chief official responsible for financial management across the entire federal government.⁵ That official sets government-wide financial management policies, monitors how agencies build and run their financial systems, and coordinates executive branch management priorities.⁶ Reporting to the Deputy Director, the Office of Federal Financial Management is headed by a Controller, also a Senate-confirmed Presidential appointee, who must have demonstrated ability and extensive practical experience in accounting and financial management at large organizations. The Controller develops financial policies, works to improve the quality of the financial data flowing to Congress, and oversees internal control policy.⁷

Annual Audited Financial Statements

Each covered agency head must prepare and submit audited financial statements covering every office, bureau, and activity within the agency. The statements must reflect overall financial position, including assets and liabilities, along with the results of operations for the fiscal year.⁸ The original act required financial statements from only a subset of agencies; the Government Management Reform Act of 1994 extended the requirement to all 24.⁹

The audit follows government auditing standards and is conducted either by the agency’s Inspector General or by an independent external auditor. Where an Inspector General exists, the IG decides whether to perform the audit in-house or contract it out.¹⁰ Auditors examine transaction records, verify asset balances, test internal controls, and determine whether the statements conform to federal accounting standards.

The statute sets March 1 as the deadline for submitting audited financial statements, but OMB Circular A-136 accelerates the actual submission date well ahead of that, with agencies required to send final Agency Financial Reports to OMB, Treasury, GAO, and Congress and post them publicly in the fall.¹¹ Individual agency reports then feed into the government-wide consolidated financial statement prepared by Treasury.

The Accounting Standards Agencies Must Follow

The Federal Accounting Standards Advisory Board (FASAB) is the body designated by the American Institute of Certified Public Accountants to establish generally accepted accounting principles for federal entities.¹² Auditors cannot issue a clean opinion on statements that depart from FASAB’s standards, which govern how agencies recognize revenue, value assets, report liabilities, and disclose costs.

FASAB guidance runs in a hierarchy of descending authority: Statements of Federal Financial Accounting Standards and Interpretations at the top, then Technical Bulletins, then Technical Releases, and finally implementation guides and widely recognized federal practices. Where no FASAB pronouncement addresses a question, an agency may consult guidance from bodies like FASB or GASB, but that outside guidance does not establish federal GAAP on its own.¹³

Internal Controls and System Compliance

OMB Circular A-123, updated effective March 10, 2026, requires agency leaders to establish internal control systems, assess whether the controls work, and report the results annually. Managers must identify and prioritize risks, take corrective action when controls fail, and document their assessments. Each year, agency heads issue assurance statements on internal control effectiveness, disclosing any material weaknesses and plans to fix them.¹⁴

The Federal Financial Management Improvement Act of 1996 layers on system-specific requirements. All 24 covered agencies must maintain financial management systems that substantially comply with three things: federal financial management systems requirements, applicable federal accounting standards, and the U.S. Government Standard General Ledger at the transaction level. Each agency head must determine annually whether its systems meet those requirements.¹⁵

When systems fall short, the agency head must develop a remediation plan, in consultation with OMB, identifying the resources, fixes, and intermediate milestones needed to reach compliance. The law allows three years to get there unless the agency shows that timeline is infeasible, in which case it must designate a responsible official and set a specific alternative date.¹⁵ Agencies also report FFMIA compliance status in their annual financial reports and reconcile disagreements between management’s assessment and the auditor’s findings.¹¹

What Happens When Audits Find Problems

When an audit identifies material weaknesses in internal controls, GAO reports the findings in detail along with specific recommendations for each affected agency.¹⁶ A material weakness means there is a reasonable possibility that a significant misstatement in the financial statements would not be caught or prevented by the agency’s controls.

Agency heads must submit a written statement to the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Oversight and Government Reform describing what the agency has done or plans to do in response to GAO recommendations. That statement is due within 180 days of the audit report. A separate written statement must go to the appropriations committees of both chambers with the agency’s first appropriations request submitted more than 180 days after the report date.¹⁷ GAO tracks whether agencies follow through in subsequent audit cycles.

The Chief Financial Officers Council

The act also established the Chief Financial Officers Council to coordinate financial management across agency lines. The council is chaired by the Deputy Director for Management at OMB and includes the Controller of the Office of Federal Financial Management, the Fiscal Assistant Secretary of the Treasury, and every agency CFO appointed under the act.² The council works on modernizing financial systems, improving the quality and consistency of financial data, developing data standards, strengthening internal controls, and shaping legislation that affects financial operations.

1
U.S. Government Accountability Office. CFO Act of 1990 – Driving the Transformation of Federal Financial Management
2
Office of the Law Revision Counsel. United States Code Title 31 Section 901 – Establishment of Agency Chief Financial Officers
3
Office of the Law Revision Counsel. United States Code Title 31 Section 902 – Authority and Functions of Agency Chief Financial Officers
4
Office of the Law Revision Counsel. United States Code Title 31 Section 903 – Deputy Chief Financial Officers
5
Office of the Law Revision Counsel. United States Code Title 31 Chapter 5 – Office of Management and Budget
6
Office of the Law Revision Counsel. United States Code Title 31 Section 503 – Functions of Deputy Director for Management
7
Office of the Law Revision Counsel. United States Code Title 31 Section 504 – Office of Federal Financial Management
8
Office of the Law Revision Counsel. United States Code Title 31 Section 3515 – Financial Statements of Agencies
9
U.S. Congress. Government Management Reform Act of 1994
10
Office of the Law Revision Counsel. United States Code Title 31 Section 3521 – Audits by Agencies
11
The White House. OMB Circular No. A-136, Financial Reporting Requirements
12
Federal Accounting Standards Advisory Board. FASAB Handbook
13
Federal Accounting Standards Advisory Board. Statement of Federal Financial Accounting Standards 34 – The Hierarchy of Generally Accepted Accounting Principles
14
The White House. OMB Circular No. A-123, Management’s Responsibility for Internal Control
15
Office of the Law Revision Counsel. United States Code Title 31 Section 3512 – Executive Agency Accounting and Other Financial Management
16
U.S. Government Accountability Office. Financial Audit – Material Weaknesses in Internal Control Continue to Impact Preparation of the Consolidated Financial Statements of the U.S. Government
17
Office of the Law Revision Counsel. United States Code Title 31 Section 720 – Agency Reports