Chief Financial Officers Act — Federal Financial Management

The Chief Financial Officers Act of 1990 (31 U.S.C. §§ 901–903) — the CFO Act — established the position of Chief Financial Officer at each of the 24 major federal agencies and created the Deputy Director for Management at OMB to oversee government-wide financial management. Before the CFO Act, federal financial management was so disorganized that most agencies couldn't produce auditable financial statements — the government literally didn't know, in any rigorous accounting sense, how much money it had, how much it owed, or what its assets were worth. The Act required each CFO agency to prepare annual financial statements and submit them for independent audit (complementing the Single Audit Act framework for grants), bringing corporate-grade financial accountability to the federal government and aligning with the GPRA performance framework. As expanded by the Government Management Reform Act of 1994 (which extended audit requirements to all CFO agencies) and the Accountability of Tax Dollars Act of 2002 (which extended them to nearly all federal agencies), the CFO framework now requires virtually the entire federal government to produce and have audited annual financial statements — covering over $6 trillion in annual spending and $50+ trillion in assets and liabilities.

Current Law (2026)

Parameter	Value
Governing law	31 U.S.C. §§ 901–903 (CFO Act, 1990)
Supplemental laws	Government Management Reform Act (1994), Accountability of Tax Dollars Act (2002), DATA Act (2014)
CFO agencies	24 major federal departments and agencies
Agency CFO	Appointed by the President with Senate confirmation (for Cabinet departments) or by agency head
OMB oversight	Deputy Director for Management (DDM) oversees government-wide financial management
Annual requirement	Each agency must prepare financial statements and submit them for independent audit
Government-wide statements	Treasury produces a consolidated Financial Report of the U.S. Government annually
Audit opinions	Agencies may receive: unmodified (clean), qualified, adverse, or disclaimer of opinion
DATA Act	Requires standardized reporting of all federal spending data on USASpending.gov

Legal Authority

31 U.S.C. § 901 — Establishment of agency Chief Financial Officers (each of the 24 CFO Act agencies must have a CFO; in Cabinet departments, the CFO is appointed by the President with Senate confirmation; the CFO is the principal advisor to the agency head on financial management)
31 U.S.C. § 902 — Authority and functions of agency CFOs (CFOs must develop and maintain integrated accounting and financial management systems; prepare and submit annual financial statements; monitor execution of the agency budget; provide financial information for agency decision-making; direct, manage, and provide policy guidance on agency financial management)
31 U.S.C. § 903 — Establishment of agency Deputy CFOs (each CFO Act agency must have a Deputy CFO to assist the CFO)

How It Works

Each agency CFO is responsible for developing integrated financial management systems, preparing annual financial statements in accordance with federal accounting standards set by FASAB (the Federal Accounting Standards Advisory Board — the federal government's equivalent of FASB for the private sector), monitoring budget execution, overseeing internal controls to prevent waste and fraud, and providing financial information to agency leadership. In Cabinet departments, the CFO is a Presidential appointee confirmed by the Senate, elevating financial management to a senior leadership role. Each CFO Act agency must produce annual financial statements — balance sheet, income statement, statement of net cost — audited by the agency's Inspector General or an independent auditor; GAO audits the government-wide consolidated statements. The auditor issues one of four opinions: unmodified (clean) — statements fairly present the agency's financial position; qualified — significant exceptions exist; adverse — statements are materially misstated; or disclaimer — insufficient evidence to form an opinion.

When the CFO Act was enacted, most agencies received disclaimers — they simply couldn't produce reliable financial statements. Three decades of effort have moved 22 of 24 CFO Act agencies to clean opinions. The Department of Defense — spending roughly $800 billion annually — famously failed clean audits for decades and only recently made progress toward auditability. The DATA Act (2014) extended the CFO framework outward: every federal agency must now report detailed spending data in a standardized format on USASpending.gov, creating a searchable database that lets anyone track how federal dollars flow from appropriation through agency to contractor, grantee, or beneficiary. FASAB standards address unique government accounting challenges: valuing federal lands and military equipment, accounting for Social Security and Medicare obligations, recording the cost of federal loan guarantees, and presenting the government's long-term fiscal outlook.

How It Affects You

If you're a taxpayer or citizen who wants to follow how the government spends your money: USASpending.gov — the public database built on CFO Act and DATA Act requirements — lets you search how every federal dollar flows from congressional appropriation through agency to contractor, grantee, or benefit recipient. Every federal contract over $10,000 and every grant is reported and searchable by agency, program, congressional district, or recipient. The Financial Report of the U.S. Government (produced annually by Treasury) is the authoritative source for the government's consolidated financial position — assets, liabilities, and the long-term fiscal outlook, including $70+ trillion in unfunded Social Security and Medicare obligations. Audit opinions signal accountability: a clean (unmodified) opinion means an independent auditor verified the agency's financial statements fairly present its position. A disclaimer of opinion — what the Department of Defense received for decades — means auditors couldn't obtain enough evidence to form any opinion at all. DOD spent roughly $800 billion annually for decades without producing auditable financial statements; it completed its first comprehensive audit only in FY 2018 and has received disclaimers since, though it is making incremental progress toward auditability. That trajectory matters: the government can't effectively control what it can't reliably measure.

If you're a federal financial manager, agency CFO, or federal financial management professional: The CFO Act (31 U.S.C. §§ 901–903) defines your statutory authority and professional responsibilities. You're responsible for developing and maintaining integrated accounting and financial management systems, preparing annual financial statements under FASAB (Federal Accounting Standards Advisory Board) standards, monitoring budget execution including identifying improper payments, and overseeing internal controls under OMB Circular A-123. FASAB sets accounting principles specific to government's unique challenges: how to value federal lands and military equipment, how to account for contingent liabilities (environmental cleanup, loan guarantees, insurance obligations), and how to present long-term fiscal sustainability disclosures that have no private-sector equivalent. The DATA Act added a layer of standardized spending data reporting obligations — converting legacy financial system data into standardized formats is a persistent quality challenge. OMB's push to migrate agencies from mainframe legacy systems to cloud-based enterprise resource planning (ERP) platforms will define federal financial management modernization for the next decade.

If you're a government contractor, grant recipient, or nonprofit receiving federal awards: Your awards are reported on USASpending.gov — your organization's name, award amounts, and performance location are publicly searchable. For contracts: reporting occurs within 30 days of obligation. For grants: the awarding agency reports through the Financial Assistance Broker Submission (FABS) system. This transparency obligation runs both ways: your financial information in federal systems must be accurate and current. For indirect cost rates (the overhead allocation grantees charge to federal awards): your cognizant federal agency negotiates these rates based on your most recent audited financial statements, submitted under OMB's Uniform Guidance (2 CFR Part 200). Clean audits and accurate financial reporting directly affect your negotiated indirect cost rates and your attractiveness as a federal partner. Audit findings identifying internal control weaknesses can trigger enhanced monitoring, additional reporting requirements, or — in serious cases — cost disallowances and suspension/debarment from future federal awards.

If you're a journalist, congressional oversight staffer, Inspector General professional, or policy researcher using federal financial data: The CFO Act's audit requirement and the DATA Act's transparency requirement together create one of the most detailed public government financial accountability databases in the world. For investigative research: USASpending.gov's bulk download function provides comprehensive data by agency, fiscal year, and award type; FPDS-NG (Federal Procurement Data System-Next Generation) provides procurement-specific detail; and the USAJOBS-linked contractor registry identifies corporate principals. Audit opinions are published in agency Performance and Accountability Reports (PARs), typically released by November 15 each fiscal year. The GAO's annual Financial Report of the U.S. Government commentary identifies government-wide material weaknesses — DOD auditability, Treasury's intergovernmental elimination challenges. For improper payments data: OMB's improper payments dashboard tracks error rates across programs — Medicare and Medicaid historically have the highest dollar-value improper payments in government. Inspector general audit reports — published on each IG's website and indexed at oversight.gov — are the primary source for agency-specific financial management findings.

State Variations

The CFO Act applies to federal agencies, but:

Most states have their own CFO or comptroller positions with statutory financial management responsibilities
State financial statements are audited under governmental accounting standards set by GASB (not FASAB)
State single audit requirements (for federal grant recipients) interact with the CFO Act framework
Some states have transparency portals modeled on USASpending.gov

Implementing Regulations

OMB Circular A-136 — Financial reporting requirements (prescribes the form and content of agency financial statements required under the CFO Act, including balance sheets, statements of net cost, and notes)
OMB Circular A-123 — Management's responsibility for enterprise risk management and internal control (implements internal control standards required by the CFO Act and Federal Managers' Financial Integrity Act)
31 CFR Part 900–904 — Federal Claims Collection Standards: the joint Treasury-DOJ regulatory framework (issued under 31 U.S.C. § 3711(d)(2)) prescribing how federal agencies must collect debts owed to the United States. Part 900 establishes scope and definitions; Parts 901–904 govern the collection process, compromise, termination, and DOJ referral. Key Part 900 provisions:
- § 900.1 — Authority: issued jointly by Treasury and DOJ — Treasury controls administrative collection mechanisms, DOJ controls litigation referral; the joint issuance reflects the statutory split in 31 U.S.C. § 3711 between the CFO Act agencies' administrative authority and DOJ's Judgment Fund and litigation authority
- § 900.2 — Definitions: "claim" and "debt" are synonymous — any amount the federal government has determined is owed to it; "delinquent" (not paid by the due date or within 30 days of demand, whichever is later); "creditor agency" (the agency to which the debt is owed) vs. "collecting agency" (the agency actually pursuing collection, which may differ after cross-servicing transfer to Treasury's Bureau of the Fiscal Service)
- § 900.3 — Exclusions — critical carve-outs: Parts 900–904 do NOT apply to: (a) debts arising under the Internal Revenue Code (IRS has its own collection regime); (b) tariff and customs duties administered by CBP; (c) claims between federal agencies; (d) debts arising under the False Claims Act or other fraud statutes where DOJ exercises direct prosecutorial authority; (e) criminal fines and restitution orders. These exclusions prevent agencies from routing tax debts or FCA judgments through the administrative offset mechanism to avoid DOJ oversight — each excluded category has its own statutory collection regime
- § 900.6 — Anti-subdivision rule: a federal agency may not subdivide a single debt into smaller amounts to avoid the $100,000 mandatory DOJ referral threshold under 31 U.S.C. § 3711(g); a $250,000 debt cannot be processed as three $83,000 administrative claims — the full original debt amount controls the referral calculation, preventing agencies from using the administrative collection process to manage large debts that Congress required to be referred to DOJ for litigation
- § 900.7 — No duplication: the Parts 900–904 standards are for administrative collection before litigation; agencies may not simultaneously use administrative offset, wage garnishment, or credit bureau reporting and pursue the same debt through litigation or a separate administrative proceeding
Parts 900–904 collectively govern the lifecycle of federal debt collection from first demand letter (Part 901) through compromise (Part 902, settling for less than full amount — see the companion entry on 31 CFR Part 902 for claim compromise authority), termination (Part 903, writing off uncollectable debts), and referral to DOJ (Part 904). CFO Act agencies — the 24 largest federal departments — are required to implement these standards through internal agency collection policies and must cross-service delinquent debts to Treasury's Bureau of the Fiscal Service after 120 days delinquent. The standards interact with Treasury's Do Not Pay program (matching federal payments against delinquent debt records to intercept payments and apply them to outstanding debts) and the Treasury Offset Program (TOP), which intercepts federal tax refunds, Social Security payments, and federal salary to satisfy delinquent debts.

Pending Legislation

HR 1686 (Rep. Flood, R-NE) — No More D.C. Waste Act: strengthen federal financial management oversight and reporting. Status: Introduced.

See also Government Accountability & Inspectors General and Federal Budget Process for related financial management legislation.

Recent Developments

The Department of Defense's long struggle toward audit readiness has been the most prominent CFO Act story — DOD first underwent a department-wide audit in FY 2018 (decades after the Act required it) and has received disclaimers of opinion in every year since, though incremental progress continues. The DATA Act's implementation has made federal spending data far more accessible, though data quality concerns persist. OMB has pushed for modernization of federal financial management systems — moving agencies from legacy mainframe systems to cloud-based enterprise resource planning (ERP) platforms. The government-wide Financial Report continues to highlight the nation's long-term fiscal challenges — including unfunded liabilities for Social Security and Medicare that exceed $70 trillion — using CFO Act financial reporting to inform the public about the federal fiscal outlook.