[Pages H7041-H7043]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

ACCOUNTABILITY OF TAX DOLLARS ACT OF 2002

Mr. HORN. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 4685) to amend title 31, United States Code, to expand the types
of Federal agencies that are required to prepare audited financial
statements, as amended.
The Clerk read as follows:

H.R. 4685

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Accountability of Tax
Dollars Act of 2002''.

SEC. 2. AMENDMENTS RELATING TO AUDITING REQUIREMENT FOR
FEDERAL AGENCY FINANCIAL STATEMENTS.

(a) In General.--Section 3515 of title 31, United States
Code, is amended--
(1) in subsection (a)--
(A) by striking ``Not later'' and inserting ``(1) Except as
provided in subsection (e), not later'';
(B) by striking ``each executive agency identified in
section 901(b) of this title'' and inserting ``each covered
executive agency''; and
(C) by striking ``1997'' and inserting ``2003'';
(2) in subsection (b) by striking ``an executive agency''
and inserting ``a covered executive agency'';
(3) in subsection (c) and (d) by striking ``executive
agencies'' each place it appears and inserting ``covered
executive agencies''; and
(4) by adding at the end the following:
``(e)(1) The Director of the Office of Management and
Budget may exempt a covered executive agency, except an
agency described in section 901(b), from the requirements of
this section with respect to a fiscal year if--
``(A) the total amount of budget authority available to the
agency for the fiscal year does not exceed $25,000,000; and
``(B) the Director determines that requiring an annual
audited financial statement for the agency with respect to
the fiscal year is not warranted due to the absence of risks
associated with the agency's operations, the agency's
demonstrated performance, or other factors that the Director
considers relevant.
``(2) The Director shall annually notify the Committee on
Government Reform of the House of Representatives and the
Committee on Governmental Affairs of the Senate of each
agency the Director has exempted under this subsection and
the reasons for each exemption.
``(f) The term `covered executive agency'--
``(1) means an executive agency that is not required by
another provision of Federal law to prepare and submit to the
Congress and the Director of the Office of Management and
Budget an audited financial statement for each fiscal year,
covering all accounts and associated activities of each
office, bureau, and activity of the agency; and
``(2) does not include a corporation, agency, or
instrumentality subject to chapter 91 of this title.''.
(b) Waiver Authority.--
(1) In general.--The Director of the Office of Management
and Budget may waive the application of all or part of
section 3515(a) of title 31, United States Code, as amended
by this section, for financial statements required for the
first 2 fiscal years beginning after the date of the
enactment of this Act for an agency described in paragraph
(2) of this subsection.
(2) Agencies described.--An agency referred to in paragraph
(1) is any covered executive agency (as that term is defined
by section 3515(f) of title 31, United States Code, as
amended by subsection (a) of this section) that is not an
executive agency identified in section 901(b) of title 31,
United States Code.

The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
California (Mr. Horn) and the gentlewoman from Illinois (Ms.
Schakowsky) each will control 20 minutes.
The Chair recognizes the gentleman from California (Mr. Horn).

{time} 1415

General Leave

Mr. HORN. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
and include extraneous material on H.R. 4685.
The SPEAKER pro tempore (Mr. Cantor). Is there objection to the
request of the gentleman from California?
There was no objection.
Mr. HORN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, H.R. 4685, the Proposed Accountability of Tax Dollars
Act of 2002, was introduced on May 8 by the distinguished gentleman
from Pennsylvania (Mr. Toomey). This bill would expand the number of
Federal agencies that are required to prepare audited financial
statements each year. At present, only 24 Departments and agencies are
covered by the Chief Financial Officers Act of 1990, as amended. They
now must meet this requirement.
This bill would require that most executive branch agencies produce
annual audited financial statements. However, the Office of Management
and Budget could exempt agencies with annual budgets of less than $25
million a year. However, to do so it must determine that those agencies
do not present risk factors that warrant audited financial statements.
I expect this waiver authority to be used rarely, if ever. The bill
would also permit the Office of Management and Budget to phase in the
financial statement requirement over a 2-year period. This provision
would give agencies additional time to prepare if they need it.
The Enron debacle and similar events underscored the need for honest
and accurate financial reporting in the private sector. I can assure
you, Mr. Speaker, that this need is just as critical in the Federal
Government. The Subcommittee on Government Efficiency, Financial
Management and Intergovernmental Relations, which I chair, has held
countless hearings on the pervasive financial management problems that
confront most Federal agencies. Requiring annual audited financial
statements will not solve all of those problems; however, it will bring
more agencies closer to providing reliable financial information and
holding them accountable to the American taxpayers:
We should bring behavior sanctions to Federal financial officers, who
misuse fiscal management.

[[Page H7042]]

Many agencies that are not currently required to provide audited
financial statements recognize their value. A recent survey conducted
by the General Accounting Office found that 12 such agencies were
voluntarily producing audited financial statements.
During our subcommittee's May 14 hearing on H.R. 4685, witnesses from
four or more of those agencies testified to the importance of audited
financial statements in achieving greater accountability.
H.R. 4685 is a bipartisan and commonsense bill. It has the strong
support of the General Accounting Office headed by the Comptroller
General of the United States and the Office of Management and Budget
headed by the director that reports to the President.
Enactment of this bill will help ensure greater accountability over
the billions of tax dollars the Federal Government spends each year. I
urge all of my colleagues to support this important bill.
Mr. Speaker, I yield such time as he may consume to the distinguished
gentleman from Pennsylvania (Mr. Toomey), who has done really an
excellent job. He has been in and over every line and has spent quite a
few hours and weeks on this legislation.
Mr. TOOMEY. Mr. Speaker, I thank the chairman for yielding me time.
Mr. Speaker, I rise today to urge my colleagues to support H.R. 4685,
the Accountability for Tax Dollars Act.
Mr. Speaker, I first introduced this bill actually in the 106th
Congress as a good government measure to combat waste, fraud, and abuse
at Federal agencies. I reintroduced this legislation in this Congress
with bipartisan support.
The Subcommittee on Government Efficiency, Financial Management and
Intergovernmental Affairs of the Committee on Government Reform then
held a hearing and a markup of the bill before reporting it out
favorably. And I want to thank very much the subcommittee chairman, the
gentleman from California (Mr. Horn), not only for his support for this
legislation, without his help we would not have this bill on the floor
today, but in addition to that help, I want to thank him for his
career-long commitment to improving the operations of government,
improving the management and effectiveness and efficiency, as well as
the accountability, of government. The gentleman from California
deserves to be recognized for that commitment.
Mr. Speaker, I decided to introduce this legislation when I
discovered, much to my surprise, that actually a majority of Federal
agencies are not required by law to prepare audited financial
statements even though, of course, we mandate that publicly traded
private enterprises do in fact perform such audited financial
statements. This strikes me as unacceptable for several reasons: first,
the agencies themselves really need reliable financial statements in
order to evaluate their own operations and operate efficiently. But,
secondly, Congress has an important oversight responsibility over all
of these agencies. And we cannot conduct that oversight properly if we
do not have reliable financial information.
Thirdly, taxpayers themselves ought to be able to look at financial
information that they can rely upon so they can evaluate whether their
Federal tax dollars are being used appropriately and efficiently.
Finally, the government ought to be willing to impose upon itself
those mandates that we are willing and able to impose on the private
sector. It is a little bit ironic that Federal law requires, as I said,
that publicly traded private companies file audited financial
statements with whom? With the SEC. The SEC, who ironically is not
required to prepare such audits on themselves.
It is interesting Congress did not formally require that any agency
prepare audits on its financial statements until fiscal year 1996. And
even then we only required 24 of the largest agencies, those covered by
the Chief Financial Officers Act, to perform these audits. The list of
agencies that do not audit their financial statements includes large
agencies charged with very significant regulatory and fiduciary
responsibilities, including the Federal Communications Commission, the
Securities and Exchange Commission, the Commodities and Futures Trading
Commission, the Equal Employment Opportunity Commission, and the
National Labor Relations Board, just to name a few.
Well, in the process of evaluating this issue, I asked the General
Accounting Office to survey agencies which are not required to prepare
audited financial statements in order that we could learn a little bit
about them, and specifically to determine what degree of effort would
be required for agencies to implement this requirement, and also
whether non-CFO agencies that voluntarily do audit their own financial
statements, and there are a number of do, whether they have realized
benefits from having done so.
The GAO study was very interesting. It found out that, first of all,
the surveyed agencies reported they either achieved significant
benefits or anticipated achieving major benefits from auditing their
financial statements. Twenty-one of the 26 largest agencies that are
not required to audit their financial statements thought that the
Federal agencies in fact should be required to audit these financial
statements.
All of the surveyed agencies that have voluntarily adopted a standard
of auditing their statements reported significant benefits, including
enhanced accountability, greater ability to identify inefficiencies and
weaknesses, improved internal controls, compliance with statutory
requirements, and better monitoring of assets and liabilities. Probably
the most convincing result of the GAO survey was the fact that almost
all of the agencies that do not prepare audited financial statements
reported that the absence of a statutory requirement was the main
reason for not doing such an audit.
So what does H.R. 4685 actually do? Well, the Accountability of Tax
Dollars Act of 2002 would extend the CFO act requirements currently
imposed on the major agencies to all Federal agencies. The act then
gives the Office of Management and Budget the authority to waive the
audit requirements for agencies with annual budgets less than $25
million. And I share the chairman's hope that this provision will be
seldom, if ever, invoked.

Now to ease the transition of this new requirement, the Office of
Management and Budget director will be given discretion for the first 2
years to waive the application of this provision for those agencies
where he deems it necessary. The agencies covered by this bill have a
combined annual budget of tens of billions of dollars, huge significant
sums of money that simply should be accounted for more rigorously.
In summary, Mr. Speaker, in our current climate of budget
constraints, a Federal agency really should be able to demonstrate
measurable outcomes and demonstrate it with audited financial
statements. Audits make an agency's transactions public so that an
agency can be evaluated on how well their programs perform; and how
well they are fulfilling their mission, rewarding the successful
agencies, and, frankly, withholding resources from those who are
failing can only be achieved if we have complete and audited financial
information on which we can rely to make our judgments.
Mr. Speaker, I believe that H.R. 4685 takes us one step closer to
achieving this goal. Both the GAO and the administration support this
bill. It was introduced with bipartisan support. I would like to thank
my colleague from Pennsylvania (Mr. Kanjorski) for being an original
cosponsor of this bill. I also want to thank the GAO for their work in
looking into this issue, and my staff for the hard work that they did
in determining an appropriate response to this. I relied on the
expertise of the GAO and the staff and their insights regarding the
costs and benefits of implementing this rule.
Once again, I want to thank the gentleman from California (Mr. Horn)
for making it possible to have this bill on the floor today.
Mr. Speaker, I urge my colleagues to support this important good
government legislation.
Ms. SCHAKOWSKY. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise in support of H.R. 4685. It is a bill to improve
the financial accountability of the executive branch agencies.
The bill before us today extends the requirements for audited
financial

[[Page H7043]]

statements to nearly all executive branch agencies. Unfortunately, this
bill provides no funds to pay for those audits. The result is that the
money spent to pay for these audits would otherwise be used by the
Inspectors General to investigate waste, fraud and abuse. I believe
strongly that Congress should fund what it authorizes.
Mr. Speaker, I have been pleased to work with the gentleman from
California (Mr. Horn) on this and other financial management activities
in the Committee on Government Reform. We share a belief that sound
financial management gives us greater freedom to fund the many programs
designed to help the public and that shoddy financial management
directly impacts every taxpayer in this country and particularly harms
the most vulnerable of our citizens.
Bad financial management is a double crime. First, it is wrong to
disregard the value of taxpayer funds by wasting them through
mismanagement. Second, it denies taxpayers the services for which they
have paid their taxes. Unfortunately, the bill we have on the floor
today is not the bill we have passed out of our subcommittee. The bill
we have passed included a section that required the agencies covered
under this bill to conform to the accounting standards set out in the
Federal Financial Management Improvement Act of 1996. The
administration insisted that those provisions be stripped from the
bill, or it would block the bill from coming before the House today. I
find this turn of events disappointing.
I am disappointed because we are passing a weaker bill than should be
passed and because we are acquiescing to an unreasonable demand by the
Bush administration. Our actions send a signal to the public that
Congress is not serious enough about accounting standards. If there is
any time in our history that we should be demanding greater
accountability from government agencies, it is today.

{time} 1430

Requiring agencies to follow the standards of the Federal Financial
Management Improvement Act is not new. In fact, every year, as part of
its financial review of the executive branch, the General Accounting
Office reports to Congress on whether each agency is conforming within
the provisions of this Act. The Act requires agencies to put in place
policies and systems that lead to sound financial management on a day-
to-day basis. Frankly, I am puzzled that the Bush administration
opposes this kind of sound financial management.
This administration talks a lot about its management initiatives and
improving accountability in the government. However, it is very careful
to make sure that it is the Office of Management and Budget that sets
the rules by which agencies are graded. I am afraid that the
administration's opposition to the accounting standards that were in
this bill is just one more attempt to make sure that OMB, and not
Congress, sets the standards by which agencies are judged. It is very
easy to claim success when you define what success is.
The bill before us today is not just about accounting standards. The
title is the Accountability for Tax Dollars Act, and I would like to
speak to that topic.
The chart in the well shows the Federal deficit in surpluses for the
years 1980 to 2001 and projections of the deficit through 2010. As my
colleagues can see, after a few years of surplus at the end of the
Clinton administration, we are back to the deficit spending of the
Reagan and Bush, Senior, administrations.
I believe that it is important for the American public to understand
just who is accountable in this situation. The administration would
like the public to believe that the recession and the attacks of last
September are responsible for these deficits, but that is not true.
The second chart, based on data from the Congressional Budget Office,
shows that the single biggest cause of the deficits in this year and
into the future is the Bush tax cut.
When President Clinton signaled to the world that he was serious
about balancing the budget, it had an important effect. International
investment began to flow into the U.S. economy and was one of the
engines of the expansion of the 1990s. These deficits will have the
opposite effect, holding back the economy and taking a toll on
everyone.
We have already seen that happening. Last week, the Department of
Commerce announced that the poverty rate was up and household income
was down. The last time we saw poverty go up and income go down was
during the recession in 1991.
Mr. Speaker, I support the bill before us today. However, it is
unfortunate that we are not also considering a bill that I introduced,
the First Things First Act. My bill truly addresses the problem of
accountability for tax dollars by preventing further implementation of
the Bush tax cuts, provisions that overwhelmingly benefit the rich and
are fueling the Bush recession.
My bill puts further implementation of the tax cuts for the top
bracket on hold until we can pay for the needs created by the terrorist
attack last year, until we can ensure the solvency of Social Security
and Medicare trust funds, until we can provide a comprehensive
prescription drug benefit under Medicare, until we can ensure Federal
funding for school modernization and hiring 100,000 teachers, and until
we reduce the number of people who face homelessness and substandard
housing.
Mr. Speaker, I ask that my colleagues pass the bill before us today,
and I ask my colleagues to be truly accountable to the American public
for their tax dollars. It is our patriotic duty to ensure that every
tax dollar is accounted for and that agencies like the Department of
Defense, which cannot account for over $1 trillion in transactions,
clean up their books and their acts.
I would like to take a personal note, Mr. Speaker, to just thank the
Chairman of the Subcommittee of Government Efficiency, Financial
Management and Intergovernmental Relations. I want to commend him and
thank the gentleman not only for the many courtesies that he has shown
to me, as the ranking Democrat on that committee, and not only for the
many, many things I learned from him on how to carry out the role of
chairman with integrity and fairness, but I want to thank him for his
service to the American people.
He has been relentless in his pursuit of government efficiency and
financial management. He has had over a dozen hearings around the
country on our capacity to deal with some of the threats of the
terrorist attacks, and this decent and dedicated leader of our country
will be deeply missed as he retires. He deserves all of our thanks.
Mr. Speaker, I yield back the balance of my time.
Mr. HORN. Mr. Speaker, I yield myself such time as I may consume.
I thank the fine speech of the gentlewoman from Illinois (Ms.
Shakowsky). She has worked in our committee on good government matters;
and, of course, she comes from Chicago, so she knows where there needs
a little work up there, but I thank her.
Mr. Speaker, I have no other requests for time, and I yield back the
balance of my time.
The SPEAKER pro tempore (Mr. Cantor). The question is on the motion
offered by the gentleman from California (Mr. Horn) that the House
suspend the rules and pass the bill, H.R. 4685, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.

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