OMB Circular A-136 — Federal Financial Reporting Requirements

OMB Circular A-136 ("Financial Reporting Requirements," most recently revised in 2023) establishes the format, content, and deadlines for federal agency Annual Financial Reports (AFRs) and Performance and Accountability Reports (PARs) — the comprehensive annual reports that CFO Act agencies must produce covering their financial condition, program performance, and internal controls. A-136 is the federal government's equivalent of the SEC's Form 10-K reporting requirements for public companies, specifying what must be reported, how it must be formatted, and when it must be submitted to OMB and made available to the public.

The AFR/PAR is the primary vehicle through which executive branch agencies report their financial condition to Congress, OMB, and the public. It includes independently audited financial statements, management's discussion and analysis, inspector general assessments, and the agency head's management assurance statement. Without A-136's standardization, each agency would produce different formats and different disclosures, making it impossible to compare agencies or aggregate data into governmentwide financial statements.

Legal Authority

• 31 U.S.C. § 3515 — CFO Act § 3515; requires each CFO Act agency to prepare and submit to the Director of OMB and Congress an audited financial statement for each fiscal year; the statutory basis for annual financial reporting
• 31 U.S.C. § 902 — CFO Act; establishes the Chief Financial Officer position and responsibilities including oversight of financial reporting systems and preparation of audited financial statements
• Government Performance and Results Act (GPRA, 31 U.S.C. § 1115) — Requires agencies to produce annual performance reports measuring progress against strategic goals; the performance reporting component of the AFR/PAR
• OMB Circular A-136 (most recent revision: 2023) — Establishes the format, content requirements, and submission deadlines for AFRs and PARs; specifies FASAB-compliant financial statement formats, MD&A content, IG audit requirements, and the agency head's Statement of Assurance

Key Mechanics

A-136 standardizes Annual Financial Report (AFR) content across all 24 CFO Act agencies. Each AFR must include: (1) Management's Discussion and Analysis (MD&A) — an executive overview of mission, performance, financial condition, systems, and internal controls; (2) FASAB-compliant financial statements — Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, Statement of Budgetary Resources, and Statement of Custodial Activity (where applicable); (3) auditor's report — the Inspector General (or outside auditor for smaller agencies) must issue an opinion on whether the financial statements are fairly presented; (4) required supplementary information — deferred maintenance, stewardship assets, and other FASAB-required disclosures; and (5) management assurance statement — the agency head's attestation on internal control adequacy. AFRs must be published by November 15 following the September 30 fiscal year end. Agencies may instead produce a Performance and Accountability Report (PAR) that combines financial and performance data in a single document. Governmentwide consolidated financial statements are prepared by Treasury using data from all agency AFRs and published in the Financial Report of the United States Government, which is separately audited by GAO.

Overview

What This Circular Requires

Required Report Components

A-136 specifies that the AFR/PAR must include:

Management's Discussion and Analysis (MD&A): A narrative overview — similar to a corporate annual report's MD&A — covering the agency's mission and organizational structure, performance highlights and challenges, financial highlights (major changes in assets, liabilities, revenues, expenses), forward-looking information on strategic challenges, and a summary of financial statement results. The MD&A must be readable by non-specialists; it's the entry point for congressional staff, oversight bodies, and interested citizens.

Financial Statements: Four required statements prepared in accordance with FASAB (Federal Accounting Standards Advisory Board) standards — the federal government's GAAP:

• Balance Sheet: Assets, liabilities, and net position
• Statement of Net Cost: Program costs by major program/line of business
• Statement of Changes in Net Position: How net position changed during the year (appropriations received, expenses, non-exchange revenues)
• Statement of Budgetary Resources (SBR): Ties together appropriations, obligations, and expenditures — the connection between the agency's budget authority and how it was used; the SBR is unique to federal financial reporting and serves the budget accountability function that commercial reporting doesn't need

Notes to Financial Statements: Detailed disclosures including accounting policies, credit program data, property and equipment, contingent liabilities, lease commitments, environmental cleanup liabilities, trust fund balances, and any other material items.

Required Supplementary Information (RSI): Additional schedules required by FASAB standards that don't appear in the primary statements — typically including the agency's deferred maintenance and repairs estimate, heritage assets disclosure, and stewardship land information.

Other Accompanying Information (OAI): Inspector General's summary of management and performance challenges; unaudited performance information (program results); and the agency's improper payment compliance report (required under the Payment Integrity Information Act).

Management Assurance Statement

The agency head — typically the Secretary or Administrator — must sign a Management Assurance Statement attesting that:

• The agency's internal controls over financial reporting provide reasonable assurance that transactions are properly authorized, recorded, and reported
• The agency's financial management systems substantially comply with FFMIA (Federal Financial Management Improvement Act) requirements
• The agency is in compliance with applicable laws and regulations

Any material weaknesses or significant deficiencies in internal controls, or FFMIA non-compliance findings, must be disclosed and reported. This is the A-123 management assurance mechanism embedded in A-136 reporting — the Management Assurance Statement in the AFR is where A-123's internal control assessment becomes a formal public disclosure.

Inspector General Audit

The agency's Inspector General (or a contracted independent auditor engaged by the IG) must audit the four required financial statements and express an opinion on whether they present fairly, in all material respects, the agency's financial position and results of operations in conformance with FASAB standards. The possible audit opinions parallel commercial accounting:

• Unmodified (clean) opinion: Statements present fairly in accordance with FASAB GAAP — the desired result
• Qualified opinion: Except for specific departures from GAAP, statements present fairly — less than clean; signals a material issue
• Adverse opinion: Statements do not present fairly — rare; indicates fundamental financial reporting failures
• Disclaimer of opinion: Auditor could not obtain sufficient appropriate audit evidence to express an opinion — most commonly seen at DoD due to documentation gaps

The IG's audit report also includes findings on internal control deficiencies (material weaknesses and significant deficiencies) and compliance findings on laws and regulations. These findings are disclosed in the AFR and tracked by OMB year-over-year.

Agency Financial Report vs. PAR vs. AFR

A-136 permits agencies to produce either:

• Annual Financial Report (AFR): Financial-focused; contains audited statements, MD&A, and required supplementary information. Performance results may be published separately (in an Annual Performance Report or Annual Performance Plan and Report).
• Performance and Accountability Report (PAR): Integrates both financial statements and program performance results into a single document.

Most large agencies have shifted to AFRs (financial-only) with separate performance reporting, since the audit timing constraint (November 15) makes integrating comprehensive performance data difficult.

Key Provisions

• November 15 deadline: AFR/PAR must be posted publicly and submitted to OMB by November 15 (45 days after fiscal year end)
• Four required financial statements: Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, Statement of Budgetary Resources — all FASAB-compliant
• IG audit: Independent audit required; clean opinion is the target; material weaknesses disclosed publicly
• Management Assurance Statement: Agency head personally attests to internal control adequacy and FFMIA compliance; must disclose any material weaknesses
• Improper payment reporting: Compliance with PIIA (Payment Integrity Information Act) reported in AFR; paymentaccuracy.gov data incorporated
• MD&A: Required narrative for non-specialist readers; covers mission, performance, and financial highlights
• Treasury consolidation: AFR data feeds into Treasury's U.S. Government Consolidated Financial Statements (published December)

How It Affects You

If you work at a federal agency (CFO, financial management office, IG): A-136 sets the annual deliverable timeline that drives your entire financial close process. The November 15 deadline means your fiscal year close, financial statement preparation, and IG audit must all complete by early to mid-November — a tight window for large agencies with complex systems. Material weaknesses disclosed in the AFR attract OMB and congressional attention; remediation plans for material weaknesses must be tracked and reported. The improper payment section is often the most closely watched by oversight: programs that miss the PIIA reporting requirements or have high improper payment rates face additional scrutiny.

If you are an auditor, contractor, or consulting firm: Federal financial statement audits conducted for IGs are among the largest audit engagements in the country — major federal departments (DoD, HHS, Treasury) have audit footprints exceeding hundreds of millions in fees. A-136's formatting requirements shape the deliverables. The FASAB accounting standards differ from US GAAP in several important ways (budgetary accounting, stewardship assets, credit reform) — auditors must be trained on federal-specific standards. The November 15 deadline imposes a hard constraint on audit fieldwork timelines.

If you are a researcher, journalist, or oversight professional: AFRs are publicly posted on agency websites by November 15 each year. The audit opinion and IG findings sections tell you which agencies have clean books and which have persistent control failures. The Management Assurance Statement's disclosure of material weaknesses and FFMIA non-compliance is the most direct public accountability mechanism for federal financial management quality. Year-over-year comparison of audit findings shows which agencies are improving or deteriorating. The Statement of Budgetary Resources is the primary tool for tracing how each agency used its appropriated budget authority — essential for budget oversight. Treasury's Governmentwide Financial Report, published in December, consolidates the major agencies' results.

Relationship to Broader Policy

• CFO Act: A-136 implements the CFO Act's statutory requirement for annual audited financial statements (31 U.S.C. § 3515); the CFO is responsible for producing the AFR
• A-127 Financial Systems: Financial systems must be capable of producing A-136-compliant statements; FFMIA compliance disclosed in AFR
• A-123 Risk Management: Management Assurance Statement in the AFR is the formal output of A-123's internal control assessment process
• OMB Budget Management: Statement of Budgetary Resources ties financial reporting to budget execution; budget data and financial data must reconcile

Recent Developments

• 1994 — CFO Act financial statement audit requirement takes effect; early years saw few clean opinions
• 2002 — Sarbanes-Oxley parallels drove increased attention to management assurance statements
• 2010 — Payment integrity reporting requirements strengthened; improper payments incorporated into AFR
• 2019 — Payment Integrity Information Act (PIIA) replaced IPIA; reporting requirements updated in subsequent A-136 revisions
• 2023 — A-136 revised; updated improper payment reporting guidance following PIIA implementation
• Ongoing — Most CFO Act agencies now receive clean opinions; DoD is the largest outlier, receiving a disclaimer of opinion on its agency-wide statements for the seventh consecutive year in FY 2024 (the FY 2024 NDAA mandates a clean opinion by December 31, 2028); Treasury's Governmentwide Financial Report notes consistent progress but persistent issues in DoD and other complex agencies