OMB relaxes audit requirement for financially sound programs

Large federal programs with sound financial management may not need to complete a financial audit each year under new guidance from the Office of Management and Budget. In a July 10 memorandum, OMB Deputy Director Sean O'Keefe said the Bush administration would waive the annual audit requirement for federal programs that have repeatedly submitted clean audits by OMB deadlines. Under the 1994 Government Management Reform Act, OMB requires 20 programs that control large amounts of money to file annual audits in addition to their parent departments' audits. They include: the Agriculture Department's Forest Service, the Transportation Department's Federal Aviation Administration and the Federal Employees Health Benefits Program, run by the Office of Personnel Management. The new guidance does not exempt federal departments and independent agencies from filing annual audits, nor does it affect the annual governmentwide audit, both of which are required under the 1994 act. OMB is relaxing its audit requirements for certain programs to free up resources that can be used to address other management problems, according to O'Keefe. "Given that resources are limited, we want to be sure to encourage the dedication of the proper level of resources to achieve the intended outcome," said O'Keefe. "This action would allow agencies to redirect resources to address other critical management areas." Programs are required to meet three criteria to qualify for an exemption from the auditing requirement. First, they must have received a clean, unqualified audit opinion for three consecutive years. They must also have submitted their last two audits on time and not be on the General Accounting Office's "high-risk" list for financial management issues. In addition, program officials are required to send OMB a plan for correcting any financial weaknesses identified in recent audits. Requests for removal from the audit requirement should be sent to: Office of Management and Budget Office of Federal Financial Management Room 6025 725 17th Street, N.W. Washington, D.C. 20503 To be exempt from the 2001 auditing requirement, program officials must submit requests by July 31.